Executive Summary The Federal Reserve Bank (Fed) has been implementing QE (Quantitative Easing) on and off for over a decade. In implementing QE, the Fed purchases Treasury securities and Agency mortgage-backed securities (MBS) – not stocks. Many believe the Fed is “printing money” when purchasing those bonds. [...]
Executive Summary Anyone who has been paying attention to the residential real estate market lately is probably shaking their head. It is definitely a seller’s market. The driving factor in housing, like most markets, is supply and demand. The lack of supply, combined with other factors discussed [...]
Executive Summary Since 1990, the monetary base has grown from around $300 billion to close to $5.5 trillion. (See first graph) The massive amount of liquidity provided through the Federal Reserve Bank’s (Fed) monetary policy has helped fuel enormous bubbles in all types of assets. One of [...]
Executive Summary The first graph below illustrates the growth in corporate profits versus the S&P 500 Index. The point of sharing this is not to predict a stock crash, but rather to display the embedded risk in the market. Historically market cycles have consisted of both an [...]
Executive Summary The good news announced last Friday by the Bureau of Labor Statistics (BLS) was 916,000 new jobs were created during the month of March. The bad news, which seems is being ignored, was 2,876,000 initial unemployment claims were filed during March. For perspective, on normal [...]
Executive Summary Financial media and the stock market seem to hang on every word released by the Fed. In fact, last week the S&P 500 Index jumped by about 1.5% in a matter of seconds on virtually no new news regarding monetary policy in the Fed statement. [...]
Executive Summary In this eye-opening look at the current stock market cycle, I compare the cycle to 1929 and 1999 as well as uncover one of the significant underlying factors fueling the bubble. In 1929 the S&P 500 P/E ratio peaked at 20, and in 1999 the [...]
Executive Summary The current housing market appears to be booming with continually escalating prices. Substantially aided by the Fed’s low interest rates, rising home prices are disconnected from the Consumer Price Index, a proxy for inflation (see second graph below). The fifth graph in The Details demonstrates [...]
Executive Summary The quote below is from Warren Buffet’s long-time business partner, Charlie Munger, and speaks to the recent irrationality in the stock market. One valuation metric used to evaluate the price of a stock is the price to earnings ratio. Historically, the average P/E ratio for [...]
Executive Summary Many are looking at the recent surge in long-term Treasury yields as a sign that inflation is on the horizon. The yield has bounced back and forth in a channel for some time. Looking at the graph below, the recent bounce does not yet appear [...]