There is an interesting bifurcation in the economic data and the earnings data which I will discuss in this article. The reason I say it’s interesting is because it’s unexpected and unsustainable. It’s simply impossible to have a long period where earnings are growing above their trend and GDP is gr
Debt Bubble As a clarification to a previous article, I showed a chart which had an elevated level of equity financing as a percentage of U.S. M A. It’s worth emphasizing that while equity issuances have been funding M A at a high level, net equity issuance is the lowest since 2007. As you can see f
The biggest news in the financial world on Wednesday was the President’s interview with the Wall Street Journal which I briefly touched on in my last article. Trump mentioned that the dollar is too strong for American exports to compete. This sent the dollar lower. A weak dollar would help exports,
The stock market had another small drawdown on Wednesday as it is down about 2.5% from its all-time high. The last 5% decline was in June 2016 which is about ten months ago. The minimal size of the stock market correction is remarkable when you look at in the context of other markets. As I
Before I get into a discussion of the latest market action, I will make a clarification of an aspect which I wasn’t aware of. As I have mentioned a few times in the past few weeks, the NY Fed’s Nowcast Q1 GDP growth estimate and the Atlanta Fed’s Q1 GDP Now growth estimate are far
There has been an increase in stock prices since the election based on optimism about the Trump administration. Investors focused on the potential tax cuts, regulatory reform, healthcare reform, and infrastructure stimulus. The fact that investors were swooning over a politician’s rhetoric showed ho
Monday’s trading was yet another example of a day where the market went up and the VIX went up. There seems to be quite a few of these occurrences happening as the market hasn’t fallen much, but the VIX occasionally catches a bid because of various potential worries such as geopolitical or monetary
On Monday, Tesla passed General Motors in terms of market cap, making it the highest valued automaker. This article isn’t about Tesla, but Tesla serves as a red flag for how out of whack valuations have become. Tesla isn’t even the leader in electric vehicles sales which is its niche. The firm lost
The latest statement by Paul Ryan, the Speaker of the House, was that tax reform could take longer to get done than healthcare reform. That’s an interesting way of putting it since healthcare reform still hasn’t gotten done. The first step of healthcare reform, which is voting on it in the House, wa
In this article, I will discuss how the dumb money is driving the stock market higher. When reviewing the behavior of dumb money investors, human psychology comes into play. The reason psychology is more important in describing the behavior of dumb money investors than smart money investors is becau
