Never Mind Their Distrust Of Data And Forecasts, Austrians Can Help You Predict The Economy
- 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?
- 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
- 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
- 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
- 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?
- 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
- 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
- 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
- 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
- Why Next Week May Be Pivotal: Introducing The 'JAJO Effect'
- Tracking 'Bubble Finance' Risks In A Single Chart
- Bubble Or Not, U.S. Stocks Are Priced To Deliver Dismal Long-Term Returns
- This 'Non-Traditional' Valuation Measure Carries 3 Messages About U.S. Stocks
- Your Guide To December's FOMC Meeting: Breaking Down The Participants
- Why The Fed Won't Taper In December
- P/E Multiples, Deleveraging And The Big Experiment: Sizing Up The Next Bear Market
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
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
- Breaking Bad News From The Fed's Z1: Expansions Tend To Explode Near Current Leverage Multiples
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
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?
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