Post Tagged with: "prediction"

Minsky’s financial instability hypothesis and the Fed’s reaction function

Minsky’s financial instability hypothesis and the Fed’s reaction function

As the Federal Reserve meets today to decide how to communicate its messaging on future rate hikes and balance sheet reduction, financial stability will play a key role. The risk of overheating was real. So let’s put some framing around this issue and ask how the Fed reacts as the data come in down the line.

Read more ›
As the Fed meets, expect expansion through 2018, but problems thereafter

As the Fed meets, expect expansion through 2018, but problems thereafter

Given where we are right now, I think this expansion will continue through the end of 2018. And I want to talk about what that means in the context of my last post and recent BIS warnings on financial markets.

Read more ›
Corporate tax cuts and monetary offset could mean recession

Corporate tax cuts and monetary offset could mean recession

Tax cuts in the US will accelerate the Fed’s timetable and increase the potential of curve inversion and eventual recession.

Read more ›
What the 33,000 job loss means about where the US economy is right now

What the 33,000 job loss means about where the US economy is right now

The latest jobs number out of the US was a loss of 33,000 jobs in a hurricane-ravaged September. Despite the job losses, the unemployment rate ticked down to 4.2%. Viewed narrowly, this number puts the Fed on hold until December. But viewed more broadly, I believe now is the time to talk about Minsky’s ‘instability of stability’ and what it […]

Read more ›
The wisdom of crowds and government bond markets

The wisdom of crowds and government bond markets

When you look at how markets are positioned, it’s clear that a lot of people see continued low growth for years to come – a veritable Japanification of the US economy. I hope this is one of those times that markets are wrong. But I am not willing to bet on the hope, just the opposite.

Read more ›
On the Fed’s pause due to dual-barrelled monetary tightening

On the Fed’s pause due to dual-barrelled monetary tightening

Fed Governor Jerome Powell recommended a June hike and 2017 balance sheet reductions, in one of the last public speeches by a Fed official before the June FOMC meeting. When the Fed follows Powell’s game plan, we will be in the unchartered waters of dual-barrelled tightening, with the attendant risks that entails. Some comments below

Read more ›
Markets actually aren’t freaking out about Trump

Markets actually aren’t freaking out about Trump

We are seeing decent selling in today’s US equity markets, with the VIX up some 25%. And most people are pointing to the Trump scandals. But this is only one day. What is happening with Trump – while negative – will not change the arc of the US economy and markets.

Read more ›

Hammond’s ‘whatever it takes’ strategy for a hard Brexit

On Friday, I wrote why, unlike Bank of England Governor Mark Carney, I believe the economic threat of Brexit to the British economy is now higher. The gist of my remarks was that an actual trigger of Article 50 under hard Brexit circumstances is when we should expect any economic impact from diminished consumption and investment. Some brief comments below

Read more ›

Why the Brexit risk is now higher, not lower

When the Brexit vote first happened, I indicated that I didn’t see the huge risk to the UK that others did. In fact, I thought the initial tail risks were elsewhere, like the Italian banking system. The economic risks for the UK were always overstated because of monetary, fiscal and currency offsets. But now that a hard Brexit comes closer, the risks have increased, not decreased, as Mark Carney, the Bank of England Governor contends. Some thoughts below

Read more ›

Black Swan Investing and the breakup of Europe

This isn’t going to be a thematic post on how to profit from Europe’s breakup, despite the sinister title. Instead, it’s a potpourri post – a mashup of different ideas I have right now and want to run by you to organize my thinking about them. I used to do this a lot more in the past – and I found it useful; I hope you did too. So for lack of a coherent theme, I chose the title above. Here goes.

Read more ›

Upbeat about the near-term, dubious on the longer-term

This is a quick post about the US economy. To put it simply, I am upbeat about what the near-term holds for the US economy. I have lots of doubts about the longer term. But whereas I might have led with the doubts earlier in the year, as the year ends, I want to lead with the optimism.

Read more ›
Re-calibrating our thinking about Brexit after MPC rate cut

Re-calibrating our thinking about Brexit after MPC rate cut

The Bank of England has cut interest rates and started a quantitative easing program that includes both government and corporate bonds. This approach was enough to send the pound Sterling down to $1.31 and 10-year gilt rates to a record low of 0.677%. While I reiterate my previous bullish views on Anglo-Saxon long rates, US dollar strength and on the UK […]

Read more ›