The Wall Street Journal – John B. Taylor: The Fed Needs to Return to Monetary Rules The economic outcomes when the central bank plays it by ear have not been good, especially in the last decade. In my view more is needed. The big swings between discretion and rules that have characterized Fed history—and the… Continue reading Should The Fed Return To Hard Rules?
<Click on chart for larger image> Yahoo Finance – “It looks like a peak”: Robert Shiller’s CAPE is waving the caution flag Major stock averages remain in earshot of all-time highs and this bull market has been nothing if not resilient, repeatedly defying predictions of its demise for five-plus years. Still, Robert Shiller, Yale professor… Continue reading Revisiting The Fed Model
Market Watch – Has the beginning of the end of the bull market begun? As profitability reverts to the mean, stocks will stagnate or decline Here’s the sobering data: According to the latest calculations of the U.S. Department of Commerce, corporate profits in the first quarter of this year represented 8.8% of gross domestic product.… Continue reading More On Struggling Profits
The Economist – Same old song: Market conditions bear a worrying resemblance to those of 2007 The general view as 2014 began was that equities would continue to do well (Wall Street enjoyed a stonking 2013, with the S&P 500 gaining 30%). This view has been undented by a volley of bad news, including a… Continue reading Does It Look Like 2007?
The Financial Times – Pimco runs risks in turning up the ‘vol’ Unlike smaller fixed income funds that might just buy and sell bonds, the $230bn Pimco Total Return fund is a clever user of derivatives trading strategies, Mr Gross went on to explain, and Pimco is one of the biggest sellers of insurance against… Continue reading Pimco Sells Vol
Zero Hedge – When The Herd Turns “In economics, [the mainstream] rely on experts who don’t know what they are talking about,” explains Professor Steve Keen in this brief but compelling documentary discussing ‘when the herd turns’. “Herd behavior is a fundamental aspect of capitalism,” Keen chides, but it is left our of conventional economic… Continue reading When The Herd Turns
The Wall Street Journal – U.S. Economy Shrinks by Most in Five Years Final Revision for First-Quarter GDP Shows 2.9% Contraction The U.S. economy contracted at a faster pace than previously estimated in the first quarter, marking its sharpest pullback since the recession ended five years ago. Gross domestic product, the broadest measure of goods… Continue reading Why Yesterday’s Bad GDP Matters
MoneyBeat (WSJ Blog) – Hedge Fund Industry Surpasses $3 Trillion for First Time The hedge-fund industry exceeded the $3 trillion barrier in May for the first time ever, according to one research firm, as new allocations and performance gains pushed total assets to a new record. Some $22 billion flowed into hedge funds last month,… Continue reading Hedge Fund Industry Grows Despite Results
The Financial Times – Lex: Central banks: investing in equities Central banks may be keen to promote transparency in the interests of financial stability, but just try to get one to open up to outside scrutiny. Details about how they invest their estimated $12tn in reserves are locked up tighter than, well, Fort Knox. So… Continue reading The Potential Effect Of Central Banks Buying Equities
Real Time Economics (WSJ Blog) – The Unreliable Nature of Forward Guidance Reprimanding Gov. Mark Carney for having repeatedly changed his guidance on when the central bank’s benchmark interest rate would rise for the first time, the opposition Labour Party’s Pat McFadden concluded that “people are left not knowing where they stand.” Expectations as to… Continue reading Central Banks Confuse As Much As Enlighten With Forward Guidance
MoneyBeat (WSJ Blog) – Here’s How Quiet it Really Is on Wall Street Stocks are slightly higher Wednesday in another low volatility, low volume type of trading session. A round of discouraging economic data didn’t cause much of a stir in financial markets, as the major stock indexes haven’t budged much from recent levels. The… Continue reading Yet Another Way To View Low Volatility