Northern Light

By | 2017-09-21T06:13:49+00:00 September 21st, 2017|Global Market Update|

Do we still live in a material world? Photo: Brocken Inaglory. Source: Wikipedia Not so much. Think about how we buy stuff: Americans are famous for “retail therapy.” When the going gets tough, the tough go shopping. That’s why we have so many malls. Only, with Amazon, we don’t need to go to the mall. There’s no need to schlep to the store: retail therapy is just a click away. Or think about lawyers: law firms used to need 1200 square feet of storage [...]

Inflation Station

By | 2017-09-14T07:28:36+00:00 September 14th, 2017|Global Market Update|

What’s going on with inflation? Dallas Fed “Trimmed Mean” PCE, Year-Over-Year. Source: St. Louis Fed Figuring out inflation is like asking about ice cream: there are a million flavors and variations. The Consumer Price Index uses a fixed basket of some 40,000 prices, surveyed monthly. The Commerce Department determines a deflator that shifts as the economy shifts. If the price of beef doubles and everyone switches to chicken, the index takes changing consumer tastes into account. And then there’s core inflation, regional inflation, and [...]

The Signal and the Noise (Part 5)

By | 2017-07-17T12:21:17+00:00 June 16th, 2017|Global Market Update|

So how do you decide? Photo: Sebastian Lühnsdorf. Source: Morguefile When a news event occurs, is it a new signal, or is it just noise? The European Central Bank is maintaining a negative inter-bank rate – is it signal or noise? The Consumer Price Index just came out flat from the month before – was that signal or noise? It’s tempting to label all these interim economic reports financial static. And a lot of them are. So much data comes at us from so [...]

Alice and the White Queen

By | 2017-07-17T12:21:17+00:00 June 9th, 2017|Global Market Update|

Is the market trying to believe impossible things? Illustration: John Teniel. Source: Wikipedia A classic “children’s” book – that isn’t really for children – is Lewis Carrol’s Through the Looking Glass, his sequel to Alice in Wonderland. In the book, Alice and the White Queen have this exchange: “There’s no use trying,” Alice said. “One can’t believe impossible things.” “I daresay you haven’t had much practice,” said the Queen. “When I was younger, I always did it for half an hour a day. Why, [...]

War, Peace, Inflation, and Software

By | 2017-07-17T12:21:17+00:00 June 8th, 2017|Global Market Update|

Is inflation dead? Source: Morguefile Growing up in the ‘70s, inflation was a fact of life. Sometimes we would see prices rise four or five percent in a single month. Persistent, high inflation was a problem, economically. The purchasing power of our savings was depleting at a rapid rate. Federal regulations kept interest rates low; banks couldn’t pay more than 4.25%, even while inflation was running at 10% per year. Gerald Ford declared a war on inflation. Annual change in CPI. Source: St. Louis [...]

Crisis Management

By | 2017-07-17T12:21:18+00:00 June 1st, 2017|Global Market Update|

What’s the next crisis? Photo Alvimann. Source: Morguefile It’s usually not the last crisis. People are ready for that. We’ve seen the challenges and dealt with them. The Euro crisis of 2011 was brought on by the perception that leaders and voters weren’t sufficiently committed to the common currency. It was dispelled by Mario Draghi’s “Whatever It Takes” speech, as well as popular votes around the Euro-zone. The Financial Crisis of 2008 was brought on by excessive lending to US homeowners, coupled with implicit [...]

Inflation Nation (Part 1)

By | 2017-07-17T12:21:32+00:00 January 4th, 2017|Global Market Update|

Why isn’t inflation coming back? Year-over-year CPI change. Source: Bloomberg In the ‘60s and ‘70s inflation grew out of control. Nixon’s price controls didn’t stop it. But it settled down after Paul Volker’s restrictive monetary policy and Alan Greenspan’s careful management of the Fed. Economist Milton Friedman famously claimed that inflation is “always and everywhere a monetary phenomenon.” But after the financial crisis, inflation dipped below zero and the Fed flooded the economy with money. Many feared that inflation would come roaring back. But [...]

Inflation Ahead?

By | 2017-07-17T12:21:33+00:00 December 28th, 2016|Global Market Update|

Is inflation finally headed higher? Core Personal Consumption Inflation. Source: Bureau of Economic Analysis It sure doesn’t look that way. The broadest measure of consumer prices, the deflator for personal consumption expenditures, was flat November. That’s because incomes were flat, and consumption was flat. Most economists believe that a reacceleration in consumption will be the overarching economic theme for 2017. But this isn’t set in stone. If employment growth slows and wages stall, then we’ll still be stuck in the rut we’ve been in [...]

Mixed Money Messages

By | 2017-07-17T12:21:52+00:00 August 8th, 2016|Uncategorized|

Where does money come from? Source: Morguefile Money is a funny thing. Most people around the world look at yen and euros and dollars and say that that’s money. But banknotes are only a small fraction of the money in the world. Most money exists in the form of bank deposits. When we buy a house or a car or pay our credit card bill, we just instruct our banks to make ledger entries transferring some of our account to someone else. When a [...]

Revising the Limits

By | 2017-07-17T12:22:08+00:00 February 23rd, 2016|Global Market Update|

Are we seeing the limits to demand? Copyright: Dennis Meadows. Source: Amazon Back in the early 1970s, a think-tank called the “Club of Rome” published a little book called the “Limits to Growth.” It used a fairly simple computer model to predict that unless people radically changed the way they lived, we would run out of some of the key resources necessary for modern life. They described our expected population growth-path as “overshoot and collapse.” The book predicted that because we were continually increasing [...]