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[19 Nov 2015 | No Comment | ]

Over the past several years, we have battled one economic scare story after another, from the damage that commercial real estate was going to cause, to the double-dip recession that was supposed to happen when the “hidden inventory” of unsold homes finally came to market. We’ve thrown cold water on recession talk when the Federal Reserve decided to taper and end quantitative easing and when bad weather temporarily hit the data.
We’ve been optimists. Not wild-eyed optimists looking for unicorns and rainbows, but clear-eyed optimists forecasting a resilient Plow Horse economy.

Faced …

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[2 Nov 2015 | No Comment | ]

The most important economic report of the next couple of weeks is not the GDP report on Thursday, which, as we said last week, is likely to show mediocre real growth of 1.5%. Strip out inventories, trade, and government and “core” real GDP growth should be around 3.5%.

Instead, the most important report is the October employment data set for release on November 6. Data already released suggest that nonfarm payrolls expanded about 235,000 in October and the unemployment rate ticked down to 5%, the lowest level since 2008. With ISM …

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[25 Sep 2015 | No Comment | ]

Back in 2008, rather than fix mark-to-market accounting, Treasury Secretary Hank Paulsen, Federal Reserve Board Chair Ben Bernanke, and other members of the financial market crisis team, chose to use a government-funded bazooka. A $700 billion bank bailout named The Troubled Asset Relief Program, or TARP.

President Bush, who authorized this approach, later explained it by saying he “abandoned free market principles to save the free market.” That statement makes no sense. Either you believe in free markets, or you don’t. Violating a free market means it’s not free. More truthfully, …

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[11 Aug 2015 | No Comment | ]

Ever since Quantitative Easing began, a group of so-called Monetarist/Austrian thinkers have predicted “hyper-inflation” and the demise of the dollar as the world’s “reserve currency.”
In spite of the fact that gold has fallen and inflation remains low, scare stories about other countries dumping their Treasury securities, US interest rates skyrocketing, and a return of the trauma of 2008 proliferate. And, if that’s not enough, according to the pouting pundits of pessimism, the Federal Reserve won’t able to address the problem because long-term rates will be headed up, rather than down.

Now, …

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[1 Jul 2015 | No Comment | ]

Don’t let anyone tell you Greece is sticking up for its “dignity” by fighting “austerity.” The current Greek government is sticking up for socialism by fighting reality.
After several years of working toward some very minor market-friendly reforms, and finally starting to see a glimmer of economic growth, Greece elected a far left government back in January. It’s economic and financial situation has gotten worse ever since. Instead of trying to boost growth and pay its debts, by trimming government spending and reducing regulation, the government is saying it won’t cut …

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[12 Jun 2015 | One Comment | ]

You would think that after 63 straight months of growth in private sector payrolls, the longest streak since the 1930s, everyone would agree that the job-market recovery is for real.  But, that ain’t the case.  A quick Google search still uncovers a whole bunch of pessimistic appraisals of jobs and the economy.
Analyzing these pessimists shows they have four major complaints about any supposed strength in the job market.
The first complaint is that the job growth is all or mostly part-time.  The numbers on part-timers come from the civilian employment survey, …

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[30 May 2015 | No Comment | ]

Last month we explained why the dreaded threat of hyperinflation hasn’t materialized, and likely wouldn’t materialize, in spite of the huge expansion of the Federal Reserve’s balance sheet the past several years, including QE1, 2, and 3.
The April inflation report, released Friday, underscored this theme. Consumer prices rose a tepid 0.1% in April and were down 0.2% from a year ago. With the exception of the Panic of 2008 and its immediate aftermath, that year-to-year decline was the lowest reading for inflation in 60 years.

However, this doesn’t mean the US …

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[20 May 2015 | One Comment | ]

Last week’s report on retail sales in April came in weaker than most economists expected, with no change from the pace of sales in March. As a result, the chorus calling for the Federal Reserve to postpone the start of rate hikes beyond June, already loud, grew even louder.
The fretting was a little misplaced. “Core” sales, which strip out the most volatile items like autos, building materials, and gas, rose a respectable 0.2% – the 13th gain in the last 15 months – in an environment with low inflation. Meanwhile, …

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[7 May 2015 | No Comment | ]

The Wall Street Journal’s editorial page and former Fed Chair Ben Bernanke are in a tiff. In a nutshell, the WSJ says growth is slow (which is true) and the Fed has overestimated economic growth (true, too); therefore, monetary policy is not working. Interestingly, after saying this, the WSJ says it does think quantitative easing (QE) has boosted the stock market.

Bernanke defends the Fed by saying real GDP has been weak due to slow growth in productivity and the lingering effects of the financial crisis. If we want more growth, …

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[7 Apr 2015 | No Comment | ]

“Dread” is the perfect word for what many investors have felt in recent years. Some have experienced it daily since the bottom in March 2009. Some experience it whenever the stock market falls.
But dread really sweeps the markets when there is weak data, a change in fiscal or monetary policy or during market volatility. This means it has cast a pall over markets once or twice a year during the past six years.

Remember the feeling on September 2, 2011, when it was reported that payroll employment in August was a …