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Why Interest Rates Are Falling

#*!? CRASH BAM @#$ Suddenly, markets (well, at least the bond market) now see falling interest rates in the short and intermediate term. The 10-Year U.S. T-Note fell from 1.47% on June 30 to close at 1.29% on Thursday July 7 (a big move in just four market sessions). Some of the rapid fall was due to short covering, so the slight give back on Friday (to 1.36%) wasn’t a surprise. For context, …Read More

The Implications Of Softening Economic Data

After a week of heightened financial market volatility caused by the Fed’s “Dots,” (week ended June 19), the past week was like a walk in the park with much lower market volatility and the equity markets resuming an upward bias. What we have observed, however, is that much of the newly released data, including employment, housing, income, durable goods, and even inflation shows the economy expanding at a much slower speed …Read More

The Rate Spike Will Damage the Recovery

Fed Intervention Needed There was quite a spike in interest rates the last week of February with the 10-Year T-Note spiking from a 1.36% level as of the close on Wednesday to as high as 1.60% intraday with a close of 1.55% on Thursday.  Friday’s close was 1.45%.  But, a lot of damage was done. It is naïve to think that this spike was caused by the inflation narrative, i.e., …Read More

Despite Wall Street Hype, Inflation is Not Imminent

Retail sales rose a record 5.3% M/M in January after three months in a row of decline.  No doubt the $600 checks from the late December “helicopter” money drop played a large role.  The Atlanta Fed now says that their GDP model pegs the current quarter’s growth at +9.5% (Annual Rate (AR)).  In addition, Industrial Production was up nearly 1% (0.9%) in January.  So, why worry?  Infections and hospitalizations are …Read More

Markets Are Bubbly – The Economy, Not So Much

Not a Bubble?  The equity markets have been driven by momentum and speculation these past few weeks, not by underlying business fundamentals.  We had GameStop, followed by Silver, then Pot stocks, and now SPACs, all driven by retail.  PE ratios are in the top 1% of their historical range.  Junk bond yields are at all-time-record low levels (sub 4%).  In January, the worst stocks based on business fundamentals, significantly outperformed …Read More

The Economy: Damaged Labor Markets; An Inflation Head Fake

On Friday, February 5, markets were set to rise no matter what the employment data showed.  If they beat to the upside, that would validate the reflation/pent-up demand narrative.  If they disappointed, well, that would simply mean more fiscal and monetary largesse (which financial markets love).  Either way, heads markets rise; tails, ditto. Labor Market Signals: Positive, Negative and Mixed As it turns out, there was validation for every viewpoint …Read More