The Independent Market Observer

10/17/13 – A Modest Proposal: Why Doesn’t the Fed Forgive the Debt?

October 17, 2013

Recently, I was invited by the CFA Institute to contribute some thoughts to a discussion about why the Fed doesn’t forgive the debt. My commentary was published, and I’ve received some very nice feedback on it. You can read it here.

Continue reading → Leave a comment

10/10/13 – Markets Start to Worry

October 10, 2013

The consequences of the debt ceiling standoff and government shutdown continue to reverberate. Markets are increasingly showing signs of nervousness, with excess volatility tracking news reports as they come out of DC.

Continue reading → Leave a comment

10/9/13 – A Modest Proposal to Solve the Debt Ceiling Problem

October 9, 2013

I’ve been reviewing my posts and articles from the last time we went down the debt ceiling crisis road, and marveling a bit. Trillion-dollar coin indeed! That post proved to be prescient in a lot of ways, although 10 months early. The options I outlined there remain the most probable this time around, but no one has been trotting them out so far. Instead, the discussion has revolved around how to make payments once we run out of money.

I don’t like the spirit of despair that this kind of planning reflects, and I think I have a better idea about how to solve the problem. It requires no issuance of coins, no scrip rather than cash—although the difference is small—and no constitutional confrontation.

Continue reading → Leave a comment

9/30/13 – Here Comes the Shutdown

September 30, 2013

Here we go again. I’ve written something to that effect several times over the past couple of years, what with the 2011 debt ceiling debate, the 2012 fiscal cliff, and now this. Governmental dysfunction has been normalized.

The phrase that comes to mind is “defining deviancy down,” from a 1993 paper by Daniel Patrick Moynihan, one of the great statesmen of American politics. The idea is similar to the boiled frog theory I described last month: with every ratchet down in behavior, the new low becomes somehow normal, and any subsequent changes are perceived as being less bad (compared with the new “normal”) than they would have been otherwise. Another way to describe it is a behavioral downward spiral—that is, behavior that formerly would have been thought absolutely disgraceful is now seen as somewhat embarrassing.

Continue reading → Leave a comment

9/27/13 – The Government Shutdown, the Debt Ceiling, and the Markets

September 27, 2013

I have to be honest: I’ve been putting off writing about this for the past couple of days, for both good and bad reasons. One good reason is that, really, there hasn’t been much news. Congress is playing games, everyone is shouting at each other, and nothing is getting done. The other good reason is that there’s not much we can do to prepare, given the level of uncertainty that prevails. No news, no action items, no need to comment.

The bad reason I have for putting this off is that, quite frankly, it’s depressing. We’ve been through this before, in both 2011 and 2012, and the fact that we’re going through it once again is just ridiculous. Be that as it may, though, here we are, so let’s deal with it.

Continue reading → Leave a comment

9/23/13 The Good, the Bad, and the Ugly

September 23, 2013

The past week has been interesting, with lots of developments. Rather than trying to cover just one, I thought we should look at several of the most important.

Continue reading → Leave a comment

9/19/13 – Fed to Economy: “You Can’t Handle the Taper!”

September 19, 2013

To the surprise of many, the Federal Reserve decided yesterday to continue its stimulus program at the current levels, buying $85 billion of Treasury and mortgage-backed bonds per month. Not only did it opt to continue buying at current levels, but Chairman Bernanke repeatedly went out of his way to note, in the press conference afterward, that the Fed reserves the right to continue stimulus, no matter what the various metrics it had previously used as targets do. He seemed to be walking back much of the guidance he had previously provided, trying to make the Fed harder for the market to predict. With this action, he succeeded.

Continue reading → Leave a comment

8/23/13 - Summer Is Almost Over

August 23, 2013

I will be taking some time off next week. I will still be blogging every morning, but I plan to spend the rest of each day doing some resting and recreating. There are a number of issues I want to think more deeply about before reengaging, and this will give me a chance to do some long-deferred reading and thinking.

Continue reading → Leave a comment

7/25/13 – Is the Detroit Bankruptcy the Beginning of the End?

July 25, 2013

Short answer: no. Detroit is an exceptional situation, which was telegraphed well in advance, and investors and portfolio managers had lots of time to relocate their money if they were paying attention. Retirees, of course, may not be so lucky.

Continue reading → Leave a comment

7/12/13 – It’s Back! Glass-Steagall Returns

July 12, 2013

For those of you who don’t know, Glass-Steagall was the law that, to put it at its simplest, separated deposit-taking banks from the investment banks. It was passed during the Great Depression to prevent Wall Street risks from affecting the normal day-to-day business of Main Street, which had happened prior to the Depression. It did this by prohibiting banks that offered deposit insurance from engaging in Wall Street activities like trading. The big thing is, it worked. There were no systemic banking crises like that of 2008 while the law was in force, from 1933 to 1999.

A modernized version was just introduced in Congress by Elizabeth Warren and John McCain, an interesting pair. Warren is the Massachusetts senator who made her name trying to regulate the financial industry, while McCain is a former Republican presidential nominee. They propose a very similar set of restrictions, with the express purpose of taking the financial industry back to 1998, before Glass-Steagall was repealed.

Continue reading → Leave a comment

Subscribe via Email

New call-to-action
Crash-Test Investing

Hot Topics

New Call-to-action



see all



The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.


Please review our Terms of Use

Commonwealth Financial Network®