Category Archives: The Spellman Report

Country Debt Enablers and the Greek Conundrum

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For a country with little penchant to tax and a greater penchant to spend, financing its fiscal deficit is an ongoing chore. When it comes to financing its deficits, governments have tricks up their collective sleeves – not available to the private sector. What makes it easy to finance a deeply indebted country is that its debt is placed — not sold and doesn’t meet a market test. Hence yields are not a deterrent to further indebtedness. Continue reading

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The Cats and Dogs of the Equity Markets

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Driving the economy to fuller employment is a macroeconomic policy success. But it comes at a cost of higher employee costs and generally reduced profit and stock returns. Some firms, in this global economy, produce with foreign labor and benefit from weaker foreign currencies. Hence, there will be both purring cats and offsetting dogs in diversified portfolios. Investment returns call for targeting those firms gaining cost advantages via foreign labor. Continue reading

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Manna from Heaven and Government Debt

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Baby Boomer entitlements are now upon us with an acceleration in the government debt overhang. In a novel approach to debt containment, the European Central Bank pays high enough prices for existing debt to create a cash bonus to issuers of debt but with adverse incentives and unfortunate side effects.
We must conclude, the rules of propriety have changed regarding debt. We were naïve to believe that when governments borrowed they intended to tax in the future and retire debt. Instead reliance is being placed on the central banks to not just neutralize debtor governments’ debt but award governments a monetary subsidy to keep on issuing debt. Continue reading

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The Point of No Return for Government Debt






The developed world economies have high government debt loads and as a result retard economic growth. The adoption of central bank quantitative ease (QE) is billed as a monetary policy but in reality is a fiscal policy of debt service reduction. QE creates microscopic bond market yield that in turn creates capital flight. This further lowers income and raises the debt ratio. So efforts to do “Whatever it takes” to save the sovereign are too late and counterproductive. Continue reading

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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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