- the source for market opinions


June 18, 2018 | Failed States, Part 1: Hopeless European Millennials And The Populist Takeover

Europe is frequently held up as an example of how the rest of the world should behave on a variety of issues. But this comparison misses at least two things: First, “Europe” is actually a lot of different countries in a lot of different situations. Second, much of what seems to work over there only […]

June 17, 2018 | Oil, The Petrodollar, And The Next Emerging Market Crisis

Oil prices are up over the past year, which is bad if you’re, say, a developing country that imports a lot of the stuff. But the US dollar (aka the petrodollar) is also up, which compounds the problem because oil is priced in dollars. So Brazil, for instance, finds itself buying an appreciating necessity that’s […]

June 14, 2018 | Shocked! To Hear That Corporate Share Buybacks Line Execs’ Pockets

Here’s one for the Clueless Regulator Hall of Fame: Corporate executives are using stock buybacks to pad their own compensation, according to SEC official (CNBC) – Share buybacks have surged since the Republican-backed tax bill made it through Congress in December. Corporate executives are using tax cuts and share buybacks to boost their own compensation, […]

June 13, 2018 | Inflation Is Back, Part 7: Just Check Out This Chart

Monthly economic readings tend to be full of noise and are therefore unreliable. So it’s best to save the excited assertions for established trends. The US Consumer Price Index appears to have reached that point: As most readers probably know, the CPI is widely believed to understate the true rate of inflation because of statistical […]

June 11, 2018 | When Will Gold’s “Summer Doldrums” End? History Says Pretty Soon

This has been a uniquely boring stretch for gold and silver – especially given all the things going on in the world that ought to light a fire under precious metals. In just the past few weeks, the US started a global trade war, Italy elected a populist government, emerging markets descended into yet another […]

June 9, 2018 | “Junk In The Trunk” – Investors Get “Comfortable” With Subprime Auto Loan Bonds

The longer an expansion lasts, the crappier its paper becomes. That may seem like a baseless assertion, but it’s actually just simple math. Early in recoveries, borrowers and lenders are both shell-shocked by the last recession, so only high-quality deals get done. But as time passes, all the good borrowers get their loans and if […]

June 6, 2018 | Inflation Is Back, Part 6: More People Now Expect Higher Prices

Turning points in a financial system usually occur in discrete phases. At first, new information that contradicts existing preconceptions is dismissed as unimportant. But as more such data accumulates, a growing number of people come to expect the new trend to continue. In economist-speak, “expectations” change, and these become self-fulfilling prophecies, leading people to behave […]

June 5, 2018 | A Spiking Dollar = Emerging Market Chaos, Part 2: The Story In Four Charts

For most of the past few years, emerging market stocks and bonds were among the favorite investments of everyone from hedge funds to pension funds to retirees. Now, not so much. The next two charts (courtesy of Saturday’s Wall Street Journal) show the huge recent run ending in January, to be replaced by a full-on […]

June 4, 2018 | Late-Cycle Sadness: Value Investors Give Up And Buy Netflix, Apple

Back in the late 1990s I interviewed for an analyst job with a value-oriented money manager. My main impression of our talk was how sad the guy was. The tech bubble was in full swing, any little nothing company with even a tangential relationship to the Internet was soaring, and this poor guy’s cash-rich, super-safe […]

June 3, 2018 | Japan Shows Why — And How — All Fiat Currencies Are Doomed

A couple of decades ago, when the post-war baby boom generation was in its prime earning and tax-paying years, governments had a chance to guarantee the survival of their financial systems. But they blew it. Instead of controlling spending, running surpluses and banking the proceeds against the inevitable retirement of millions of boomers, most chose […]

May 29, 2018 | Housing Bubble Pathologies Start to Bite – Yet Another Sign the Cycle Has Peaked

The early stages of a housing bubble are fun for pretty much everyone. Homeowners see their equity start to rise and feel smart for having bought, home seekers have to pay up, but not too much, and fully expect their new home to keep appreciating. People with modest incomes feel a bit of pinch but […]

May 28, 2018 | A Spiking Dollar = Emerging Market Chaos

The dollar collapse thesis – which ends with all fiat currencies achieving their intrinsic value of zero — doesn’t preclude some thrills and chills along the way, in which some currencies fall faster than others and wreak havoc on various parts of the global economy. This might be one of those times, as instability in […]

May 27, 2018 | The Next Populist Political Issue Emerges: CEO Pay

It’s always been understood that corporate executives make a lot more than rank-and-file workers. But the gap between top and bottom was hard to calculate, and therefore hard to turn into media sound bites, so it didn’t play much of a role in the US political process. But this year, for the first time, corporations […]

May 25, 2018 | Debt Slaves, Part 1: Million Dollar Student Loans And The Coming Bailout

Today’s Wall Street Journal is profiling an orthodontist who has $1 million in student loans, is paying less than the interest that’s accruing, and because of this will owe $2 million in the not too distant future. The list of things that have to happen for a situation like this to evolve is long and […]

May 23, 2018 | We’re No Longer Living In Refi Paradise

Back in the 1990s we did our first cash-out refi. And it was amazing. The bank lowered our monthly mortgage payment AND wrote us a check for $16,000. I told that story to everyone I met for months afterward, and they were, without exception, astounded. That, in a nutshell, is the refi paradise in which […]

May 22, 2018 | The Number That Ends This Cycle…Part 2: Goldman Sachs Makes Its Choice

Everyone seems to agree that if interest rates keep rising a recession and equities bear market will ensue. But no one knows where the breaking point is in terms of, say 10-year Treasury yields. So it’s become a topic of debate with a lot of heavy-hitters offering opinions. Yesterday Goldman Sachs weighed in: Goldman: Don’t […]

May 21, 2018 | Is Oil About To Become Front-Page News? “A Glut That Held Prices Down For Years Is Essentially Gone”

Here’s a new indicator for you: It seems that the difference between the price of oil here and abroad is a measure of tightness in the market, with a rising spread indicating higher prices in the future, with all the inflationary pressures that that implies. From today’s Wall Street Journal: Trans-Atlantic Oil-Price Spread Soars as […]

May 19, 2018 | Italy: An Anti-Euro Government Takes Power In the Heart Of The Eurozone

Ah, Italy. My people; fun to be around, a nightmare to govern. And now an existential threat to the European Union, the euro currency, and the global bond markets. After suffering for over a decade under a monetary regime designed by and for efficient economies like Germany, the Italian people have finally said enough, giving […]

May 16, 2018 | There’s A Number That Ends This Cycle — But What Is It?

After an epic (generation-spanning at the long end) decline in interest rates, the trend has finally reversed. Which means, if history is still a reliable guide, there’s a number that ends this cycle and ushers in the next recession and equities bear market. But what is it? Here’s a chart (from MishTalk via Crescat Capital) […]

May 14, 2018 | Iraq Gets A Modern Political System: Low Turnout, Surging Populism, Potential Chaos

Remember when Iraqis were first able to vote in national elections back in the 2000s, and huge numbers braved terrorist threats to go to the polls and celebrated afterwards? Their enthusiasm contrasted sharply with US elections where turnout was low and the voters that did show up tended towards ambivalence. But fast forward a decade […]

May 13, 2018 | Russia Deploys Exotic New Weapon: A “Budget Surplus”

The price of oil is rising, which is obviously good news for those who sell it to the rest of us. Russia in particular seems to be enjoying the current trend, so much so that — if I’m understanding this correctly – Moscow is now receiving more in taxes than it’s spending. This is producing […]

May 10, 2018 | The 1970s All Over Again? Part 1: The Middle East Explodes

For most Americans the geopolitical/financial crises of the 1970s happened so long ago that they’re about as relevant as the Revolutionary War or the Reformation. But for seasoned citizens who were around back then and paying attention, the similarities to today are becoming both eerie and scary. Consider: In the early 1970s the Middle East […]

May 9, 2018 | New Loan Sharks Entering The Credit Card Business

A while back, a writer (whose name and story details I unfortunately don’t remember) was researching the credit card business and tried to figure out how card issuers decide which customers to pursue. To this end he created a series of fake personas ranging from an affluent straight-arrow who always pays her bills on time […]

May 7, 2018 | Here’s When Everyone Should Have Known That Argentina Would Implode

About a year ago, Argentina – which has inflated away and/or defaulted on its currency every few decades for the past century – issued 100-year government bonds. And the issue was oversubscribed, with yield-crazed developed-world institutions throwing money at the prospect of a lifetime of 7% coupon payments. A contemporaneous media account of the deal: […]

May 6, 2018 | Plunging Birth Rates Confuse Economists But Are Actually Great News

Birth rates are plunging almost everywhere. The first chart below shows that even notoriously populous China and India have entered the same reproductive neighborhood as the US and are not that far from the assisted living center formerly known as Japan. Which is to say their populations have not only stopped increasing, they’ll actually start […]

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