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Yearly Archives: 2013

Fed Funds Future Foggy, Fudgy

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The stock market is surging on solid corporate profits. Jobs are being created, if a bit slowly. Should the Federal Reserve continue its policy of Quantitative Easing? The short answer is probably not. But the policy of buying $85B in mortgage backed securities is continuing, at least for the foreseeable future. And with Janet Yellen, the Fed Vice Chair, slated to replace Ben Bernanke in January we have every reason to believe that the policy will continue.

It’s time to examine how the Fed sets their benchmark interest rate, the Fed Funds Rate, and what we can reasonable expect them to do with it in the near future. It shows just how much the Fed is really in charge of the economy – absent a Federal Government that is doing what needs to be done.

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Corporate Profits – A Bad Thing?

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Though the stock market is hitting new highs, many people are less than impressed. It’s commonly believed that the Federal Reserve’s $85B per month spending on mortgage backed bonds is all that is holding things up more than reality. That was backed by the big rally after Bernanke announced the program (aka QE3) would not “taper” in the near future, but continue.

But the truth is that corporate profits are at levels that they have never been before, meaning that there is underlying value in the stock market that is driving the rise. More importantly, corporate profit margins (profit over gross revenues) are also at unknown highs. It points to not only how we get out of the job shortage that is the reason the Fed keeps buying, but also the most obvious ways to close the budget deficit – and gives a little more definition to the boomtimes that probably like ahead in the 2020s.

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Science & Technology

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If you peer through a magnifying glass at a bug on a leaf, you may find yourself looking at a different world.  Tiny legs might work their way along the delicate structure, as firm as a human hiker across the solid ground itself.

This world takes on the color of the mind observing it when it becomes a story.  Some may see this new thing and ask questions – how the bug came to like that particular leaf, how it is able to grip it, and so on.  Others may be content reporting the details of the situation, such as the shape of the legs and jaws of the bug.

Anytime new perspectives open up the difference between science and technology is revealed at its basic essence.  Science is a practice of asking questions far more than providing answers.  Technology is about rendering that new information into something practical and useful.  That difference may seem subtle, but it is critical to understanding how new information shapes our personal and public lives in a world bombarded with new ideas and observations.

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Fix the Debt

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With the big fight behind them, it’s time for the leaders in Washington to sit down and get to work in order to prevent another confrontation in January. Haha! I know, it’s always best to open with a joke, so I hope you liked that one.

Well, if you’re like most people this isn’t a joke at all. The Federal budget deficit is serious business and one of the most pressing problems facing this nation. There are a lot of myths being repeated, however, and many people will be surprised to learn that the deficit was reduced dramatically in 2013. With some growth happening it’s down to just 4% of the economy – from a high of nearly 10% in 2008. But it’s still critical to get a handle on things before the median Baby Boomers start retiring in 2017  if we’re going to realize a new era of growth.

Ready to get serious?

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Dissin’ the Jobs Report

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The September Jobs report finally came out after being delayed by the shutdown. Any way you look at it, a longer delay would have been better. According to the official Bureau of Labor Statistics (BLS) figures, the economy only added 148k jobs in September.

But there’s a lot more to it this time around lurking behind the scenes. The markets largely shrugged off the bad news and most of the reporting on the event was dismissive. It’s almost as though the anticipation was bigger than the event – like a disappointing Christmas (whoops! Can’t say that ‘round here!). Is it possible that financial reporting is starting to wake up?

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