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The Fed’s new bubble – Part 2

In part I of this two part series, I discussed the possible rush for the exits and market volatility in what I saw as a long overdue correction. The violence of the correction and the extremes of volatility that I worried about have now actually appeared. As I rewrite the introduction of this part II, conventional Wall Street wisdom has now become that the correction and volatility are due to the …Read More

2018: A Pivotal Year

Since my last blog, even more volatility has been present in the marketplace (both equities and debt spurred by the narrative that whatever tax legislation was passed by Congress would greatly benefit the economy and especially U.S. corporate profits.  In the two weeks running up to the passage of the Senate’s version of the tax bill, the equity markets moved significantly depending on how any particular Republican Senator intended on …Read More

Turning a Sow’s Ear into a Silk Purse

It wasn’t a big surprise that Wall Street advanced the narrative that the havoc wreaked by Hurricanes Harvey and Irma is actually a positive for the economy, now aided and abetted by the strangest employment report, perhaps of our lifetimes. (Conveniently ignored is Hurricane Maria, which completely wiped out Puerto Ricco’s economy, Hurricane Nate, and the California Wine Country conflagration.) The Recent Data Let’s begin with the most recent underlying …Read More

Deflation’s Persistence Implies Yields Will Be Lower for Longer

Despite what you hear from the TV pundits, the U.S.’s second quarter ended on weakness, and there is little evidence that economic acceleration occurred.  In previous years, slow GDP growth in Q1 was followed by 3%+ in Q2.  Not this time!  The Atlanta Fed GDPNow model, which uses a lot of sentiment indicators, is all the way down to 2.4% for Q2.  I suspect that the Commerce Department’s initial GDP …Read More

At Recession’s Onset, There is No Bell, Bugle, or National Anthem

From my reading of the business media, there are few business economists who believe, like I do, that the probability of a recession in the next 12 months is greater than 50%.  A recession is generally viewed as two consecutive quarters of negative real GDP growth. Looking forward, a recession isn’t inevitable, as there have been ‘soft landings’ in the post-World War II era.  Nevertheless, from my lens, there doesn’t …Read More

Hope is Not a Good Investment Strategy

According to the Bespoke Investment Group, every year, Wall Street analysts declare that the stock market will rise, and since 2000, the annual average forecast has been for a 9.5% gain.  The reality is that the market has only risen at a 3.9% rate over this time frame.  The 2008 forecast was for a market increase of 11%; the reality was -38%.  To say that Wall Street promotes the stock …Read More