Archive for February 2016

After a prolonged period of staggeringly low inflation, led by a strengthening dollar and declining energy prices, inflation is back! As measured by the Personal Consumption Expenditure index, the Fed’s preferred inflation index, inflation is 1.3%, and core inflation (which ignores food and energy) is at 1.7%, its highest reading since 2/13, and a level…

The Friday File: President Washington appointed 10 Supreme Court justices, followed by FDR with eight and Jackson with six. Three presidents made no Supreme Court appointments; Harrison, Andrew Johnson and Carter. William O. Douglas is the longest serving Justice at 36.6 years, John Marshall is fourth at 34.4 years, Scalia is 15th at 29.4 years.…

In 2006, the four biggest banks (J.P. Morgan Chase, Bank of America, Wells Fargo and Citigroup) collectively had $5.2 trillion in assets, 44% of all US bank assets. Today, those same four banks hold $8 trillion in assets or 51% of all assets. Moreover, only Wells Fargo is valued above book! This dismal situation suggests…

In 9/08, the government took over Fannie and Freddie after investing $116 billion and $71.5 billion in them respectively. In exchange, the government initially took a 10% dividend on bailout monies and since 2012, against stockholders wishes, has been taking all profits. In 2015, Fannie earned $10.3 billion, Freddie $5.5 billion, dividend rates of 8.9%…

Bernie Sanders’ single-payer healthcare proposal will probably cost $2.4 trillion/year, not the $1.4 trillion/year he estimates. The difference, savings generated. Single-payer can cut administrative costs by 5% to 7% (not 14% as suggested). The remaining savings depend on paying all providers at Medicare rates and obtaining outsized savings on prescription drugs, both doubtful. Winners would…

Illegal drugs are roughly a $300 billion/year global industry and reducing supply has always been the preferred mode of combating them. Regrettably, the combination of very inelastic demand (meaning buyers are unresponsive to price changes primarily because the drugs are addictive) and each gang being the sole buyers of the illegal crops grown by the…

The Friday File: By analyzing 2 million phone calls, we now know Oregonians speak fastest, followed by residents from Minnesota, Massachusetts, Kansas, and Iowa. The slowest talkers are Mississippians, followed by residents from Louisiana, SC, AL, and NC. Those who gab the most, New Yorkers, followed by citizens of CA, NJ, NV and MD. The…

While India’s economy is growing at 7.3%, China’s at 6.8%, and ours at 2.4%, India’s GDP is just $2 trillion, the same size as Italy’s while China’s is $10.4 trillion and ours is $17.4 trillion. At these growth rates, China grows by $700 billion/year, we by $450 billion/year and India by $150 billion/year. Moreover, China…

With the Bank of Japan recently joining the European Central Bank and central banks in Denmark, Sweden and Switzerland in imposing negative interest rates, close to 30% of sovereign bonds now offer negative yields. As a result, banks in those nations and investors everywhere are plowing into US Treasuries to improve returns and avoid fees.…

Financial indicators such as yield spreads between investment grade bonds and junk bonds, equity values, inflation rates, Treasury yields and commodity prices suggest a weak economy and a moderately high recession probability. Yet car and home sales, employment growth, job quits, loan delinquencies, income growth, and now consumer spending suggest continued unspectacular growth and a…