question-mark-money

Did 2013 Prove That Fiscal Stimulus Doesn’t Work?

Scott Sumner has confidently declared that the 2013 growth figures prove that fiscal stimulus doesn’t work.  And he says so because a lot of Keynesians came out prior to 2013 declaring that the sequester would torpedo the economic recovery.  But since the economy was actually quite strong in 2013 during a period of fiscal tightening then Sumner says this MUST…

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stfu

Why No One Listens to These Economists

A recent poll from the University of Chicago shows that economists overwhelmingly believe that the fiscal stimulus helped the economy coming out of the Great Recession.  And this has lots of economists scratching their heads (see here and here for instance).  After all, if the stimulus helped then why, with such a muddling recovery over the last 5 years, were…

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caution

Expect Higher Treasury Yields in Second Half of 2014

While many investors refuse to accept this fact, we are clearly marching toward higher treasury yields later in the year and in 2015. Even after today’s bond selloff, we are still around the yield levels we had during the dark days of the government shutdown. Here are a couple of key factors that will drive yields higher from here.

Interest_Rates

Rising Rates: The Good, the Bad…No Ugly

The US Fed has said it will almost certainly boost short-term interest rates by 2015, and many bond investors are focused intently on managing the risks of rising rates. But it’s also important to recognize that there are benefits.

zirp

The Zero Interest Rate Decade

Over the last few years I’ve repeatedly stated that interest rates are likely to remain at zero when the next recession occurs.  The consensus still sees rate hikes occurring in mid-2015, but I don’t necessarily agree.   And it looks like I am in some pretty good company now.  David Levy, Chairman of the Levy Forecasting center had some similar…

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gold-bars-india

Exter’s Defunct Pyramid

I had never seen this before, but a reader pointed out a concept that is often used by gold bugs to promote the idea that gold is the ultimate safe haven.  It’s called “Exter’s Pyramid” and is named after a former Fed official named John Exter. Here’s how Wikipedia describes the concept: “Exter is known for creating Exter’s Pyramid (also known as Exter’s…

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macro4

Spot the Secular Stagnation

Growth in the euro area has also broken down. It has yet to initiate a new expansion trend, which is in part, why some do think that it has not really and truly exited its recession.

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Dangerous Investment World Generalizations

“Diversify”
“Think long-term”

“Buy and hold”

“Passive investing”

“Stocks for the long-run”

Blah, blah, blah, blah….

QE

Why The Fed Doesn’t Have to “Unwind” QE

One of the more common questions I get is about QE and the Fed’s “exit strategy”.   Many people seem to think the Fed has to unwind its balance sheet before the Fed can raise rates or tighten policy.  So, the concern is that the Fed has a $4.5T balance sheet and when inflation starts to rise they’ll have to…

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Success stamp

FRED on “Spurious Correlations”

This is pretty funny.  From the St Louis Fed.  No comment necessary: “Relationships between macroeconomic time series are not usually straightforward enough to establish with a simple graph. The problem is that almost all time series tend to grow in the long term as an economy grows. So, any measure in nominal terms will grow even more, since inflation rates are…

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question_mark (1)

Q&A Answers – Part Deux

Here are the rest of the answers to last week’s Q&A.  I hope you find it helpful. jmacdon says: Eddie Elfenbein had a recent post about a model for the price of gold, based partly on Gibson’s paradox. What I don’t understand is why anybody would think there is a paradox. It seems to me that the interest rate should be…

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strategy

Economic Schools of Thought and Market Performance – Part Deux

In a previous post I put together a hypothetical benchmark global portfolio so we could take different economic schools and analyze how they might have helped us navigate the current bull market.  I want to continue the series today.  As a reminder, here’s the benchmark allocation and performance: US Stocks: 20% Foreign Stocks: 20% REITs: 5% Corporate Bonds: 19% US Govt Bonds:…

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