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Japan

Corona, Corona, Corona Bonds Really Do Have More Fun!

The equity market finally showed some sensitivity to the effects of the coronavirus (Covid-19) last week with the S&P 500 falling 1.25% from its record high close on Valentine’s day for the holiday shortened week.  The leading issue which dominated every news cycle (except for the Democratic debate for a few hours) was Covid-19 and the economic uncertainties surrounding it.  Markets rose on news or speculation that infection cases were …Read More

Demographic Trends: The Case Against Negative Interest Rates

Japan has a 2.2% unemployment rate, yet, for 30 years, they have not had any significant economic growth, due to their demographic structure. Today, the developed world has Japan’s 1990s demographic features, with falling fertility rates, rising dependency ratios (retirees/working aged), and, ultimately, declining populations. Under these conditions, aggregate GDP growth will be harder and harder to achieve. QE’s “Wealth Effect” All the central banks of developed economies have adopted the Fed’s …Read More

Look For The Preponderance Of The Evidence, Don’t Rely On One Factor

The headline on my LinkedIn page on Friday (October 4th) read: “Jobless rate reaches half-century low, HP plans to cut up to 9,000 jobs…” Is this good news about jobs, or bad? I’ve learned many times over the years to rely on the preponderance of the evidence, and not on any single indicator. The jobs numbers, themselves indicate that the economy is still expanding. But, the lower level of job creation, along with …Read More

The Goldilocks Labor Report: “Just Right!”

It isn’t ever a good sign when markets become manic. August was quite volatile with five days out of 22 (23%) where the S&P 500 intra-day market swings exceeded 2%, and three days when the market closed down more than -2.5% from the prior day’s close. (We haven’t seen such price volatility since 2011!) While, so far, September has been less volatile, the market is still susceptible to tweets. For example, news about the …Read More

The Rocky Road to “Normal”

The terms “normal,” “normalize,” and “neutral” are common in today’s economic discussions.  But, does anybody really know what “normal” is?  When the Federal Reserve (Fed) says that it  wants to “normalize” interest rates, do they have a rate scheme in mind?  Does it mean that rates will be similar to what they were 10-20 years ago?  That’s what most people believe “normal” is.  The truth is “normal” is significantly lower.  The current …Read More

Markets Have Recovered, But Charts Look Like Niagara Falls

In January, the equities markets bounced from significantly oversold conditions at the end of December, on the hopes that a) the Fed stopped it tightening cycle in time, and b) the halt to the government shut-down occurred in time to avoid negative Q1 GDP growth. As I have stated in prior blogs, “hope” is not a good investment strategy. But wait! The “hope” regarding the Fed doesn’t even make sense. …Read More