The Stock Market Continues to Climb the Wall of Worry There is always a good reason not to invest in the stock market, but you may miss a significant portion of your capital growth. Image: Bank of America Merrill Lynch
How to Get Inflation? Mainly, inflation comes from excess money supply growth. There is too much money in the system chasing too few goods and services. Nominal GDP = M x V = P x T M = quantity of money V = velocity of circulation of money P = level of prices T =…
Europe’s Stocks Are Really Unloved Europe’s benchmark has lagged other major ones in recent years. But on the positive side: the valuation is low, Europe will not disintegrate, the rotation from bonds to equities has not yet begun, and there is a fairly good growth in 2019. Image: Bloomberg
Are We Near a Recession? “The leading index for each state predicts the six-month growth rate of the state’s coincident index. In addition to the coincident index, the models include other variables that lead the economy: state-level housing permits (1 to 4 units), state initial unemployment insurance claims, delivery times from the Institute for Supply…
When Is the Next Recession Coming? If history helps us to predict the future, a recession can occur when: Wage Growth minus Fed Funds Rate is below -1%. Why? Because the Fed is too tight at that moment. Since 1965, a recession has never occurred until Wage Growth minus Fed Funds Rate was below -1%…
Record Valuation Dispersion 1951-2017 Today, there’s an extreme valuation divergence. The crowd invests in the most expensive part of the market. And the Value vs. Growth differential has never been so extreme, even during the Great Depression and the Dotcom bubble. Source: Sound Shore Management
Why the Fed Can’t Raise Interest Rates Above Inflation Rate, Today? The Federal Reserve can’t raise the Fed funds rate above the inflation rate because the US productivity growth is too weak.Net Domestic Investment to GDP is in a long-term downtrend and reduces productivity.This makes it difficult to see the Fed funds rate exceed the…
Where Does Inflation Come From? Mainly inflation comes from excess money supply growth. There is too much money in the system chasing too few goods and services. Over the long term, Nominal GDP = Money Supply x Velocity of Money = Inflation + Real Economic Growth “Inflation is always and everywhere a monetary phenomenon.” –Milton Friedman. You…
Why Do Eurozone Bond Investors Accept Zero Long-Term Interest Rates? Because they have a deflationary view of the euro area economy. Now, investors are losing so much money just by holding German bonds in real terms (adjusted for inflation). Today, the Germany 10-Year bond yield hits 0% again. Keep in mind that raising interest rates in…
What Will Cause The Next Recession – Paul Krugman On UBI And More Nobel Prize-winning economist Paul Krugman speaks about the next recession, income inequality vs. growth, wages, universal basic income (UBI), redistribution and geographic inequality. https://www.youtube.com/watch?v=Ja2PY2CnpOQ
Why Potential GDP Has Been Cut in Half Since the 1950’s? The main reason is a lower productivity than previous business cycles, due to: – lower population growth – the service sector is growing faster than the industry sector – lower quality jobs in the service sector have a lower productivity than in the industrial…