Time to Bury the Phillips Curve
The Phillips Curve is an economic concept that posits a stable and inverse relationship between inflation and unemployment. As inflation rises, unemployment falls, and vice versa. Many free market economists had thought that the Phillips Curve had already died in the aftermath of the stagflation of the 1970s when both inflation and unemployment rose together. Certainly, the academic arguments...
Wall Street Banks Warn of Economic Downturn
Analysts at a number of large banks are warning of an economic downturn. Their warnings are based on observations of various technical data, none of which look very rosy. One of Morgan Stanley’s chief strategists has noted a breakdown in the correlation of the prices of various assets. Higher correlations tend to indicate bullish sentiment, as various asset prices move...
Is Saudi Arabia Turning to the Yuan?
In the aftermath of the failure of the post-war Bretton Woods monetary system, the dollar’s position as the world’s reserve currency was strengthened by the development of the petrodollar system. Middle Eastern oil-producing countries agreed to price their oil in dollars, accept only dollars as payment for oil, and invest their dollars in US government debt. In exchange, they...
Germany Finishes Gold Bar Repatriation Ahead of Schedule
The German government finished its planned repatriation of gold holdings by transferring the last bars held at the Banque de France in Paris back to Germany. The German government’s plan was to hold at least 50% of its gold within Germany, a task which has now been completed through transfers from New York and Paris. Those gold holdings are...
The Curious Case of Secretary Mnuchin’s Visit to Fort Knox
Treasury Secretary Steven Mnuchin recently visited the United States Bullion Depository at Fort Knox. According to Bloomberg, Mnuchin stated that “The last time anybody went in to see the gold, other than the Fort Knox people, was in 1974 when there was a congressional visit. And the last time it was counted was actually in 1953.” It’s interesting that...
The Russell 2000’s Price to Earnings Ratio is Higher Than You Think
In what will likely come as a shock to many investors, the price to earnings ratio of the companies in the Russell 2000 index of small-cap stocks has been shown to be much higher than normally reported. Most publications that report the Russell 2000’s P/E ratio apparently fail to take into account the earnings of companies that are losing...
Housing Bubbles in Major Cities Sound the Alarm
Housing prices in Denver, Houston, Miami, and the Washington, DC metropolitan area are officially considered overvalued. While that’s probably not news to the people who live in those areas, it’s yet more evidence that the housing market in the United States is reaching, if not already well into, bubble territory. Surprisingly, markets in San Francisco and New York City are...
Sound Financial Planning Prepares for More Than Just Retirement
Millions of Americans actively plan for retirement and arrange their finances with that end in mind. But as daunting as retirement and the loss of steady income can seem, for most people that won’t occur for decades. The more pressing reality, one which most Americans will face and which few are prepared for, is job loss. In many cases,...
Barcelona Attacks Not Affecting Gold or Markets
The terrorist attack in Barcelona may have shaken up Europe, but its effects on US markets appeared to be negligible. The Dow was down over 274 points, posting its biggest one-day loss in over three months. Domestic concerns seemed to be the primary cause for that, however, with disappointing business earnings numbers distressing investors. Further concerns over shakeups within...
Alan Greenspan Warns of Bond Bubble
Former Federal Reserve Chairman Alan Greenspan warned recently that the bond market bubble is in danger of bursting sometime soon. The originator of the phrase “irrational exuberance” is once again pointing out the dangers of low-interest rates and the likelihood that when rates start rising they will rise rapidly. Greenspan’s Fed and Low-Interest Rates The irony of Greenspan’s most recent comments...