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Cyniconomics  

  • Never Mind Their Distrust Of Data And Forecasts, Austrians Can Help You Predict The Economy
    Jul. 22, 2014 IYF, SPY, DIA 33 Comments

    Summary

    • We show that Austrian ideas about the credit markets (and, to some extent, those of the Minskyites) are twice validated by history.
    • First, lending that's unsupported by prior savings appears to be a major part of the business cycle over the last six decades.
    • Second, extreme gaps between lending and prior savings were complicit in the last century's two worst economic crises.
  • Planning For Future Rate Hikes: What Can We Learn From History?
    Jul. 6, 2014 SPY, DIA, QQQ 13 Comments

    Summary

    • The Fed’s forecasts show a steady pace of interest rate hikes from 2015 until the fed funds rate is nearly 4%.
    • Fed officials suggest the economy will strengthen enough to withstand higher rates (reaching “escape velocity”).
    • We review the last 60 years of interest rate changes, which cast much doubt on the notion that we can escape the usual effects on financial markets and the economy.
  • Global Drag Threatens Worst U.S. Export Performance In Over 60 Years
    Jun. 20, 2014 SPY, DIA, QQQ 3 Comments

    Summary

    • U.S. export growth in the current business cycle is now weaker than in each of the prior nine cycles.
    • Growing risks to the export sector won’t necessarily forestall the current expansion.
    • However, export performance bears watching alongside other indicators and especially corporate profits.
  • Where $1 Of QE Goes: The Untold Story
    Jun. 4, 2014 24 Comments

    Summary

    • We find a curious result in the Fed's financial flows data.
    • Banks increased their net lending between but rarely during QEs 1, 2 and 3, suggesting that QE merely displaces private sources of credit.
    • We offer a few possible explanations and interpretations.
  • Tracking Credit Market Risks: 3 Underappreciated Indicators Show The Dangers Of Excessive Lending
    May. 7, 2014 3 Comments

    Summary

    • America's public and private debt relies on four types of financing.
    • The financing mix carries significant implications for economic risk.
    • History shows that three particular indicators can offer warning signs of future economic troubles.
  • Is This What A Credit Bubble Looks Like?
    Apr. 24, 2014 SPY, DIA, QQQ 4 Comments

    Summary

    • Corporations are only investing about half of available funds (internally generated and borrowed) back into their businesses, well below the historic norms of 2/3rds to 3/4ths.
    • Consequently, the debt-to-fixed asset ratio for nonfinancial corporations rose to 65% in 2013 (according to our estimate), well above the previous peak of 59% in 2007.
    • We consider how much higher the debt ratio could rise.
  • Bulls Vs. Bears: Some Profit Margin Stories Are Better Than Others
    Apr. 7, 2014 SPY, DIA, QQQ 5 Comments

    Summary

    • Investors should be wary of “new era” stories holding that profit margins are structurally higher than before.
    • These stories fail to consider the most basic determinants of corporate profits.
    • Using an approach that considers both external and internal pressures on profitability, we conclude that recent trends are better explained by elevated risks than by permanently higher margins.
  • Why You Shouldn't Fall For These Corporate Capex Fallacies
    Mar. 17, 2014 SPY, DIA, QQQ 6 Comments

    Summary

    • We critique four popular arguments about capital expenditures (capex).
    • We show that historical correlations contradict all but one of the four arguments.
    • We explain why you shouldn’t fall for the story that corporations have been underinvesting and will soon lift the economy into a robust recovery through capex.
  • What Needs To Happen Before We See A Big Recovery
    Mar. 7, 2014 SPY, DIA, QQQ 30 Comments

    Summary

    • Contrary to what you may hear from policymakers focused on employment and headline GDP, more telling indicators such as private domestic demand show a declining trend.
    • To understand that declining trend, it helps to screen out the noise from the BEA's personal income data, last released on Monday.
    • While personal income has been held back by a few temporary factors, it's also showing the effects of the fact that the economy is creating very few "breadwinner jobs."
    • The connection between job quality and the overall economy is strong and will continue to determine whether we see the big recovery that many economists have been predicting.
  • Why The Next Global Crisis Will Be Unlike Any In The Last 200 Years
    Feb. 10, 2014 71 Comments
  • Fear The Stock Bubble, But Don't Sweat The Emerging Market Crisis
    Jan. 31, 2014 DIA, SPY, QQQ 3 Comments
  • Why Next Week May Be Pivotal: Introducing The 'JAJO Effect'
    Jan. 27, 2014 SPY, IWM 2 Comments
  • Tracking 'Bubble Finance' Risks In A Single Chart
    Jan. 21, 2014 SPY 3 Comments
  • Bubble Or Not, U.S. Stocks Are Priced To Deliver Dismal Long-Term Returns
    Jan. 13, 2014 SPY, DIA 11 Comments
  • This 'Non-Traditional' Valuation Measure Carries 3 Messages About U.S. Stocks
    Jan. 6, 2014 SPY, DIA, QQQ 2 Comments
  • Your Guide To December's FOMC Meeting: Breaking Down The Participants
    Dec. 11, 2013 SPY, QQQ, SH 2 Comments
  • Why The Fed Won't Taper In December
    Editors' Pick • Dec. 9, 2013 DIA, SPY, QQQ 45 Comments
  • P/E Multiples, Deleveraging And The Big Experiment: Sizing Up The Next Bear Market
    Dec. 2, 2013 SPY, DIA, QQQ 19 Comments
  • The Post-Crisis Facts Are In, And They're Not Kind To Keynesian Thinking
    Nov. 26, 2013 7 Comments
  • Spotting The Cracks In The New Summers/Krugman Hypothesis
    Nov. 25, 2013 2 Comments
  • Revealing The Escher Economy That's Embedded In The Establishment Interest Rate View
    Nov. 12, 2013 PLW, GOVT, TRSY 5 Comments
  • An Audacious Plan To Fix The QE Non-Taper And Fiscal Non-Action In One Swift Move
    Oct. 28, 2013 3 Comments
  • Fonzie Or Ponzi? One Theory On The Limits To Government Debt
    Editors' Pick • Oct. 22, 2013 DIA, SPY, TLT 106 Comments
  • Breaking Bad News From The Fed's Z1: Expansions Tend To Explode Near Current Leverage Multiples
    Sep. 30, 2013 SPY 2 Comments
  • 63 High Government Debt Episodes And What They Tell Us About Our Options Today
    Sep. 19, 2013 3 Comments
  • Why Stock Prices Are More Stretched Than You Think: A Tale Of 3 P/E Multiples
    Aug. 17, 2013 SPY, DIA, QQQ 55 Comments
  • America's Urban Distress: Why The Public Pension Problem Is Worse Than You Think
    Aug. 6, 2013 20 Comments
  • America's Urban Distress: Which States And Regions Set Up Their Cities To Fail?
    Aug. 4, 2013 3 Comments
  • Previewing The Bad News That's Likely To Complicate The Debt Ceiling Battle
    Jul. 24, 2013 5 Comments
  • Stock Prices Are Outrunning Corporate Profits: When Has This Happened Before?
    Jul. 18, 2013 SPY, DIA 8 Comments
  • Preparing For Bernanke's Speech With A Short 'Who Said It' Quiz
    Jul. 9, 2013 2 Comments
  • Step Right Up And Test Your Central Banking Skills Against The Scariest Economy Of All
    Jul. 8, 2013 SPY 4 Comments