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Tag Archives: Real Interest Rates

Weekly Market Pulse: What Is Today’s New Normal?

Remember “The New Normal”? Back in 2009, Bill Gross, the old bond king before Gundlach came along, penned a market commentary called “On the Course to a New Normal” which he said would be: “a period of time in which economies grow very slowly as opposed to growing like weeds, the way children do; in which profits are relatively static; in which the government plays a significant role in terms of deficits and reregulation and control of the economy; in which the...

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Weekly Market Pulse: Trading Places

They’re out there panicking right now. I can feel it. They’re out there. They’re panicking. Look at them. – Eddie Murphy as Billy Ray Valentine in Trading Places I thought of that scene the other day when a good friend in the investment business told me that investors today are panicking into the market rather than out as they were last spring. I have to say, I find it hard to disagree with him but I think there are specific parts of the market where panic is more...

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Weekly Market Pulse: The More Things Change, The More The Song Remains The Same

Markets continue to move based on the expectation of a post-virus boom. At least that is the dominant narrative right now. The economy, boosted by another round of stimulus, will surge once the virus is under control and things return to normal. President Biden last week offered his version of optimism by saying that families would be able to gather for a July 4th celebration, but only in small groups for backyard barbecues. I’m guessing that the President doesn’t get out on his...

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How Central Banks Steal From Savers

This chart is an incredible disgrace and illustrates how conservative savers, especially seniors, have been robbed by the central bankers.  Christine Lagarde’s recent comment fueled our ire, We should be happier to have a job than to have our savings protected – ZH And she was talking about nominal rates!  If the central bankers continue to destroy savings, nobody is going to have a job. Real CD Yields The chart below hardly reflects the “greatest economy ever.”  It illustrates and...

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Monthly Macro Monitor: Market Indicators Review

The markets we use to monitor the economy (and those that influence it, which amounts to the same thing) have been tracking an economic slowdown since the 4th quarter of last year. That’s when interest rates, real and nominal, long term and short term, started to decline, credit spreads started to widen and the copper to gold ratio started to fall. Those are all classic market signals of an economic slowdown. Some of those have moderated since the beginning of the year though and today...

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Bi-Weekly Economic Review: Growth Expectations Break Out?

There are a lot of reasons why interest rates may have risen recently. The federal government is expected to post a larger deficit this year – and in future years – due to the tax cuts. Further exacerbating those concerns is the ongoing shrinkage of the Fed’s balance sheet. Increased supply and potentially decreased demand is not a recipe for higher prices. In addition, there is some fear that the ongoing trade disputes may impact foreign demand for Treasuries. There are...

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Bi-Weekly Economic Review: One Down, Three To Go

Economic Reports Economic Growth & Investment We pay particular attention to broad based indicators of growth. The Chicago Fed National Activity Index and the Conference Board’s Leading Economic Indicators are examples. We watch them because we are mostly interested in identifying inflection points in the broad economy and aren’t as interested in the details.  Why? Because, while bear markets do happen outside of recession, it is rare and unpredictable. Our best chance of...

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Bi-Weekly Economic Review: Housing Market Accelerates

The economy ended 2017 with current growth just slightly above trend. In general the reports of the last two weeks of the year were pretty good with housing a standout performer going into the new year. We are still trying to get past the impact – positive and negative – from the hurricanes a few months ago though so it is probably prudent to wait for more evidence before making any definitive pronouncements about the economy. While the data has been good lately the reaction in...

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Real Interest Rates Not So Real – BIS

The Bank of International Settlements (BIS) is out with a very interesting piece, Why so low for so long? A long-term view of real interest rates?, by Claudio Borio, Piti Disyatat, Mikael Juselius and Phurichai Rungcharoenkitkul. The basic premise is that monetary regimes rather than real variables — such as savings-investment balances, GDP slack, demographics and dependency ratios — drive real interest rates over the long-term.  In addition, that global real interest rates have become...

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Bi-Weekly Economic Review: Animal Spirits Haunt The Market

The economic data over the last two weeks continued the better than expected trend. Some of the data was quite good and makes one wonder if maybe, just maybe, we are finally ready to break out of the economic doldrums. Is it possible that all that new normal, secular stagnation stuff was just a lack of animal spirits? Is it possible that the mere anticipation of tax cuts was sufficient to break us out of the 2% growth paradigm? Or are there other factors that have us on the precipice of a...

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