The Independent Market Observer

A Preview of the March Employment Report

March 31, 2016

Despite all the signs of an economic slowdown in recent months, one thing has just kept going: the job market. Month after month, employers have kept hiring and kept expanding the demand for labor.

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Interest Rates: Lower for Longer It Is

March 30, 2016

interest ratesJanet Yellen made it very clear yesterday that, as far as she’s concerned, the trajectory for interest rates will be lower for longer. In a speech to the Economic Club of New York, Yellen said that she thinks the risks in the global economy justify continued low rates here in the U.S.

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Inflation: Three Shades of Gray

March 29, 2016

I left off last week with a discussion of the Federal Reserve’s interest rate policy and inflation. As I noted, the Fed may well be forced to raise rates faster than the market is now pricing in, as inflation increases.

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Monday Update: Despite Disappointing News, Slow Growth Should Continue

March 28, 2016

Last week’s economic news was discouraging, with weak headline numbers and generally weak details. Nonetheless, the data points more toward continued slow growth, not a collapse.

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Interest Rates: Lower for Longer, or Faster and Farther?

March 24, 2016

Two of the big economic stories—interest rates and the stock market—came together in the aftermath of the most recent Federal Reserve meeting. The Fed opted to keep rates where they are (not a surprise), but the statement and Janet Yellen’s press conference were unexpectedly dovish, suggesting that rates are likely to stay much lower than the Fed had previously indicated. The expectation dropped from four increases in 2016 to just two, which surprised and encouraged the stock market.

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The Growing Money Supply—Not a Risk

March 23, 2016

Yesterday, we concluded that the recent decline in money velocity is due to the money supply increasing faster than economic growth, rather than a collapse in growth itself. So, at worst, slower money velocity is a symptom of potential trouble rather than a cause.

Today, let’s consider another side of the issue: is the fact that growth in the money supply exceeds that of the economy itself either a symptom or cause of future economic trouble?

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The Velocity of Money: Safe at Any Speed?

March 22, 2016

Recently, concerns about the velocity of money have resurfaced. Several readers have asked whether declining money velocity presages a crash, a recession, or something equally bad. It’s a fair question. As with many such issues, though, we’ve been down this road before several years ago. Low money velocity didn’t mean problems then, and it shouldn’t mean problems now.

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Monday Update: A Mixed Bag for Economic News

March 21, 2016

Last week’s news wasn’t particularly good, but neither was it particularly worrisome. Economic reports were mixed, with weak headline numbers supported by better details and trends.

Overall, growth remains slow and steady, despite the lingering slowdown from the end of last year.

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Will We Have a Depression?

March 18, 2016

Today’s topic comes from a reader question that underlines, very succinctly, the economic event people dread most. We talk about the stock market, we talk about the Great Recession, but the real fear is that we are in, or about to enter, a repeat of the Great Depression—and that we won’t be able to get out of it.

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Appearance on CNBC's Power Lunch, March 17, 2016 [Video]

March 18, 2016

Is the Fed behind the curve on global risk? That's part of what I talked about yesterday during an appearance on CNBC's Power Lunch. I also spoke with program co-anchor Brian Sullivan about the markets and stock opportunities.

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The Student Loan Problem (Or Is It?)

March 17, 2016

Student loan debt has increased dramatically in recent years, and as graduates reportedly struggle to find jobs, there's growing concern about the role these loans might play in the next financial crisis. The fear is that a systemic default could rock the financial system, much as subprime mortgage defaults did.

Do we really have a systemic problem on our hands? And just how great is the risk? Let’s take a look at the underlying data.

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How Likely Is a Recession?

March 16, 2016

I wrote the other day about the very real chance of an economic boom over the next couple of years, not as a prediction but as a way of considering possibilities. Today, let's reverse course and consider the possibility of a recession.

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Changing Political Trends: The U.S. and Europe

March 15, 2016

The news here in the U.S. is all about the election. In Europe, it’s all about the migrant crisis and the politics surrounding it, at both the national and EU levels.

In many ways, the U.S. election and those in European countries boil down to the same thing: the conflict between the nation—defined as the people who “belong” thereand those who don’t belong.

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Monday Update: Quiet But Positive

March 14, 2016

There were no major economic data releases last week but a number of minor ones. News was generally positive, despite some weak spots.

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Are You Ready for . . . the Coming Economic Boom?

March 11, 2016

One way to think about what’s next is to consider what no one is really talking about. We have heard so much about recessions, global economic collapse, the oil market, and so forth that you could be forgiven for believing the world is coming to an end.

That’s not the case, of course. At least here in the U.S., things have been getting consistently better, at an accelerating rate. But is anyone taking that seriously? Given current conditions, it’s not unreasonable to consider that an economic boom could be on the way.

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ECB Stimulus: A Desperate Move?

March 10, 2016

I wrote the other day about the next crisis and why it might well come from Europe. The news from the European Central Bank this morning reinforces my convictions. Although markets seem to be cheering the announcement of more stimulus, to me it looks like one more sign of increasing systemic stress.

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The Presidential Election and Free Trade

March 9, 2016

Today’s economic news comes straight from the campaign trail, but it might not be the news you think. The big story is that opposition to free trade is now a major vote winnerand an issue that stands to affect the policies of both parties.

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The Stock Market: Reasons for Optimism

March 8, 2016

As the market creeps back up, investors may be inclined to doubt the recovery. After all, there must have been a reason for the pullback we just saw. Couldn’t stocks drop again for the very same reason?

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Monday Update: Signs of Spring

March 7, 2016

Last week’s economic news was very good, with all major releases beating expectations.

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Economic Risk Factor Update: March 2016

March 4, 2016

Once again, it’s time for our monthly update on risk factors that have proven to be good indicators of economic trouble ahead. After flashing a yellow light for the last several months, the change in consumer confidence indicator has declined even further, moving closer to the worry zone. Some signs of weakness are also appearing in other areas, such as the yield curve indicator.

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Looking for the Next Crisis

March 3, 2016

I am traveling today, speaking to investors, and during the discussion after my presentation, a question arose: where will the next financial/economic crisis be?

We’ve talked about many different risks but not about where the next systemic crisis might come from. It’s a question worth considering.

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Monthly Market Risk Update

March 2, 2016

Today, I’m launching a new monthly feature on key market risk factors. I’ve written on this topic from time to time, but given recent market conditions and behavior, I think it’s useful to review these factors on a regular basis.

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Market Thoughts for March 2016 [Video]

March 2, 2016

In my latest Market Thoughts video, I discuss the markets and economy in February, which was turning out to be a scary month before a late rally left the market flat. Why did the pullback happen, what caused the recovery, and what does the future hold?

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It’s All About the Jobs

March 1, 2016

The market’s movements continue to raise a lot of questions. After the decline to start the year and the ongoing recovery, does the market really have any idea where it’s going?

In the short term, the answer is no.

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