Archive for April, 2012

The Ides Of May Could Be Upon Us

Saturday, April 21st, 2012

This week we saw the Dow’s price teeter totter up and down as we head towards May. When there was no news, the Dow sat and idled, without direction, extremely lackluster. When news struck, the Dow moved briskly, only to quickly forget that news and return to an idle state. Unlike the steep uphill rally in March, April has been a month of lackluster whipsaws. Does this forebode the “Ides of May”, when the old adage comes into play, “Sell in May and Go Away.” (more…)

Is It Structural or Is It Hysteresis?

Sunday, April 15th, 2012

Is It Structural or Is It Hysteresis?

Last Thursday, April 12th, the weekly unemployment claims report was released. The Number soared from 367k the week before to 380k, yet what had been forecast was a drop to 355k. What made this number so concerning was that, not only did the number rise, but that unemployment claims are based upon the prior week, and the prior week was Good Friday when government offices were closed. That meant that the number was based on 4 work days not 5. At this point, the question becomes, is unemployment now structural or is it still a result of the 2008 recession (hysteresis). (more…)

The Feds “All In” Poker Monetary Policy

Sunday, April 8th, 2012

Access to money at a reasonable interest rate is what businesses and consumers have come to rely on to spur the economy. For this purpose, the Feds have lowered interest rates to bargain basement levels, hoping that this will serve as a catalyst for the country’s lethargic business investment/hiring. By reducing borrowing costs for machinery and equipment, the Feds assume that new factories will be built, more stores opened and apartment buildings constructed, all leading to additional employment. Short-term reduction of interest rates as a stimulus to business spending is normal operating procedure for the Feds. But when interest rates hover at nearly zero for long-term, there are “unintended” side affects that do not benefit all. (more…)