Tuesday, May 27, 2014

Quantitative Easing – Is it Inflationary or Deflationary?

On May 15, 2014 the CPI index was published in the U.S. which showed general price increases as measured by the BLS were a meager 2% annually.  This was after a year of massive bond buying by the Federal Reserve.  During the same year over year period, the Fed added $1.162 Trillion dollars of liquidity into the worldwide economy.
 
What exactly is going on?  The population has been led to believe that when the Federal Reserve “prints” money, the economic result is inflation.  Chances are that the current path taken will result in a similar outcome.  However, if you are looking at the present financial market and believe the Fed may have found the Golden bullet on how to tame inflation – simply lower interest rates to zero percent and flood the market with cash – think again.  Why?  It is actually very simple.  It depends on where all the cash, goes.  And eventually, the Fed is not in total control of where the excess money goes.

Monday, May 19, 2014

Nervous Investors Move to Bonds just like Belgium?

I have run across data that belongs in the category of strange and unusual in the May 15th publication of the TIC data (Treasury International Capital Report).

The strange aspect of the data is that in the published figures, the tiny country of Belgium with a GDP of only $509B, somehow managed to purchase $40.2B in Treasury securities in the month of March.  The purchases follow a six month barrage of purchases by Belgium in which $214.6B in Treasuries were added to security accounts held in the country.  Based on the data, Belgium has escalated to third, behind only Japan and China (mainland) in the rankings of foreign countries which hold the most U.S. Treasury reserves.




Wednesday, May 14, 2014

Theory of Financial Relativity: Powerful New Book Helps Protect Investments, Exposing Framework for Predicting Market Trends.

Masterfully crafted by investment guru Daniel Moore, ‘Theory of Financial Relativity’ explains why financial markets suddenly change course and how these changes can be predicted. By meticulously studying U.S. financial markets from WWII to the present day, Moore has uncovered fourteen market corrections that display a predictable pattern of change. Sharing this information with the public for the first time, Moore’s work is poised to help millions protect their investments and take advantage of their movements for success.


For Immediate Release


Durham, NCBoth consumers and critics traditionally treat U.S. financial markets as a volatile and unpredictable world that could drastically change direction at a moment’s notice. While this theory holds a shred of truth, a powerful new book exposes the previously unknown and systematic pattern of ‘ups and downs’ that can actually help investors predict when a bull will become a bear.

Everything is showcased in ‘Theory of Financial Relativity’ by Daniel Moore. Hailed as “the most interesting man in the financial world,” Moore has spent hundreds of hours combing over seventy years worth of market trends to expose a game-changing and predictable pattern.

Read more >>


Wednesday, May 7, 2014

Fed Cornered by QE Program – Reverse Repo Path Being Considered

In Fed Chair Janet Yellen’s testimony to the Senate Banking committee on May 7, 2014 there were many questions about when the Fed would “normalize” its interest rate policy, specifically the Fed Funds rate.  She stuck to the party line, saying it is expected to be a “considerable time” before the Fed will raise short term interest rates.  When pressed for a definition of “considerable”, she did a political dance and left the definition to “it depends on economic circumstances”.  In other words, it depends on what will do the least amount of damage to the political party in charge.

One path to actually raise interest rates, but escape the consequences that raising the Fed Funds rate entails, is to use a technique known as the Reverse Repo.  The "experiment" that the Fed is currently actively

Tuesday, May 6, 2014

Market Winds are Shifting – Time to Assess the Signals

On Friday, May 2nd the April jobs report was published by the U.S. Bureau of Labor Statistics showing that 288,000 new non-farm payroll jobs were created in the month.  It was the strongest month to month growth since January of 2012.  In addition the unemployment rate fell to 6.3%, with 138.252 million people estimated to be employed during the month.  This is the highest total number of employed people since March of 2008 and is on the verge of becoming an all-time high in terms of total employment.

The information was published a day after both the DOW and S&P500 (DIA) (SPY) set new all-time highs.  The immediate response by the market when the jobs information was released was a jump higher.  However, by mid-day the market was slightly down, seemingly unimpressed by the job figures, and ended the day on a down tick.  Why?  Research has shown that while jobs are of course an important economic indicator, they are always a trailing indicator.  Anyone trading stocks on the jobs report is searching for fools gold.  The more important aspect of the jobs report is whether the data causes an unexpected change in the expected direction of market influential factors that do impact stock valuations.