I just returned from a speaking engagement in Tennessee where I decided to do a “low tech” presentation on the current state of the financial markets. Low tech means no PowerPoint slides… just good old-fashioned notes on a yellow pad. I thought I would share what I wrote down on the way to Nashville:
Inflection Point: (N) – Mathematics – A point on a curve at which the curvature changes from convex to concave or vice versa. In describing our current thinking, I have to resort to an investment writing cliché where the financial markets are described as being “at an inflection point.” While the mathematical definition for an inflection point…
Just two days ago the 4th quarter GDP came out as a negative number, which was much worse than expected. In fact, not one of 83 analysts had anticipated a negative number, meaning they were all too bullish on the 4th quarter growth number. But yesterday the Chicago Purchasing manager’s index, a growth barometer, was…
In my last column, I described a bearish scenario where the markets come to the realization that the monetary authorities are out of bullets. This was simply an exercise in critical thinking and doesn’t actually line up with our current forecast, and I did promise I would come back with a bullish scenario.
One of my favorite scenes in the Pixar movie Finding Nemo comes at the end. The fish had managed to outwit the Dentist (who was holding them captive in a tank) by dirtying the water enough to force a water change. In order to do that, the Dentist had to bag the fish and leave…
The Federal Reserve spoke yesterday, and not surprisingly decided to buy more treasury bonds to keep expanding the balance sheet. It might have been a bit surprising that they have now also explicitly targeted an improvement in the unemployment rate (6.5%) and stated a tolerable inflation band (2.5%) for investors to use as guides for…
Everybody knows that the dice are loaded. Everybody rolls with their fingers crossed. Everybody knows that the war is over. Everybody knows the good guys lost. Everybody knows the fight was fixed. The poor stay poor, the rich get rich. That’s how it goes, Everybody knows. Leonard Cohen, “Everybody Knows”
Right now we sit in an unusual place in financial history: World fundamentals are taking a back seat to policy makers who are defending the current system with new monetary tools. As market analysts, we’ve watched the perpetual bull and bear debate grow as divisive as ever, and while both camps have impressive arguments, neither…
Bearish investors look at the chart below and immediately notice that Fed intervention in the form of QE1 and QE2 (quantitative easing program 1 and 2, or perhaps more accurately, money printing programs 1 and 2) occurred after substantial market declines. QE1 is announced after the Lehman Brothers collapse in 2008 and QE2 is hinted…
