19 Nov 2014

Are Banks Safer?

The mantra coming out of the 2008 financial crisis was that banks that are ‘too big to fail’ are simply too big. Our government passed the Dodd-Frank Wall Street Reform and Protection Act and the countries from the G20 got together to create the Financial Stability Board (FSB) in an effort to create a safer banking system. One of the great ironies of the too big to fail problem is… Read More

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18 Nov 2014

Japan is in Recession. When is it Not in Recession?

Not a single major Wall Street economist forecast that the Gross Domestic Product (GDP) in Japan contracted in the third quarter, so yesterday’s economic release that showed an annualized loss of -1.6 percent came as a real surprise. The average forecast, according to the Wall Street Journal was for a positive gain of 2.25 percent. The chart below shows the growth of the US and Japanese economy from an equalized starting… Read More

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10 Nov 2014

Mano a Mano with Ben Bernanke

The highlight of last week’s Schwab Impact conference for me was seeing, and then meeting, former Federal Reserve Chairman Ben Bernanke. Initially, Bernanke came to the stage in front of nearly 5,000 attendees and gave a 10-15 minute speech about the Federal Reserve’s response to the 2008 financial crisis. He then did a 45 minute question and answer session with Schwab’s Chief Investment Strategist, Liz Ann Sonders, who did a… Read More

31 Oct 2014

GDP Treats Investors

The consensus growth forecast for third quarter GDP was 3.00 percent, so markets responded happily to the 3.55 percent reading from the Bureau of Economic Analysis. The largest contribution to growth came from net exports, which grew at a rate of 1.32 percent and consumer spending added 1.22 percent while inventories were a negative contributor at -0.57 percent. I am always a little confused by how the government reports GDP… Read More

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9 Oct 2014

When The Fed Speaks, The Market Listens

Unlike most central banks, the Federal Reserve has what is known as a dual mandate: to foster full employment and stable prices. Generally speaking, doves are thought to focus more on full employment at the expense of inflation and, theoretically, hawks are more willing to accept higher unemployment for the sake of stable prices. Of course, in reality, everyone is in the middle somewhere, since no one wants high unemployment… Read More

20 Sep 2014

Why Aren’t Interest Rates Higher?

With a lot of focus being put on the coming end to the Federal Reserve’s quantitative easing campaign, this article will delve into some of the other factors impacting interest rates in the US. The Federal Open Market Committee (FOMC) has maintained a steady course ever since Chairman Bernanke first hinted at the end of quantitative easing in the spring of 2013. The “Taper” which is scheduled to complete this… Read More

17 Sep 2014

ALM Insights – September 2014

ALM Insights is focused on banks and other institutions that use their portfolio to manage risk on both sides of their balance sheet. It takes an in-depth look at securities investment strategies, balance sheet and asset/liability strategies, regulatory topics and general economic information. To view this issue, click the image below. In This Issue: What if You Called The Market Perfectly? The Impact of Fed Tightening Why Aren’t Interest Rates Higher?

8 Sep 2014

Markets React to Disappointing Jobs Data

The employment situation in the US was worse-than-expected in August, according to new data from the Bureau of Labor Statistics. The headline unemployment rate fell from 6.2 to 6.1 percent, but as it is often the case, the headline rate doesn’t tell the whole story.  For starters, one of the largest contributors to the decline can be explained by a lower unemployment rate among teenagers and other less-educated workers. The… Read More

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3 Sep 2014

Falling Dollar Fallout

Five years ago, dire predictions were a dime a dozen. It was, after all, a very scary time fraught with uncertainty. Amid all of the dreadful forecasts, one bothered me a lot less than the others: the US dollar would collapse leaving Americans pushing around wheelbarrows of worthless cash in order to buy just one loaf of bread like in Germany’s Weimar Republic. The idea was that the Federal Reserve… Read More

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7 Jul 2014

Unemployment Report Does’t Disappoint

The fireworks started a day early on Thursday with the Bureau of Labor Statistics announcement that employment increased by 288,000 in June and that the April and May numbers were revised upward by a combined 29,000 jobs. June marked the fifth month where more than 200,000 jobs were added per month and averaged more than 250,000, a streak that we haven’t seen since the late 1990s. Furthermore, the unemployment rate… Read More

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