18 Jul 2016

Is Helicopter Money Coming to Japan?

The S&P 500 was up 1.49 percent for the week, which was actually the third straight weekly gain of more than one percent. The continued ramp up in policy support expectations was a widely discussed positive for the week.  Much of the focus was on Japan, where Prime Minister Abe’s ruling coalition scored a landslide victory in the upper house last Sunday. Abe ordered his ministers to immediately begin compiling an economic stimulus… Read More

5 Jul 2016

Why Did Stocks and Bonds Gain Last Week?

One of the interesting things about the stock rally last week is that bonds also rallied.  Over longer periods, stocks and bonds are lowly correlated, which means that they are generally independent from each other. Over very short periods, especially when there is a lot of activity, stocks and bonds are usually negatively correlated.  If you had told me that stocks would rebound sharply last week and gain 3.27 percent, which reversed most… Read More

22 Jun 2016

A Cloud on the Horizon

“Businesses are Falling Behind on Their Loans Like it’s 2008.”   This is a headline that popped up on my Bloomberg TOP news screen recently.  Since the financial crisis, every bank I have talked to has been focused on increasing C&I lending.  After being snake bit by real estate, banks have all chased after commercial loans.  That makes a headline like this particularly alarming and a situation worth further investigation. Looking… Read More

22 Jun 2016

Bullard’s Errant Dot Matches Market

In the market summary section above the performance table yesterday, I mentioned that St. Louis Fed President James Bullard had broken ranks with his fellow Fed members and his previous statements and said that he expected rates to stay even lower for longer. I made a quick reference to the famous ‘dot plot’ and said that his dots were pretty far from the consensus.  I thought today I would show the dot… Read More

28 Apr 2016

Fed Stands Pat For Now

As expected, the Federal Reserve left policy unchanged.  For the third straight meeting, they left out any assessment of the balance or risks and said that they ‘continue to monitor inflation indicators and global economic and financial developments. The big concern going into the meeting was that the Fed could describe risk as more closely balanced, potentially providing a strong signal for a June rate hike. The statement no longer… Read More

16 Feb 2016

Fed Policy: From ZIRP to NIRP?

In the third quarter last year, I wrote at least two articles that used the acronym ZIRP, which stands for ‘zero interest rate policy.’  At the time, all of the conversation was about how the Fed was ending ZIRP with their first interest rate hike in seven years. Today is the two-month anniversary of the hike and the discussion has moved from ZIRP to NIRP, which stands for ‘negative interest… Read More

5 Feb 2016

Interest Rates in Perspective

So far, 2016 has been full of surprises, but most of the attention has gone to wildly volatile oil and stock prices.  Less noticed, but equally important, has been the boost on bond prices, as seen by the dramatic fall in bond yields. The 10-year US Treasury note, the bellwether benchmark, started out the year yielding 2.27 percent, 10 basis points (a basis point is one hundredth of one percent)… Read More

28 Jan 2016

As Expected, Fed Stands Pat

As expected, the Fed maintained their policy stance yesterday in their first meeting of the year and left interest rates unchanged.  The statement noted that the Fed expected ‘only gradual increases’, given their current economic outlook. The statement revealed their softer view on economic activity by removing its reference to economic activity ‘expanding at a moderate pace’ and noted the slowdown in growth late last year. The also took out the… Read More

22 Jan 2016

Stock Losses Take a Breather

Yesterday at lunch, when stocks were down more than three percent, I was reading market analysis and one analyst said that investors were disappointed by the ‘lack of policy response.’ That really struck me because markets were off sharply and it hadn’t occurred to me that the Federal Reserve hadn’t said anything material this year that might shore up stocks. Although we are steeped in losses very early in the… Read More

15 Jan 2016

Insight: Fed’s Backing Down

Comments from central bankers have been dovish in recent days – they seem to be backing down from earlier statements that suggested that the fed funds rate could increase by one percent or more this year. St. Louis Federal Reserve President James Bullard noted that ‘with renewed declines in crude oil prices in recent weeks, the associated decline in market-based inflation expectations measures is becoming worrisome.’ He further said that… Read More