Last week, the stock market got pounded when Ben Bernanke repeated his plan to begin withdrawing quantitative easing. This means the Fed would buy fewer government bonds than the $85 billion they are buying each month . . . like, say, $84 billion. In other words, no big deal! Still, the market did what it does best . . . over-react. This week, more attention…
Wall Street’s infamous Vampire Squid, AKA Goldman Sachs, has issued their latest quarterly assessment. I take their thoughts seriously, even though I don’t trust anything they say. Here are some of their current thoughts: 1. “Global markets have started to worry that the US economy is moving a bit too nicely over the hump of fiscal contraction.” Paging Congress — are you listening? Never mind .…
Republicans use the word “taxes” too much.Democrats use the word “fairness” too much.Existentialists use the word “absurd” too much. Thursday’s market convulsion was absurd, losing 354 points! Yes, yes, it was partially due to bad data coming out of China, but it was primarily due to the absurd reaction of U.S. traders (not investors) to Ben Bernanke’s press conference on Wednesday. In the real, rational…
It takes thousands of hours studying economic textbooks and decades of experience to be even a fair economic forecaster. Last week, a noted hedge fund operator, whose expertise was forecasting, said his skills were irrelevant in this market. His argument was that Ben Bernanke, Chairman of the Federal Reserve System, has suspended the laws of economics. He said the trading game is now fixed .…
I have a relative whose only ambition in life was NOT to work. It was a negative ambition that I never understood. Sadly,it is also a “luxury” that fewer and fewer people have.The Great Recession has many older Americans considering the prospects of staying in the workforce past their normal retirement age. But, working past your normal retirement age is not a new necessity. According…
I just re-read one of the best investment books ever written: Unexpected Returns: Understanding Secular Stock Market Cycles, written by Ed Easterling in 2005. When I read it the first time, the most interesting lesson was what he styled the “Y-curve effect.” He demonstrated pretty clearly that PE multiples decrease whenever there is a change in the rate of inflation. In other words, investors will…
Yes, yes, I know the sky really is falling this time! Europe still tries to maintain one currency with seventeen different fiscal policies. Derivatives still present a clear and present risk to both the market and the economy. Still, nobody knows what caused the infamous Flash Crash on May 6, 2010 or how to prevent another one. And, we just learned that traders can buy…
Years ago, I realized that I was working for a crook. After carefully nailing down the details, I went to the FBI and later testified against him. Although he is probably out by now, the last I heard, he was serving time in a Federal prison in California. During the infamous Savings & Loan crisis in Texas, the Governor appointed me to the Texas State…
When I was a boy, there was a turnip farm about an hour’s walk away. In those pre-citified days before I learned fancy ways, it was not unusual for me to simply pull a turnip out of the ground, brush the dirt off with my pants and eat it raw. But, the reason I went to this little farm was that there was a small,…
The stock market has been drifting down over the past few weeks, almost entirely due to the concern that the Fed may start “tapering” or reducing QE3 from $85 billion monthly to something lower, like maybe even $84 billion. The stock market is afraid of this! And, because the Fed has said they will begin this when unemployment hits 6.5%, the monthly Jobs Report this…
The economy is clearly showing signs of recovery, albeit a weak one. Investment pundits on Wall Street are mostly enthusiastic about a continued bull run. Yes, the market over-reacts to any comments about quantitative easing (QE), forgetting that reduced QE means the economy is getting better. But, of course, that’s what the market always does: it over-reacts. Against this generally bullish environment, I have feared…