Commentary

Shiller’s ECY Makes Relative Sense, but the Market’s Absolute Return May Be Another Story

It often happens that associations which end up leaving an indelible mark on our collective memory of certain market events are the result of sheer happenstance

Commentary

This Era May Come to Be Remembered as the Federal Reserve’s Third Great Mistake

The Great Inflation of the 1960s and 70s, the earliest stages of which were already underway when Graham spoke at the St. Francis Hotel, eventually produced some of the most astonishing economic dislocations in U.S. history.

Commentary

Recession is On the Way: Questioning One's Sanity; Beat the Crowd, Panic Now!

In 2006-2007 I called for a recession. We got a big one. I called for another one in 2011, as did the ECRI. That recession never happened. 50% is not a very good recession predicting track record except in comparison to consensus economic opinions that have never once in history predicted a recession. Consensus opinion is batting a perfect 0.00%
Commentary

Diving Into the Payroll Report: Wages Rebound (But Don't Get Too Excited), Revisions, Huge Jump in L

Wages rebounded from the dip last month (but don't get too excited as per details below). Also, there were big upward revisions to many prior numbers. The unemployment rate rose this month because of a huge increase in the labor force. The civilian institutional population also leaped this month, and apparently these newly-found people are all looking for work.
Commentary

Germany's "Time Pressure" Thesis; Noose Tightens on Europe

Today German Chancellor Angela Merkel proclaimed Greek Diplomatic Offensive Is Failing. Merkel’s Christian Democratic-led bloc in parliament has agreed not to give in to any “bad compromise that “defacto adds up to a debt writedown,” Hans-Peter Friedrich, a deputy leader of the caucus, said in an interview today.
Commentary

Australia Coming Apart at the Seams

With the huge spotlight on Europe, Greece, the US Dollar, Canada, Switzerland, and China, it's easy to lose track of major things outside of mainstream attention. Like what? Like Australia. Australian Government on Brink of Collapse
Commentary

Gallup CEO Calls 5.6% Unemployment Rate "The Big Lie": What's a Realistic Unemployment Rate?

On Linked-In, Gallup CEO, Jim Clifton proclaims 5.6% unemployment is "The Big Lie". And it is. I have talked about this for years, but perhaps it would be interesting to hear the same thing from a CEO of a big agency. I picked this story up from ZeroHedge.
Commentary

Diving Into the ISM: What's It All Mean?

This morning the Institute for Supply Management released its much followed Manufacturing ISM® Report On Business®.
Commentary

Fed "Mystified" Why Millennials Still Live at Home; My Answer May Surprise You

A New York Fed research paper wonders Whats Keeping Millennials at Home? Is it Debt, Jobs, or Housing?
Commentary

Japanese Style Deflation Coming? Fed Falling Behind the Curve?

There's some interesting discussion points in the UK-based Absolute Return Partners October 2014 Letter, by Niels C. Jensen, most of which I agree with, others not.
Commentary

Reflections on 2013: What's Important, What's Not, and What's Ahead

A tale of 2 halves with lingering questions characterizes what we can say was the story for housing for 2013. In the first half of the year, rates were low as the 10 year note was well under 2%. People were still refinancing, as home prices rocketed. Multiple bids were common, and pundits like Ivy Zelman cheered the improving market with praise like "Housing is in Nirvana".
Commentary

Attention Investors: Don't Fear Rising Rates; Fear Perpetually Low Rates

This months Insight will take a look at the performance of bonds during two previous inflationary periods, the 1940s and the 1970s, and illustrate two very different total return experiences. Through these examples, we will show that bond investors-- and by extension, any investor with a traditional balanced portfolio, should not fear rising rates as much as they should fear perpetually low rates.
Commentary

Prepare for the 1-2 Punch of Declining Earnings and Multiple Contraction

The market today is counting on continued earnings growth driven in large part by ongoing quantitative easing without inflationary consequences. In a recent strategy letter, we show that the markets expectation for future earnings growth is overly optimistic based on the fact that earnings are currently more than 40% above the long-term trend and mean-reversion and history suggests that real earnings are likely to decline over the next 5 years.
Commentary

Inflation Lags Monetary Expansion: Prepare to be Swindled

In May 1977, the consumer price index (CPI), which measures a basket of consumer goods in the U.S. economy, had risen 6.7% from the year before. The indexes had doubled over the previous 15 years, and by 1977 investors were fully aware that the rate of change was increasingi.e. the inflation rate was spiraling higher. By then, this inflationary awareness had worked its way into every corner of the financial markets, as commodities, gold and interest rates rose, and the stock market remained in a deep funk.
Commentary

Where Are the Bears? Evidence vs. Anecdotes in Assessing Market Sentiment Over a Full Market Cycle

Imagine the stock market as a national park with just three kinds of animals: bulls, bears, and pigs. The saying bulls make money, bears make money, pigs get slaughtered conveys the idea that one can be bullish or bearish and be successful depending on the market environment, whereas greedy pigs are almost always set up for catastrophe.