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 [...]
You may have had the same experience I had as a kid. When I wanted to know how to spell a word or what it meant, my mom would say, “Look it up in the dictionary.” But the dictionary on the shelf then would be woefully out of date today. Every year lexicographers, the people who write and edit 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 [...]
What’s that I hear? It’s very faint, but it sounds familiar. I cup my hand around my ear to hear better and, yes, I’ve heard it before. In the distance, there are shouts of “Abolish the IRS. We want a Fair Tax.” The idea of a Fair Tax was first introduced in 1999 by former Georgia Congressman John Linder. His [...]
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 [...]
A one year, educational look back through the lens of Super Bowl commercials. The economy was awash in liquidity. Behavior had changed. Would trends continue? Would behavior revert? The Fed's first rate hike would occur roughly one month later. H/T Steve Beiser. Last year’s Super Bowl commercials – if you invested $10k when they aired you would have….• FTX - [...]
I was reading Bill McBride's blog, Calculated Risk, recently and came across this post on heavy truck sales as a recession indicator. As Bill notes: Usually, heavy truck sales decline sharply prior to a recession. Sales were solid in January. It certainly looks like sales do indeed peak before recession. But how long before recession? Does this really work as [...]
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