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Money (32)

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Ms. DiMartino Booth, why is the Federal Reserve bad for America?
Because of its intellectual dishonesty. The Fed noticed around 2009 that if they had had a more reliable and realistic inflation gauge on which to set policy, they would have seen the crisis coming. But despite that recognition, they chose to do nothing about it.

Are there more realistic inflation gauges?
Several Federal Reserve Districts have come up with alternative gauges. The underlying inflation gauge from the New York Fed for example also includes asset price inflation. And it runs about one percentage point higher than what the Fed measure is – they prefer the core Personal Consumption Expenditures Price Index, the core PCE.

How would monetary policy look like with a more realistic inflation gauge?
Monetary policy would be much different. The Fed would not have been able to maintain a monetary policy as easy as it has done over the…

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What Yield Curve Inversion Is Telling Us

The US yield curve has (almost) inverted, and this has been making headlines for the last couple of months now. This should come as no surprise, as the yield curve is perhaps the most reliable recession indicator out there. But what does an inverted yield curve tell us about future returns? Our analysis shows that while asset class returns in general are somewhat subdued between the first date on which the yield curve inverts and the start of the recession, the inversion of the yield curve is not followed by extraordinary deviations in returns.

Definition

Before moving over to the results of our analysis, we would like to dwell briefly on the definition of the yield curve, and the combination of maturities in particular. In most empirical research, the yield curve is either defined by the differential between the 10-year and 3-month US Treasury yield…

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Admin

Maybe you've never heard of MMT (Modern Monetary Theory). But no doubt, as the 2020 election nears, you will. It's the latest contentious buzzword to hit Washington, D.C.

The idea, despite its name, is not new or "modern." But it has set off a heated political and economic debate, with Fed Chairman Jerome Powell telling Congress last week that Modern Monetary Policy is "just wrong."

Does Modern Monetary Theory, or MMT, represent a brave new future of ever-expanding government spending to meet Americans' vital needs? Or is it a dangerous idea that could lead to runaway inflation, financial disaster and, ultimately, collapse?

The theory, in a nutshell, says that because the U.S. can borrow in its own currency, it can simply print more money when it needs to pay off its debts. All the Fed has to do is keep interest rates low. Simple. It's an increasingly popular idea among left-leaning economists.

 …

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Admin

Market Predictions For 2018? Bring 'Em On!

Saxo Bank has a few

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Naturally, predictions like this are more for bank PR than education but they have some value.

For one, they're a reminder that unexpected, huge and unpredictable moves happen in markets. And they happen far more often than we expect.

The thing is, they usually happen somewhere you least expect.

As for this set of predictions, let's hope this trader is you (from the report):

"World markets are increasingly full of signs and wonders, and the collapse of volatility seen across asset classes in 2017 was no exception. The historic lows in the VIX and MOVE indices are matched by record highs in stocks and real estate, and the result is a powder keg that is set to blow sky-high as the S&P 500 loses 25% of its value in a rapid, spectacular, one-off move reminiscent of 1987. A whole swathe of short volatility funds are completely wiped out and a formerly unknown long volatility trader realises a…

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Admin

The Winners And Losers Of A Cashless Society

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Courtesy of: The Money Project

 

There is a global push by lawmakers to eliminate the use of physical cash around the world. This movement is often referred to as “The War on Cash”, and there are three major players involved:

1. The Initiators
Who?
Governments, central banks.
Why?
The elimination of cash will make it easier to track all types of transactions – including those made by criminals.

2. The Enemy
Who?
Criminals, terrorists
Why?
Large denominations of bank notes make illegal transactions easier to perform, and increase anonymity.

3. The Crossfire
Who?
Citizens
Why?
The coercive…

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Admin

The Trump Effect On Currencies

trump-effect-on-currencies.jpg
Courtesy of: Visual Capitalist

Rhetoric has already had an impact on currencies in a big way

Targeting companies or entire nations on Twitter is an unprecedented and controversial method of communication for a President-elect – but one can’t argue with its effectiveness so far.

In today’s chart, we take a look at Donald Trump’s rather unconventional form of “monetary policy”, and how it has potentially influenced the U.S. dollar and five other major currencies since his election in November.

Ready, Aim, Tweet

A preview of President-elect Trump’s “America First” directive can already be seen on Twitter.

Trump’s infamous account, which is…

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Admin

Paper Trading Is Obsolete

1291340?profile=originalI don't actually embrace this headline.  In my experience, yes, emotions exist while paper trading.  It's merely that you can sleep at night knowing your bank account didn't go up in flames but that's just me.  It's also essential in my book that you determine what "type" of trader you want to be.  It's one thing to say you want to invest like Warren Buffett but just what does that entail?  Do you rally know?  It's also super easy to be sucked in by get-rich-quick ads and bloggers who entice you to sign up for their premium edition (none of which I recommend).  Don't underestimate the market.  It's NOT easy, even if you believe you've got a plan and everyone loses.  Everyone.  The trick is not to be fooled.  Ignore the headline newsfeed hype and learn to invest without…

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Admin

Don't Be Fooled The Bond Rally Continues

1291344?profile=RESIZE_480x480We’ve been bulls on 30-year Treasury bonds since 1981 when we stated, “We’re entering the bond rally of a lifetime.” It’s still under way, in our opinion. Their yields back then were 15.2%, but our forecast called for huge declines in inflation and, with it, a gigantic fall in bond yields to our then-target of 3%.

The Cause of Inflation

We’ve argued that the root of inflation is excess demand, and historically it’s caused by huge government spending on top of a fully-employed economy.  That happens during wars, and so inflation and wars always go together, going…

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Admin

Seven Ways To Trade The Brexit Vote

Next week will be a historical one for both the United Kingdom and the global economy. On June 23rd the British people will decide whether to leave or stay in the European Union. Polls have been mixed over the last couple months, but the latest out show momentum for leaving, which is scaring the markets.

Loss of British sovereignty is the fundamental reason for leaving the EU, as many supporters want to take back control of U.K. borders in order to curb immigration. Those that wish to stay in the EU say there are severe short-term economic consequences that would make trade difficult and slow the economy. Even President Obama recently said that if there is a Brexit, the U.K. would go to the “back of the queue” in American trade deals.

While debate and speculation is running rampant, markets are watching the British Pound closely. Last week U.S. indices tracked and moved with the Pound tick for tick, showing that traders are very concerned about the upcoming…

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Admin

Business Loan Delinquencies At 2008 Levels

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Energy defaults have been heavy on my mind as their Bankruptcies are expected to increase greatly in the second half of 2016.  I didn't even touch on farms and other exploding debt. Clearly I'm not alone in this concern.  It's not housing this time; it's much worse.  If rates rise, what will happen? Emphasis in bold mine.  Read on.

This could not have come at a more perfect time, with the Fed once again flip-flopping about raising rates. After appearing to wipe rate hikes off the table earlier this year, the Fed put them back on the table, perhaps as soon as June, according to the Fed minutes. A coterie of Fed heads was paraded in front of the…

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Admin

We're Shifting Fast To A Cashless Society

war-on-cash.jpg
We talk about this subject at great length in my neck of the woods and oh boy, is it coming..........fast.  Now let's be honest here and let me ask a few questions.  How much cash are you carrying right now in your wallet? The last time you saw eight year olds selling Girl Scout cookies, did you have to pass them by with no bills in your pocket?  No thin mints for you!  How many purchases do you make per day in cash and how many times do you simply swiping your debit or credit card?  Do your bills come in the mail and get paid via the same method, or are they paid on the internet? 

Love it or hate it, cash is playing an increasingly less important role in society.

In some ways this is great news for consumers. The rise of…

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Admin

Where Money's Been Flowing

When first-generation ETFs launched in the 1990s—such as the SPDR S&P 500 Trust (SPY) and the PowerShares QQQ Trust Series 1 (QQQ)—lead this year's outflows, that is a sign that institutional investors are scared. These first-to-market ETFs have the ample liquidity that big institutions tend to love, with many trading more than $500 million in volume a day. While newer ETFs that may do the same thing or more for cheaper have been launched in the intervening years, early ETFs still tend to curry favor with large investors that value liquidity. These investors tend to be more tactical, and thus outflows from these ETF stalwarts are a bearish sign. 

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Photographer: Balchunas, Eric

U.S. Treasuries of all maturities are raking in cash

According to…

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Admin

The Fall Of FICO Standard

Having worked in the mortgage field for a few decades, the scoring of FICO (or disgust of it) definitely caught my attention.  Some of the credit-scoring travesties are given.  In my opinion, they can't make changes fast enough......or merely admit you're only going to lend to the rich.  That's what it's coming down to; slowly but surely.

Naturally, lenders of all stripes have been evaluating credit for far longer than FICO (originally founded in the ’50s as Fair Isaac Co.) has existed. In fact credit rating standardization wasn’t a priority until the 1970s with the passage of the Fair Credit Reporting Act — and FICO data has only been widely available to lenders since 1987. The FICO scoring system (the 300-800) as we sort of understand it today has only existed since 1989 and it  wasn’t until 2003 that consumers had legal access to it.…

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Admin

China On Margin; Oh My

1290915?profile=originalChina traders on margin accounts is a thought both wildly exciting, yet utterly terrifying at the same time.  Even more so in the wake of $10 billion in fraudulent currency trades discovered just last week. 

Chinese markets have had a long standing reputation as being nothing more than unmonitored casinos plagued with corruption and insider trading.  What could possibly go wrong?

According to the WSJ, the Hong Kong and Shanghai stock exchanges have published an overhaul of rules governing a…

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Admin

Value Stocks Hit (or miss) The Mark?

image1.jpg?width=227After 5 years of a bull market, the only place left to invest is in value names”
“The best protection in this volatile market are value stocks”

How reliable are these sorts of claims?  Those promoting the approach offer lists of stocks that are considered undervalued typically when they meet such financial criteria as low price/sales, low price/book value, or high, stable and growing dividends. However, they rarely attach timeframes or price targets.

So I decided to do some “back testing”.  By searching the term “value stock lists”, I gathered a small random sample of such lists published in 2012-13; stocks in these lists met one or more of criteria that qualifies them as “value stocks” at the time.  I then compared their stock price on the publication date with that of twelve months later; as a benchmark, those changes were…

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Admin

Which Is Wrong? Bonds Or Stocks?

1290848?profile=RESIZE_1024x1024With so much money flowing into bonds and treasuries (TLT shown) in 2014 while the stock market rose, one must wonder..........which one is going to give?  (click chart to enlarge)

Certainly it would seem not everyone believes the economy is strong enough to support future earnings and rising profits.

Is the five-year bull run finally running out of steam?

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Admin

1290814?profile=RESIZE_1024x1024Americans lust for things they cannot afford continues as credit usage has rebounded since the height of the credit crisis however, with the Fed's current zero interest rate policy (ZIRP), the ongoing use of credit is not necessarily a thing for concern.

After all, if you were able to refinance your home from 6% down to 3%, that's a good thing, right?  Ditto for your credit cards which may have been 9.9% prior to 2008 and now down at much lower levels.  Indeed ZIRP has aided corporations and individuals to grab historic, once-in-a-lifetime opportunities to restructure existing debt and issue new debt for acquisitions for almost nothing.

In that respect, I guess Obama's statement "we're much better off than we were" would ring true here.

What does bother me, however, is the enormous recovery and usage of subprime lending. …

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Admin

Stock Buybacks; Sustainable Smoke And Mirrors

1290774?profile=RESIZE_480x480My simplistic view of the stock market, the one my muddled brain is able to wrap around, is to imagine that of the waterfalls at the Continental Divide at Glacier National Park in Montana.  Numerous rivers, all converging into to one.  Hedge funds, pension funds, investment firms, your own 401k, option flows, you name it.........and share buybacks.

Throughout the recovery, the amount of cash being held on corporate balance sheets was in some instances, astounding, leaving many investors wondering if/when the cash would be deployed. 

Well if you haven't noticed, they have been deploying more and more.  Just imagine the many streams you see in this image to the right.  One is M&A which can be the acquisition of a company to compliment ones existing structure OR a direct competitor which is a plus for a stock by…

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Admin

NFA Bars Yu-Dee Chang and His Associated Brokers

th?id=HN.608028637570925666&w=103&h=103&c=8&pid=3.1&qlt=90&rm=2&width=103Ouch.  I'd hate to go to work and find out the office was being closed.  Wait!  I did (!) however it was downsizing, not misappropriation of customer funds. 

National Futures Association (NFA) has effectively barred Vision Financial Markets LLC (Vision), a futures commission merchant Member of NFA, and Ace Investment Strategists LLC, a commodity trading advisor Member of NFA from membership. NFA also has barred Ace's principal, Yu-Dee Chang (Chang),…

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