To understand the Fed, one has to understand their “dual mandate.”  They are charged with minimizing both inflation AND unemployment.  What could be wrong with that? This dual mandate came about when Keynesian economics was the dominant school of thought.  One Keynesian principle is something called the “Phillips Curve,” which looks like this: You can see … Continue reading A Divided Fed . . . So What?

Yesterday, the Dow rose 254 points.  It was a perfect storm of sorts.  The early morning economic report on consumer spending was surprisingly strong.  There was breaking news that three Greek banks were merging, thinking that they would have better access to the market.  (Today, they will look more like three drunks trying to hold … Continue reading Reports, Breaking News, Rumors . . . and Silence

Years ago, when I was thinking about retiring from banking and starting my own investment advisory business, a good friend and client suggested I spend some time at her cabin high in the mountains of Wintergreen.  Unfortunately, the weather was not great.  There was a low ceiling, and we found ourselves inside the cloud, literally.  I could … Continue reading Head in The Cloud

Today, Wall Street waited and prayed that Bernanke would save us from another recession by announcing another round of quantitative easing or QE3.  He disappointed us, and the Dow promptly dropped over 200 points. But, then somebody wondered why he refused to do anything else to help us and noticed it was because we don’t … Continue reading The Joy of Disappointment

For the first three days of this week, the stock market coasted serenely past earnings surprises, merger announcements, and economic reports.  We were secure in the knowledge that “Uncle Ben” Bernanke would once again preserve our economy, as he has done since the Global Financial Crisis in 2007. Yesterday, the realization began to sink in … Continue reading It’s Showtime!

When a deal falls apart after the handshakes, you can usually blame the lawyers.  You may have thought the Greek bailout was behind you, and Europe was now focused on the bigger problem of Eurobonds to bailout the whole of Europe.  You would be wrong, unfortunately. The bailout of Greece will NOT happen, and the fault … Continue reading Still in the Rear View Mirror

While I don’t like Goldman Sachs, I do respect their research.  Reading their latest “Market Pulse” is always interesting. They expect our GDP growth will slow to 2-2.5% through the end of 2012 but still expect the S&P to reach 1400 by year-end, which would require one raging bull very quickly.  They believe the stock market has … Continue reading Checking In With The Vampire Squid

World markets were mixed overnight but generally calm.  The Dow will probably open up about 80 points this morning.  Despite the good news out of Libya, oil is not reacting strongly.  Only gold is showing any drama, back up to $1,880 again. On the calendar, the most important item this week is Bernanke’s speech at … Continue reading Calm Before the Storm?

Accepting the premise that “he who has the gold makes the rules,”  I’ve been thinking about the most likely end-game for the European crisis. The Euro zone is not the United States of Europe.  We have one monetary policy and one fiscal policy.  They also have one monetary policy but twelve fiscal policies.  A unified monetary … Continue reading Could Greek Retirees Do For Germany . . . What World War II Could Not?

Warren Buffett once said he would rather be the broker than the partner of anybody who thinks they can predict the market.  That’s good advice! Yesterday, John Bollinger, who is a highly respected market technician and developer of the Bollinger Bands, predicted we are now putting in the bottom of this bear market.  Also, Rick … Continue reading A Technical Prediction

At 3:00 AM this morning, I was watching Bloomberg as the European markets opened and heard “stocks slide around the world as the U.S. slips into recession.”  Talk about a rude awakening! The U.S. may slip into another recession, especially if Europe cannot get its act together, but the odds are no worse than 1-in-3.  … Continue reading The Joy of Insomnia

Normally, we talk about commodities as a single asset class, as they have the common characteristics of benefiting from both growth and inflation.  In other words, they’re normally good to own during the expansion part of the cycle but not the contraction part of the cycle.  They’re also reasonably good inflation hedges.  But, take a look … Continue reading A Tale of Two Commodities