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  • Stocks At Record High, Treasuries At Record Low - A Rarity

    Stocks as measured by the S&P 500 and the Dow have cruised to new record highs over the last week. Treasury yields on 10-year notes and 30-year bonds moved to all-time record lows last week. Historically, these two things rarely happen at the same time. In fact, the S&P 500 has hit a record high when the 10-year Treasury note yield was below 2% only once in the last 40 years.

    The fact that stocks are at new highs and Treasury yields are at new lows is largely due to red-hot foreign demand for US securities. There are continued worries about the UK and Europe in the wake of "Brexit" and rising concerns about China's economy. With negative interest rates spreading around the world, foreign investors are gobbling up Treasuries which still have positive yields and adding US equities as well. Some say this is the "New Normal." But is it?

    That's what we'll talk about today.

    ...
  • GDP Report Shows the Economy is Stalling

    It appears that the debt ceiling fiasco will finally be put to bed with a Senate vote later today, as I predicted. But not before our leaders in Washington led us to the brink of another financial crisis. Frankly, the new debt ceiling deal is UGLY as I will discuss below. But before we get to that, we have to look at last Friday's very disappointing GDP report - it was a shocker. So was the Fed's latest assessment of the economy last week. And so was yesterday's ISM manufacturing report which plunged in July. It is now clear that the US economy is very close to moving back into recession again.

    None of this is good news for the stock markets, which are down again today following a significant sell-off last week. The debt ceiling drama pointed out to millions of Americans just how dire our national financial situation is, and they are moving out of the stock markets in droves to the safety of Treasuries or cash. Is this an overreaction? I'll give you my thoughts as we go along.

    ...
  • Have We Turned The Corner On The Recession?

    While the global recession and credit crisis are still in full swing, at least we have finally seen a few positive economic reports of late. Specifically, we have seen some good news in the housing sector where new and existing home sales actually increased nicely in February, following months and months of decline. We also saw an unexpected jump in durable goods orders for last month. These reports, along with the nice jump in the stock markets, have led several noted forecasters to suggest that we've seen the bottom in the recession and the worst of the credit crisis. I am not so convinced.

    We will also take a close look at Treasury Secretary Geithner's latest bank bailout plan that would partner government and private investors in a scheme to take toxic assets off of the banks' books, but there is no guarantee that this new plan will work. We'll also examine the Fed's latest plans to buy Treasury debt and more toxic assets from banks. Next, we'll examine the latest report from the Congressional Budget Office regarding President Obama's record large budget for 2010, which the CBO says will result in a massive $2.3 trillion deficit. Can I say, I told you so?

    It's a lot to cover in one letter, but I trust you will find it interesting....