There has been a lot of angst over the last couple of weeks about a potential banking crisis. There have been 4 failures so far: Silvergate, Silicon Valley Bank, Signature Bank, and Credit Suisse. The first of these hasn't been mentioned much because it was primarily associated with lending in the crypto market and, as far as I know, there [...]
A bank's assets triple over a few years when interest rates are low. The bank invests those assets in long-term, higher-yielding municipal bonds with little credit risk. Inflation flares up and interest rates rise, reducing the value of the municipal bonds and funding dries up. Regulators become concerned that the failure of this bank could damage public confidence in the [...]
Last week started with investors focused on Jerome Powell's testimony before Congress and any hints about future monetary policy. During the course of two days of testimony, which was deemed more hawkish than expected, the market priced in another rate hike and pushed out the possibility of a rate cut all the way to January 2024. The week ended with [...]
With the 1-year Treasury bill paying 5%, why would anyone take the risk of owning stocks? - Everyone It is a good question and I can't tell you what investors will do this year or how stocks will perform, but history says it isn't the level of rates that matters for stock returns. Believe it or not, it isn't even [...]
I think everyone can agree that stocks and bonds sold off last year because interest rates rose. You might get some argument about why rates rose but the fact they did is sufficient to explain the drop in stocks and bonds. It doesn't matter if you think rates went up because the Fed raised their target rate on Fed funds [...]
The hardest thing about investing is the patience it requires. Markets can and do go through long periods of stagnation that test every investor's commitment to their strategy. The last year has been a tough one for investors but the frustration actually extends back further than just 2022. The total return of the S&P 500 since June 1, 2021 is [...]
As I sit here writing this Sunday afternoon, the US has just shot down a third UFO in the last 3 days in addition to the Chinese "weather" balloon last week. I have no insight into what these things might be but I do wonder if we haven't declared war on the National Weather Service. The federal government has become [...]
Has the Fed's rate hiking campaign actually lowered inflation? Or would it have happened anyway? Jerome Powell has said that the rate hikes would involve "pain" but if that is the criteria I don't see it. Higher rates have hit the real estate market but almost nothing else. And even there, mortgage rates are now trending back down and activity [...]
Your cares and troubles are gone There'll be no more from now on! Happy days are here again! The skies above are clear again Let us sing a song of cheer again Happy days are here again! Lyrics: Jack Yellen, Music: Milton Ager That's certainly how it's felt since the turn of the new year with the NASDAQ up nearly [...]
The Fed meets this week and is widely expected to raise the Fed Funds rate by 0.25% to a range of 4.5% - 4.75%. The market has factored in a small probability that they do nothing and leave rates alone, but they'll probably do what's expected because they've spent the last couple of months preparing the markets for exactly this [...]
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