Other People’s Money

The stock market is high. What gets a market feelin’ good and oblivious to everything around it is a powerful drug, one that has the ability to cloud judgement like nothing else. The opium of markets is OPM, or Other People’s Money.

Where the stock market should be feeling blue and dealing with the realities of a world unraveling with trade wars and debt, it’s taken another course. It’s decided to just get high the best way it can. In that state of euphoria none of that other stuff matters, and everything is good. We have plenty of OPM to go around.

Right now, the stock market has a serious OPM crisis that very few people are talking about.

Continue reading

Advertisements

Jobs Are Good!

Good news! The economy added 313k jobs in February!

Like all news, we need some kind of reality check first. Did it really? The long and short of it is that, as always, the ADP employment report is less noisy and thus more accurate. It had a gain of 263k jobs in February, which is probably the right number. Still very good news all around.

But is good news actually bad news? Along with the jobs report we have the increase in wages, which stands at a modest 2.6% over the last year. Does that mean inflation is tamed? We will see what the markets think.

Continue reading

Yes, But How is It All Screwed Up?

We’ve made the Barataria position very clear – that current federal policy is doomed to trash the stock market and somewhat damage the overall economy. That wasn’t talking about new tariffs, however. As the mechanism for screwing things up shifts, the predictions as to how it will all go down have to shift.

So here we are, trying to make some sense of the senseless. It’s more of a crapshoot every day.

Continue reading

Inflation is Back

Inflation is back. What’s left to see is what anyone does about it.

The Consumer Price Index (CPI) for January came in at a strong 2.1% over the last 12 months. That’s above the target rate of 2.0% set by the Federal Reserve for the fourth month in a row. There will be attempts to explain it away in various ways. In the noise that will be created over this what will count is action by the Federal Reserve one way or the other.

Continue reading

A Bold Prediction

We’ve been talking about the stock market this week, so why not end it with a bold prediction: Once the federal debt ceiling is raised, look for the stock market to utterly tank within two weeks, certainly within a month.

While there are many reasons why the market is taking at least a pause if not slouching towards a correction, the most important is the appetite for government debt. A time like this requires careful management and attention to consequences. We’re not getting it. What we have instead is mismanagement on an epic scale that will certainly spook the market and ultimately kill it.

Continue reading

Where Do Stocks Go Now?

Stocks appear to have stabilized after a rough week. But several questions remain. Was this a one-time shock event, or is it a correction? And if it’s a correction, how low can things go?

We can be sure that what has happened so far is not an isolated event, but part of a major change in the regime from loose, cheap money to a more normal economy. Corporate profits are high, and America is taking care of business, so there’s no apparent reason to be terribly afraid.

Yet the change is significant, and precisely how significant will not be clear for some time. Here is what to watch for as stocks and other markets absorb the change and make a transition into a new economy.

Continue reading