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The Fed’s Ill-Designed Inflation Policies

On Thursday, August 27, Fed Chair Jay Powell spoke at the Fed’s annual Jackson Hole symposium. His talk was much anticipated, as it was expected that the old 2% inflation objective would be updated. In fact, the Fed had telegraphed the change; and the Fed has been following the newly announced policy for several months. The policy change allows the Fed to permit inflation to exceed the Fed’s announced 2% target without …Read More

The Inflation Scare

Interest rates backed up last week.  The 30-year T-Bond, which was 1.19% on August 4, closed at 1.44% on Friday (August 14).  The 10-year T-Note closed at 0.71%.  It was 0.52% on August 4.  The CPI showed up with a +0.6% M/M rise (7.4% annual rate) for July.  That pushed the Y/Y rate to +1.0% from +0.6% in June.  Clothing prices rose +1.1% M/M in July.  They had risen +1.7% …Read More

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

The Opposite: The Market Takes A Cue From Seinfeld

The Opposite In one of the 1990s Seinfeld episodes known as “The Opposite,” George Costanza decides to make decisions opposite of what his “normal” instincts would tell him to do. The results of his “opposite” actions were a beautiful girlfriend, a standing ovation, and a job with the N.Y. Yankees! Today’s equity market seems to be behaving similar to George, choosing to do the “opposite” of what one would normally expect from …Read More

With GDP at 2.3 percent and gold prices low, should you buy?

The data on the economy has been mixed of late, and the price of gold has tanked again. In what follows, I try to analyze these trends. The U.S. Economy U.S. GDP growth of 2.3 percent in the second quarter appears, at first glance, disappointing. But given the very significant headwinds in the manufacturing sector (recession in the oil and gas industries), the strong dollar, and falling worldwide demand which …Read More