One of the things I’m increasingly dismayed to learn is that no matter how much detail, data, and qualification I might include in these commentaries, my conclusions will often be summed up by writers or bloggers in a single sentence that often bears no relation to my point. For instance, my view that quantitative easing will trigger a "jump depreciation" in the dollar has evidently placed me among analysts warning of hyperinflation and Treasury default (a club whose card is nowhere in my wallet).
To clarify once again – I emphatically do not anticipate inflationary pressures until the second half of this decade. As I’ve repeatedly emphasized, the primary driver of inflation – historically and across countries – has been growth in government spending for purposes that do not expand the productive capacity of the economy.
Quantitative easing does not pressure the dollar by fueling inflation. It has a much more subtle effect (but one that can be expected to be amplified if fiscal policy is long-run inflationary as it is at present). Normally, equilibrium in capital flows between countries is achieved through changes in interest rates. As a result, countries with greater capital needs or higher long-run inflation tendencies also have higher interest rates. If interest rates can adjust, exchange rates don’t have to. But notice what quantitative easing does: by sitting on long-term bond yields (and creating a negative real interest rate differential versus other countries), quantitative easing prevents bond prices from acting as an adjustment factor, and forces the burden of adjustment on the exchange rate.
While some observers have noted that the value of the Japanese yen did not deteriorate dramatically over the full course of quantitative easing by the Bank of Japan – from its beginning until it was finally wound down
Although the data doesn’t necessarily indicate that a double dip is here (just a slowing of the expansion so far), there is no doubt that mentally, we’re collectively urging it on.
Stocks suck, commodities have all been schmeissed (even gold last week), housing is going through another leg down (yanking the $8,000 tax credit sure didn’t help), the bond market is screaming (under 3% yield on the ten year!) and everyone is getting themselves liquid again.
While I understand that it’s only natural, at least historically, for the expansion to cool off from the initial rip-roaring pace, it is impossible to ignore how pathetically quickly we’ve lost what little momentum our trillions of dollars have gotten us.
Zero percent interest rates forever, tax credits for cars and homes, infrastructure spending, stimulus after stimulus – and it’s starting to feel like we fired a cap gun at a charging elephant.
Here’s some reading on the latest in Double Dip-ology. Hopefully they’re wrong, but the stock market doesn’t seem to think they are…
Mark Cuban once remarked something to the effect of "stocks that don’t pay dividends are like baseball cards – only worth what you could convince the next guy to pay for them."
Floyd Norris looks at some statistics on dividend declarations last year:
Will stock investors who like receiving quarterly dividends have better news this year? S&P thinks yes, according to the article:
“The fourth quarter was in no way a good period for dividends, but compared to recent history it marks a significant improvement, and when added to the stabilization in increases, supports our belief that the worst is over for dividends,” said Howard Silverblatt, the senior index analyst at S.& P.
“Standard & Poor’s believes that the dividend recovery will be slow, and that it will take until 2012 to 2013 to return to where we were in 2007 and 2008,” he added.
The dearth of positive dividend news becomes even more vexxing in the context of our zero interest rate environment so let’s hope the rebound in payout increases happens.
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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Last week, I started a new weekly series entitled "3 Things Worth Thinking About". The focus here will be three things, ironically enough, that are worth considering with respect to your portfolio and related investments. As I have discussed many times previously, focusing only on "bullish" commentary when markets are rising is really of little use as it creates a "blind spot" to related investment risks. The same goes for when markets are falling. These cognitive biases get in the way of making logical and disciplined investment decisions to not only garner returns when markets rise, but avoid depletion of capital when they don't.
Moments ago, after weeks of relentless humiliation for John Kerry, Israel and Hamas agreed to yet another 72 hour ceasefire - one which if the previous "ceasefires" are any indication, will be broken within hours if not minutes. Regardless, Kerry, who cobbled this agreement after much "hard work" alongside the UN's Ban Ki-moon, was ecstatic: "We urge all parties to act with restraint until this humanitarian ceasefire begins, and to fully abide by their commitments during the ceasefire," Kerry and Ban said. "This ceasefire is critical to giving innocent civilians a much-needed reprieve from viol...
The march for fully autonomous driverless cars marches on. In May, Google announced the Next Phase in Driverless Cars: No Steering Wheel or Brake Pedals. Google’s prototype for its new cars will limit them to a top speed of 25 miles per hour. The cars are intended for driving in urban and suburban settings, not on highways. The low speed will probably keep the cars out of more restrictive regulatory categories for vehicles, giving them more design flexibility.
Google is having 100 cars built by a manufacturer in the Detroit area, which it declined to name. Nor would it say how much the prototype vehicles cost. They will have a range of about 100 miles, powered by an electric motor that is roughly equivalen...
Shares in packaged foods producer Kellogg Co. (Ticker: K) are in positive territory on Monday afternoon, trading up by roughly 0.20% at $65.48 as of 2:20 p.m. ET. Options volume on the stock is well above average levels today, with around 12,500 contracts traded on the name versus an average daily reading of around 1,700 contracts. Most of the volume is concentrated in September expiry calls, perhaps ahead of the company’s second-quarter earnings report set for release ahead of the opening bell on Thursday. Time and sales data suggests traders are snapping up calls at the Sep 67.5, 70.0 and 72.5 strikes. Volume is heaviest in the Sep 72.5 strike calls, with around 4,600 contracts traded against sizable open interest of approximately 11,800 contracts. It looks like traders paid an average premium of $0.37 per contrac...
Once again, stocks have shown some inkling of weakness. But every other time for almost three years running, the bears have failed to pile on and get a real correction in gear. Will this time be different? Bulls are almost daring them to try it, putting forth their best Dirty Harry impression: “Go ahead, make my day.” Despite weak or neutral charts and moderately bullish (at best) sector rankings, the trend is definitely on the side of the bulls, not to mention the bears’ neurotic skittishness about emerging into the sunlight.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, incl...
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We tried holding up stock prices but couldn’t get the job done. Market Shadows’ Virtual Value Portfolio dipped by 2% during the week but still holds on to a market-beating 8.45% gain YTD. There was no escaping the downdraft after a major Portuguese bank failed. Of all the triggers for a large selloff, I’d guess the Portuguese bank failure was pretty far down most people's list of "things to worry about."
All three major indices gave up some ground with the Nasdaq composite taking the hardest hi...
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
I just wanted to be sure you saw this. There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.
If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.
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