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We recently wrote The Lag Effect Unveiled to appreciate why it takes time for higher interest rates to inflict economic damage. We follow that up with a discussion of something equally worrying that also lags Fed rate hikes. A financial crisis will likely follow the Fed’s “higher for longer” interest rate campaign. We are not […]
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The hit TV series “That 70s Show” aired from 1998 to 2006 and focused on six teenage friends living in Wisconsin in the late 70s. The irony was that the actors playing the teenagers were not born in the late 70s and had never experienced life during that period. Many alive today cannot fathom a […]
Higher mortgage rates are resulting in a shortage of inventory of used homes and a surge in new homebuilding. Recent data shows a third of all homes for sale are new homes. That is almost three times the average ratio. While homebuilders have been taking advantage of the low inventory situation by offering home buyers […]
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The term “Bond Vigilantes” is a nostalgic twist on an old-west theme. In the nineteenth century, the American West formed self-appointed groups, or committees, to assume the duties of law enforcement and judicial authority when citizens found law enforcement lacking. In the bond market, the term “Bond Vigilante” was first coined by Ed Yardeni in 1980, […]
“Based on its current assessment, the Governing Council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to target.” And with that statement, the European Central Bank (ECB) appears to have halted its rate hiking cycle. […]
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Despite surging interest rates, there are few signs they are impeding economic activity or causing distress amongst borrowers. It may seem strange that higher rates are not proving troublesome for an economy with such a high amount of leverage. Don’t breathe a sigh of relief quite yet. There is often a delay, called the lag […]
The FDIC graph shows that banks are sitting on over $500 billion of losses on their investment securities. This doesn’t include bank loans and other assets with significant unrealized losses. The graph may look scary, but thanks to a rule passed during the financial crisis, it may not be. In 2008, banks were taking tremendous […]
Our Daily Commentary from August 25 summarizes a SimpleVisor stock scan, highlighting companies with high sales exposure to China. The article states: “Once again, trade tensions are heating up with China as President Biden signed an executive order to limit U.S. investments in Chinese technology companies for national security concerns. China says a response is […]
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Mega-cap stocks continue to dominate the market in 2023. The question is, why? After all, many other great companies have arguably much better valuations and fundamentals. Yet, those companies continue to lag the market’s overall returns as the bifurcation between the Mega-cap companies and everything else widens. The chat below clarifies the problem, which compares […]