Everybody knows you can’t keep borrowing forever. But everyone also believes that the conductors, engineers, and stokers in charge of this train will “do something” to prevent any serious accidents. After all, they’re our elected officials… with their expert PhD appointees. They’re the brightest and the best… Well, aren’t they?
Three times the market has tried to correct – in 1987, in 2000, and in 2008. And three times the Fed has “come to the rescue” with more cash and credit, slashing interest rates and goosing up stock and bond prices through so-called “quantitative
Stocks are near record highs… with the Dow closing at nearly 25,000 last Friday and the so-called FAANG stocks hitting levels not seen since the Nasdaq crash in 2000. Debt is at a record high, too. Not only are the feds borrowing at an unprecedented rate,
The Fed has announced a program of quantitative tightening – in which it sells (or simply allows to expire) the bonds in its portfolio at a rate of $600 billion a year. Meanwhile, the federal government itself has cut taxes, forcing it to cover its
It’s easy to give a crackpot solution. So, to avoid further criticism, we will join the quacks and mountebanks, with a program that is sure to work. You saw the movie, Trading Places? We will simply swap people around.
The cronies always find the “national security” rationale useful. But it is dangerous. The military is pure win-lose. The more you have – except in rare circumstances – the worse off you are.
And when the next recession/crisis comes, the King of Debt, Donald J. Trump, will respond with even more budget-busting initiatives.The feds are running record peacetime deficits with no emergency in sight. GDP is growing. We have “more than full
Now, the Fed – reversing 30 years of policy – strikes a match. After its artificially low rates, and its quantitative easing… it intends to engineer a “soft landing” using its quantitative tightening policy. Instead, it is likely to blow the whole
Investors have been trained to believe that buying publicly listed stocks is a way for them to participate in the growth of commerce and industry… and that by buying stocks, they are “funding” U.S. enterprise. They think they are rewarded with what Wall
The typical shareholder is a long way from the corporate headquarters. He usually knows nothing about what is going on in the business. He may not even be aware that he owns the stock at all. He buys index-tracking mutual funds or exchange-traded funds
Nobody’s gotta buy a Harley. Raise the price, or simply do something that sours buyers on the American brand, and they stop buying. Already, Harley sales are falling all over the world.
Bonds yields are climbing… Today’s chart tracks the yield of the 30-year Treasury bond. As you can see, since its recent low in September 2017...
Finance generally, and liquidity in particular, played a larger and larger role, while actual business – providing products and services – declined. Main Street went down. Wall Street went up. Debt increased. And gradually, the whole economy became
(1) It keeps rates too low for too long. (2) It raises them, causing a serious allergic reaction on Wall Street… which it then medicates (3) with more low rates. It is now in the middle of Mistake 2. And our guess is that a recession/crash will happen
Ever since Alan Greenspan slashed interest rates in response to the 1987 stock market crash, we’ve been watching the Fed give what appeared to be free money to the financial economy. Now, it seems to be taking it away. Mr. Powell says the Fed plans to take
There is no way to “grow your way out of debt” when your income is falling while your debt is still increasing. Instead, you have to suffer the indignities of a correction, including a major reset in the stock market. That is what Warren Buffett is
The story is complicated by U.S. financial sanctions, dollar-denominated debt, anemic oil prices… and many other things. But the basic plot is simple: Venezuela spent too much. It borrowed too much. Now, it is broke. It can’t even keep up appearances.
At last, after months of following clues and spending millions of other people’s money, he’s nabbed some fiendish criminals. Who? A retired St. Petersburg police officer… a 31-year-old web designer… and various other big-time miscreants earning $4 to
In the panic after the 2008 financial crisis, Congress created the Office of Financial Research (OFR) - a group that would sound an alarm if the financial system were ever in danger. Now, 10 years later, stocks are three times as expensive. Debt is far
Yesterday, they discovered that bond prices should be lower (taking into consideration a probable, but not certain, new “quantitative tightening” program from the Fed… as well as the latest print on inflation). As prices fell, the yield on the benchmark
Some areas have done well – boosted by the pumping up of asset prices going on for the last 30 years. The number of multimillionaire has surged. The average man, however, has not gained a penny. The latest figures show that a man over 25 earns an average
There’s more debt. Stock and bond prices are higher than ever before. In the next crisis, the puny reserves now available to the Fed will not be nearly enough. So the Fed is busily trying to stockpile interest rates – hiking them to a more “normal”
Gold is up 9% since this time last year. But it’s been a volatile ride. Over that time, there have been five drawdowns – or peak-to-trough price falls – of at least 4%.
Now, the Fed – clueless as ever – has once again made its intentions known. It’s going to raise interest rates and let the bond pile it built up during QE shrink… removing an important prop from the market. How long will it take traders to put two and