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[5 Sep 2017 | No Comment | ]

The hits keep coming. Hurricane Harvey left destruction in its wake, and now, Hurricane Irma has Florida in its sights.

It’s been five years since Hurricane Sandy, nine years since Ike and twelve years since Katrina. As with all major weather events, personal tragedy, pain, suffering, and loss are left in their wake. We have prayed, and continue to pray, for those affected. But at the same time, in our job as economists we look toward rebuilding and economic restoration. This is where investors often make two different mistakes about how …

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[23 Aug 2017 | No Comment | ]

While the Sunday morning talk shows discuss the number of Civil War monuments that can dance on the head of a pin…and a rare Eclipse grabs focus…investors might be shocked at how the economy has accelerated.
Although we still have more than a month left in the third quarter, and many more pieces of data to come, as of August 16th the Atlanta Fed’s “GDP Now” model, which tracks and estimates real GDP growth, says the economy is expanding at a 3.8% annual rate in Q3. If correct, that would be the fastest pace for any …

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[8 Aug 2017 | One Comment | ]

For many years now a relatively large contingent of analysts, investors and journalists has been convinced the stock market was in a bubble because the “Shiller P-E” ratio was just too high. Back on 8/12/2013, in our Monday Morning Outlook, we made our case that the Shiller model was too pessimistic. Now that looks like a pretty good call.
In the past four years, the bull market in stocks has continued, with the S&P 500 generating a total return – including both share price increases and reinvested dividends – of almost 60%, …

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[14 Jun 2017 | No Comment | ]

When the Federal Reserve raises rates by another quarter percentage point on Wednesday, you’re going to see many stories about monetary policy getting tight and the potential threat that poses for the economy in general and the bull market in stocks in particular.
As usual, you should discount the conventional wisdom. What’s really going on is the Fed is getting “less loose,” not “tight” and there’s ample room for the Fed to stay along this path without risking a recession or a bear market. The banking system is full of excess …

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[18 Apr 2017 | No Comment | ]

Last Friday, payroll employment data, from a survey of businesses, showed the US created just 98,000 jobs in March. The consensus of forecasters had expected job growth of 175,000. The other jobs number, which comes from a survey of households, showed 472,000 new jobs in March.
Private jobs have now grown for 85 consecutive months, and the US economy is on the eve of completing its eighth consecutive year of growth. For comparison, the average post-World War II recovery is just 61 months.
Some analysts (they know who they are), who were …

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[29 Mar 2017 | No Comment | ]

Well, that was fun! The GOP’s attempt to reform healthcare hit a brick wall of politics. Conservative Republicans wanted to completely “repeal” Obamacare, while moderates and leaders were willing to keep much of it as long as it cost less. Moving one way or the other lost too many votes. Democrats refused to participate. So, the bill died.

The stock market rose when it looked like Speaker Ryan’s bill would pass, and fell when prospects faded. But US stocks remain undervalued. Nothing, other than politics, has changed and we expect equity …

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[9 Mar 2017 | No Comment | ]

As Washington DC melts down, entrepreneurs keep moving, people keep working and spending; the economy keeps growing. The Federal Reserve keeps meeting and speaking, too, but now it appears they will actually act.
Next week’s Fed meeting (March 15th) is going to be major news one way or another. Most analysts lean our way and now think the Fed will raise short-term interest rates by a quarter percentage point (25 basis points). We laid out the case two weeks ago (Time for a Rate Hike). If the Fed does raise rates, …

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[23 Jan 2017 | No Comment | ]

A memorable part of President Trump’s inaugural speech pointed to mothers and children trapped in poverty, rusted-out factories, a flawed school system, and crime and gangs and drugs. He described these problems as “American carnage” and stated emphatically that it “stops right here and stops right now.”
You’d have to go all the way back to President Carter’s “malaise” speech in July 1979, as gas lines were forming during the energy crisis, to find a sitting president so stark.

The difference is that Carter had already been president for 30 months, and …

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[18 Nov 2016 | No Comment | ]

Elections have consequences and the impact on U.S. economic policy of last week’s election will be enormous. We’re sure we’ll be writing about all of these issues in much greater depth over the next several months, but, for now, here’s a broad outline of what to expect.
One of the Republicans’ first tasks will be repealing much (but not all) of the Affordable Care Act, also known as Obamacare. To get that done, they will use the budget reconciliation process in the US Senate, where they don’t need to break a …

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[22 Aug 2016 | No Comment | ]

You know the economy is getting better when the pessimists’ theories on economic doom have been so wrong for so long they have to start recycling the old ones.
Right after the crisis a wave of mortgage “re-sets” was supposed to cause a double dip recession. The idea was that many of the mortgages taken out in the housing boom, particularly interest-only mortgages, had to re-set at higher interest rates or require principal payments, which would eat up workers’ meager earnings, in turn reducing consumer spending and putting us back in …