Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject [...]
The Wizard: I AM OZ...the Great and Powerful! Who are you? The Wizard: Pay no attention to that man behind the curtain! The Great Oz has spoken! Dorothy: How can you talk if you haven't got a brain? Scarecrow: I don't know. But some people without brains do an awful lot of talking, don't they? All lines from Frank Baum's [...]
As we enter the Janet Yellen age of Federal Reserve stewardship, I am perhaps most struck by the contrast with her predecessors. I certainly don’t mean that in reference to her sex, rather her career trajectory and professional history. Ben Bernanke, for example, while being a Princeton professor, had established a very distinguished record of scholarship, much of which was [...]
I spend a lot of time on Japan not simply because it is the originator for the great QE experiment, rather the similarities between the US and Japan are well-worn and numerous. The primary interest in 2013, with the central banks of both going all out in monetary cajoling, is that those similarities are growing ever-closer. A few days ago [...]
"More than 17 percent of all FHA loans were delinquent in September, according to data on the agency’s website." I believe that number was 9% last quarter. Of course not all delinquencies turn into bad loans, or full-on NPL's, but both the trend and absolute level should be alarming. The major problem, however, seems to be the mortgage guarantee business [...]
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