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[11 Apr 2014 | One Comment | ]

For the last couple of months it’s been an open question whether US economic growth was slower because of brutal winter weather or if something more serious and worrisome was going on.

 
We have consistently sided with the “weather theory.” The winter of 2014 was one of the coldest and snowiest in the past 30 years, at least in the population centers in the East and Midwest. It was likely enough to slow real GDP growth from the 2.6% pace of the past year to under 1% annualized growth in the …

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[28 Mar 2014 | No Comment | ]

During Fed Chair Janet Yellen’s first press conference last week, some analysts said she made a major mistake. Supposedly, she put an actual time limit on when the Fed may start to lift the federal funds rate.

 
 
She said it would be “around six months” after the Fed ended any further purchases of bonds for its Quantitative Easing program. This could be true, but she used enough qualifiers that it became clear six months is not a hard target.
The Fed dropped its 6.5% jobless rate as a trigger point for raising …

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[21 Mar 2014 | No Comment | ]

No one can know with absolute certainty exactly how much the brutal winter weather affected jobs. But, the 162,000 increase in February private sector payrolls was a positive shock to the consensus. January, at 145,000, was surprising, too.

 
The Labor Department also has a monthly survey on civilian employment, an alternative measure of jobs that includes small business start-ups. The February total was just 42,000. But the Labor Department said 601,000 people missed work last month because of weather, compared to an average of 357,000 over the previous ten Februarys.
In other …

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[14 Mar 2014 | No Comment | ]

Today marks the fifth anniversary of the bull market that started back in March 2009, and total returns over the period have exceeded 200%. It was on March 10, 2009 that equities jumped 6% and never again returned to the panic lows set the day before.
 

 
Hitting this milestone has many investors wondering how much more time the bull has to run. But instead of thinking in terms of time, we prefer to think about the “kinds of events” that bring the bull to an end, or worse, turn a bull …

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[14 Feb 2014 | No Comment | ]

What happened to stocks in January and early February is nothing new. It’s happened quite a few times in the past four years and eleven months. Ever since mark-to-market accounting was fixed in March/April 2009, these corrections have been short-lived and relatively mild. And once they were over the market went higher. It’s been a very strong bull market.
 

 
Nonetheless, few investors truly understand why things turned around so abruptly in 2009 and every time the stock market declines there is a mad rush to believe this time the sky really …

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[28 Jan 2014 | No Comment | ]

After strong gains in 2013, equities have struggled this year. Thursday and Friday felt a little panicky. US stocks were down close to 3%, gold was up, and the 10-year Treasury yield fell below 2.75% for the first time since November. Investors are on edge, short-sellers are a little giddy and we even heard a TV host mention the infamous “Black Swan” again.
It’s hard to tell exactly what triggered the “Risk Off” trade, but last Thursday, even though 15 out of 20 S&P 500 companies beat earnings estimates, weakness in …

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[14 Jan 2014 | No Comment | ]

That was fast. A little over two years ago, we declared that housing had not only bottomed, but was about to start its first real growth spurt since the bubble (Housing At An Inflection Point 11/2/2011). While some agreed, others expressed polite disagreement or, in some cases, incredulity.
While we may not get everything right, this time we couldn’t have timed it better. Housing starts are up about 65%, new home sales are up more than 50%, existing home sales have turned the corner, and national average home prices are up …

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[19 Dec 2013 | No Comment | ]

It’s Déjà vu all over again. Back in September, we expected Chairman Bernanke to announce that the Fed would begin to taper Quantitative Easing. Like Lucy pulling away the football just as Charlie Brown was trying to kick it, the Fed changed its mind at the last minute. No tapering.

 
So, here we go again. On Wednesday, at his last official press conference as Chairman of the Federal Reserve, we expect Ben Bernanke to finally announce tapering. In order to keep a lid on long-term bond yields, the Fed will also …

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[15 Dec 2013 | No Comment | ]

Payrolls keep growing. Economic data stays positive. The stock market makes new highs. It’s been consistent for nearly five years. And so has the pessimism. In fact, the pouting pundits of pessimism get more determined each month, trying to prove that things are really bad out there.

 
We really do tip our hats to those who dive deeply into the details of job reports – even though they don’t really understand the data – to find that one nugget of negative information that will boost hits on their webpages and get …

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[29 Nov 2013 | One Comment | ]

The most frequent question we get lately is “what happens to long-term interest rates when quantitative easing ends?” Many analysts argue that the Federal Reserve is buying and holding a huge share of Treasury debt and once QE ends other buyers will suddenly have to absorb more. This will cause interest rates to soar, bust the housing market, undermine stocks, and possibly cause a recession.
 

 
We disagree with this analysis in major ways. To respond, we crafted some charts which you will be able to find on our blog, here. In …