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This week, the Federal Reserve updated their economic projections. They are now forecasting 1-2 rate cuts this year, and by the end of 2025, they predict rates will be 1% lower. The labor market remains strong with low unemployment, and the inflation rate has decreased but is still over the 2% target. Depending on the […] Read the full article…
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• Ten Year Treasuries touched 5% on October 19th, up 1.43% since Jan 1. • Two-year rates exceed ten-year rates in July of 2022 (yield curve inversion). • In the past, yield curve inversion has always signaled recessions. • The recessions typically have occurred 18-24 months after inversion. Over the course of the past months, […] Read the full article…
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• The Federal Reserve is aggressively raising rates (1.5 – 1.75%), but continues to lag the market with 2-year Treasuries at (2.8% on July 5). • The economy is likely to go into a recession, if not already in one (based on the Atlanta Fed GDPNow forecast). I expect the recession to be shallow. • […] Read the full article…
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• In it’s March 15 statement, the Fed said that, ‘in the near term the [Russian] invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity’. The Fed raised rates just .25% • Bonds rates have risen sharply this year and most of the yield curve is […] Read the full article…
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In Feb 2021, I wrote an article warning people about frenzies in the IPO and SPAC markets (posted here) I cited a working paper that said, ‘We find, first, that for a large majority of SPACs, postmerger share prices fall’ reference here In May of 2021, the SEC took the extraordinary step of warning investors […] Read the full article…
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For most of 2021, Fed Chairman Powell was talking about inflation as being transitory. Now Powell is talking much tougher on inflation. During his confirmation hearing on January 11, he said the following, “As we move through this year … if things develop as expected, we’ll be normalizing policy, meaning we’re going to end our […] Read the full article…
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Economic charts may be as boring as they come… but not this one. Below we have a chart of US Real Disposable Income. Pandemic aid and enhanced unemployment payouts took what was a steady 2.6% growth over the last 10 years and generated a big shock up in income. Here we see massive pandemic aid […] Read the full article…
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We have been hearing about inflation concerns for months. On Wednesday, Federal Reserve Chairman Jerome Powell said temporary inflation could last into next year. Also on Wednesday, the normally very bullish Prof of Finance, Jeremy Siegel from Wharton said a fresh surge of inflation is making him nervous. He went on to say, that inflation […] Read the full article…
S&P 500 earnings estimates for 2021 and 2022 continue to look very strong. Average earnings growth from 2008 – 2019 averaged just over 10%. Earnings forecasts from 2019 through 2022 are forecasted to grow at rate of 12.3%, including the pandemic dip. This is based on S&P Dow Jones estimates for the S&P 500 companies. […] Read the full article…
(Photo: Larry Johnson, cc2.0)
In a speech this morning, Jerome Powell, head of the Federal Reserve, said that the economy had met the test for ‘substantial further progress’. He went on to say that the Federal Reserve could begin tapering asset purchases this year, but that the Federal Reserve will be patient when it comes to raising interest rates. […] Read the full article…
(Photo: Edmund Garman, cc2.0)
In July, the board for the Oregon Public Employee Pension System (PERs) cut return assumptions from 7.2% to 6.9%. The 6.9% return assumption was well above that recommended by the investment consultants Meketa Investment Group and the actuary for PERs Millman. Meketa recommended a 6.6% assumption while Millman recommended 6.27%. According to NASRA, based on […] Read the full article…
Inflation is a highly persistent topic for the media and for some clients as well. Today, let me summarize my outlook and portfolio strategy. • We have short-term inflation; Long-term inflation is the open question • Much of the inflation we do have is due to supply-demand shocks • Consensus opinion of macro economists & […] Read the full article…
On Monday, Vanguard’s Investment Strategy Group released their monthly economic and market update. • Vanguard expects 7% GDP growth for the full year 2021 • Inflation is expected to peak this year and decline in 2022 • Interest rates for the 10Y are expected to rise late 2022 reaching 3% in 2024/5 Vanguard’s team noted […] Read the full article…
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Yesterday we got the news that a bipartisan group of ten senators have reached a tentative deal on infrastructure spending. My first reaction is very positive. Could the two sides actually come together and agree on infrastructure? It’s still early in the process, but let’s see if they can get it done. We don’t have […] Read the full article…
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• The Case-Shiller National Home Price index hit a record high adjusted for inflation at the end of March • At the same time, new home starts fell 13 percent month over month in April • Builders are facing issues with increased raw materials costs, labor shortages and affordability issues Over the long run, home […] Read the full article…
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Mid- to late March of last year the Covid 19 shutdown of the economy was well underway. The government response was every bit as unprecedented as the shut-down. Today, I’d like to take a big picture view of what happened, where we are and what happens next. Let’s dive in. What happened? Decisions made by […] Read the full article…
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I’ve been investing for over 35 years and having lived through a number of speculative bubbles you start to get a feel for them. Today, I believe we have some pockets over very over-valued assets such as certain high growth tech and biotech stocks and SPACs. So, today I want to talk a bit about […] Read the full article…
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• In a CNBC interview yesterday, Janet Yellen said, ‘I think the price of doing too little is much higher than the price of doing something big.’ • She argued that unemployment would be 10% if we measured it correctly. • She said inflation is not a big concern because the Federal Reserve ‘has tools’ […] Read the full article…
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This is a question that comes up from time to time. Let’s look at Bitcoin from three ways: first as an investment. second as a way to generate speculative returns, and third as a hedge or option that will payoff if we end up with substantial inflation or dollar weakness. Think of the last category […] Read the full article…
(Photo: Mike Mozart
This past weekend I watched a clip from Bloomberg with an interview of a fellow in Ireland who made his first investment ever. He took his entire $300 savings and bought two shares of GameStop. His rationale was that someone had given him a tip. I hope it works out for him. Now don’t get […] Read the full article…
