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equity market

Money Explodes; Gold Glitters; The Recovery Slows

I often get asked why the price of gold is rising, and, as a follow on, will it continue.  The price of gold has always had a significant correlation (80%) with the Fed’s balance sheet (i.e., the “money supply”), especially during periods of significant balance sheet expansion (money printing).  The table shows the Y/Y change in the money supply of the western world’s major economies.  The U.S., clearly the largest …Read More

On Reopening: We’ve Just Seen The Iceberg’s Tip

New Data Should Accelerate Re-Opening When the pandemic started, the only data available was the number of new cases, existing cases, and deaths. The original models, perhaps based on prior pandemics like the Spanish Flu of 1918, forecast significant deaths, up to as many as 2 million in the U.S., and, of course, mass infections. Based on that, governments all over the world shut-down their economies. New mortality data is now available …Read More

The Shape Of Things To Come: ‘V’ Or ‘L’ Recovery

What do -38%, -34%, -30%, and -25% have in common? If you guessed that these are the Q2 real GDP forecasts from the major financial houses (Morgan Stanley, Goldman Sachs, Bank of America, JPMorgan), you would be correct. Incredible as it may seem, we are likely headed for a drop in Q2 real GDP in that magnitude, and the just passed Q1 quarter looks to be somewhere near high negative single digits. …Read More

The Shape Of Things To Come: ‘V’ Or ‘L’ Recovery

What do -38%, -34%, -30%, and -25% have in common? If you guessed that these are the Q2 real GDP forecasts from the major financial houses (Morgan Stanley, Goldman Sachs, Bank of America, JPMorgan), you would be correct. Incredible as it may seem, we are likely headed for a drop in Q2 real GDP in that magnitude, and the just passed Q1 quarter looks to be somewhere near high negative single digits. …Read More

The Potential Economic Impact Of The Reaction To The Coronavirus

Will You Catch Coronavirus? There is a minuscule chance of contracting the coronavirus if you live anywhere but in Hubei Province in China, and even less of a chance if you live in the U.S. The last time we had something like this (SARS), the public and business reaction wasn’t as extreme. It appears that social media has had a lot to do with this more intense and extreme reaction. SARS infected a …Read More

FOMO, Momentum, The Fed, But No Fundamentals

As of this writing, the equity markets are on a three-day losing streak, caused by less optimism on the “trade war” file. And, while there were some positives in recently released economic data, most major economic indicators continue to show business contraction. The equity market has been driven by “the economy is strong” narrative, FOMO (Fear of Missing Out), momentum, and the injection of huge amounts of liquidity by the Fed (QE4). Unfortunately, …Read More