Fed Following

At today’s press conference, Fed Chairwoman Yellen did away with forward guidance. Instead, she suggested that the Fed will rely on an array of lagging economic indicators to set policy. She is signaling that the Fed will keep interest rates exceptionally low and allow inflation to systematically exceed 2%; appropriately dovish policies. Separately, her suggestion…

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Bullish Britain

Across the pond, the UK economy is really picking up. Employment is up sharply, real GDP rose 3.1% in the first quarter, the best growth since 2008, the labor force participation rate is 72.9%, the highest it has been almost a decade and hours worked are at a 25 year high. If these trends continue…

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Increasing Interest

While expecting Q1 GDP growth to be revised down to an annualized rate of -2% from the current -1%, expect the Fed to keep tapering on autopilot and reduce it by another $10 billion to $35 billion/month at the conclusion of the June 17-18 meeting. Markets will now be laser-focused on how and more importantly…

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Super Soccer

The Friday File: While 32 teams compete in the World Cup, only a handful have a chance at winning and Team USA isn’t one of them. Brazil, Argentina and Germany are clear favorites with Columbia, Netherlands, Portugal and Uruguay as possible but unlikely winners. For a dark horse, go with Belgium. The final will pit…

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Similar Schools

The LA County judge that struck down California’s teacher tenure laws as unconstitutional is following in the footsteps of Brown V. Board of Education. In Brown, the Supreme Court forced all schools in a district to have demographically similar student populations. Then came decisions mandating expenditures/student be increasingly equalized across schools. Now comes the first…

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Mediocre Monetary Meddling

Rather than using a cannon, last week the ECB used a popgun. By reducing the rate it charges banks on loans and by charging banks on deposits held at the central bank, the ECB hopes to spur lending. It won’t happen. Separately, it’s also finally injecting liquidity into the banking system. What these steps have…

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Idiotic Incentives

President Obama’s decision to give student loan borrowers the option of limiting loan payments to 10% of their income and to forgive all balances after 20 years — 10 years if the borrower works for government — is harmful. It not only encourages government employment, but it spurs colleges to build increasingly fancy buildings to…

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Junky Jobs

While the total number of working Americans now finally exceeds the number that were working before the recession began, the quality of the new jobs is not great. While food service, social assistance and home healthcare have seen the largest increases in employment, 3.1 million jobs collectively, high paying sectors like manufacturing, construction and government…

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Developing Data

The most important pieces of monthly economic data at present are net job creation, change in total employment compensation, and the change in the amount of revolving credit outstanding. Job data tells us how quickly things are improving (slowly), compensation data tells us how much wage inflation is developing (none yet) and revolving credit growth…

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Terrible Tobacco

The proposed merger between cigarette makers Reynolds American and Lorillard would create a behemoth with 40% of the US cigarette market, behind Altria’s 50% market share! The government is now concerned about antitrust issues given two firms with 90% of the market. Are you kidding me! Is the government’s job to protect smokers from price…

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