Author Archives: Lew Spellman

Oil Boombustology

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It’s long been in the DNA of market observers that when money growth outpaces the economy’s growth, booms are created and so are busts. The latest is the oil boombustology with greater impact than is commonly understood. This raises the question of what is left of growth in the US economy without oil expansion. Continue reading

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Goodbye to the Robinson Crusoe Bond Market

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With the U. S. economy having achieved lift-off momentum, the Federal Reserve has ended it epic and historic bond buy known as quantitative ease. The corollary reflex is that interest rates will return to our historic sense of normal, but that is not occurring. The Fed is not all-powerful and is losing pricing control to collective global forces. Continue reading

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The Deflationary Trap and the Central Bank Game of Chess

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Few who lived through the “runaway” inflation of the 1970s would have dreamed that someday inflation would be a desirable public policy? We have come to find out that it surely beats deflation. But how to achieve inflation has proven to be elusive. Continue reading

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The Keynesian Dead End: A Watershed Moment

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John Maynard Keynes had an idea that seemed good at the time (the 1930s): Governments can stimulate an economy with what he called “loan-expenditures” — that is, debt-financed spending. This past week, the UK is paying down its World War I debt, as if we needed a reminder. Debt doesn’t go away; it just accumulates, requiring additional taxes to pay the forever-interest meter and miring its own economy as well as their trading partners. Continue reading

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The Evils of Serial Quantitative Ease and the “Welfare of Everyone”

Not since the days when Mark Twain’s Tom Sawyer charged his friends for the privilege of painting his fence has the world gone quite so upside down and backwards as when the European Central Bank pushed market interest rates into negative territory. This means borrowers are being paid to borrow. This, in the mind of the Fed’s Chairwoman serves “the welfare of everyone” though it serves the welfare of no one. Continue reading

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America’s Exorbitant Privilege is Skating on Thin Ice

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The willingness of the rest of the world to hold a block of its assets denominated in the U.S. dollar means that U. S. asset prices are enhanced and the U. S. is able to sell a substantial portion of its government debt to foreign holders at cheaper interest rates. This is known to foreigners are U.S. “Exorbitant Privilege.” But that privilege is being squandered by short sighted U. S. policies and plans are underway to switch reserve currencies. Continue reading

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Financial Price Discovery Postponed for the Duration

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At the moment, financial market prices float detached from the anxieties of market investors because the same anxieties drive the central banks into large scale asset purchases. As a result, risks that trouble investors instead of being translated into lower prices are being translated into high prices, a condition equally true for bonds and stocks. Continue reading

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The Robin Hood Reflex Once Again Confronts Capitalism

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Thomas Piketty, a name you are not likely familiar with, is a French economist who has given voice to the notion that the rich are getting richer at a faster rate than others. His recent book skyrocketed to first on the Amazon best-selling list immediately. And of course, what follows is the Robin Hood reflex to redistribute. Don’t dismiss the political ramifications that Piketty-mania is having and the costs to society from adopting redistribution. Continue reading

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On Saving the Economy: Plan B

The antidote to a troubled macro environment since Keynes wrote the book in the 1930s Depression has been the dual demand-side sledgehammers of government deficit spending and monetary expansion. This has been Plan A to address a beleaguered economy and other things needing fixes. Having not worked miracles, governments at all levels across the globe are on to Plan B. Continue reading

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Bill Gross and the Rise and Fall of Bond Market Nirvana

Bonds are fun to own when interest rates are very high and then bond prices start to rise. That makes for favorable income and capital gains simultaneously. Such was the opportunity bond investors in U.S. markets enjoyed commencing in 1981 …and then for three following decades. It was bond market Nirvana, which unfortunately for bond investors is fading into the rear view mirror. Continue reading

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