One of the articles referenced in Janet Yellen’s Jackson Hole speech last week was a piece written for the Peterson Institute for International Economics by Senior Fellow Olivier Blanchard. Dr. Blanchard has, as noted earlier today, all the “right” credentials, which is why his conjecture gets included into the speeches of Federal Reserve Chairmen. Having taught at both Harvard and [...]
If the Wall Street Journal meant to reach for reassuring comfort, they fell far short. After spending late summer last year and into the fall proclaiming that manufacturing didn’t matter (12%), the newest round of talking points are “false positives.” In other words, manufacturing and industry does matter, after all, but just “not enough” to tip into full recession. That [...]
Coincident to the “final” release of quarterly GDP are the updated estimates for corporate profits. While the Q4 headline didn’t much alter from the preliminary version sent out a month ago, there was much in the profit section relevant to both economic cycle and structure. The BEA provides several different breakouts of business profits, but the main emphasis should remain [...]
The function of recession is not just some negative numbers that appear from seemingly nowhere, though that is how convention sees it of “unforeseeable” trends and “shocks. It may take the NBER years in some cases to declare, officially, a cycle peak but that doesn’t mean there aren’t warning signs much closer to the event. Among them is, again, not [...]
Continuing on with the valuation theme, there are a couple of additional “market” indicators that are also at or above dot-com levels. While not strictly a valuation technique, the level of margin debt and really customer net worth gives us an insight into one aspect of multiple expansion. Margin debt for FINRA accounts (which includes both NYSE and what used [...]
The quarterly update of the Flow of Funds Report (now called the Financial Accounts of the United States, but still Z1) means we can update a couple measures of stock market exuberance – Tobins Q and Market Value of Equities compared to GDP. The delay in preparing and releasing the data, however, means staleness since the latest estimates are for [...]
There is something very much broken in the media, particularly with regard to economic reporting. I have already commented more times than I care about the overemphasis on logical fallacies, but the proportionality of the disconnect only grows with share price inflation. Under the headline, Bull Market Shows No Sign of Death With Yellen Support, this Bloomberg article begins, “The [...]
Given recent and growing consternation about stock prices and financial assets, it has been heartening to some that so many people are now talking about bubbles. The logic here is that if everyone “knows” there is a bubble there simply cannot be one. Even Robert Shiller, newly minted Nobel Laureate, was pulled into the discussion. With the recent creep upward [...]
I’ve gotten a few emails asking for more detail on why the market structure seems to have changed or evolved since about 1990, particularly that relation to the Federal Reserve’s full implementation of interest rate targeting. Coincidence and correlation is not always causation, so it is useful to unpack the full chain of circumstances between them to get a better [...]
Before 1950, if you asked who owned stocks, the answer was very straightforward: wealthy individuals. Ninety percent of all equities were owned by the household sector, concentrated in the wealthiest segments. Most individuals had little savings to speak of, so stocks really were a plaything of the rich. All data below is taken from the Federal Reserve’s Financial Accounts of [...]
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