Negative Interest Rates as “Black Hole Experiment” If somebody else thinks what you think, you can’t be crazy, right? Explanation #2: you’re both suffering from exactly the same malady. Either way, it’s reassuring to read famed investor Jeremy Grantham’s latest thoughts on today’s bizarro world of negative interest rates and inflated asset prices, courtesy of...Read More
Markets Now Testing 3 Hypotheses “Don’t fight the Fed.” –Wall Street mantra “Don’t fight the Fed . . . unless the Fed is out of ammo.” –2015 update(?) I don’t know if the Fed put is kaput, but the Chinese put — if there ever was one — certainly appears to be history. What I’m referring...Read More
Did the Fed “Buy Itself a Landslide?” “Dear Jack: Don’t buy a single vote more than is necessary. I’ll be damned if I’m going to pay for a landslide.” —JFK quoting a made-up telegram from his father, Joseph Kennedy, after he first won election to Congress. As far as I’m concerned — and I know a lot of...Read More
Short-Term German Bonds Pay Negative Interest “I am not so much concerned with the return on capital as I am with the return of capital.” –Will Rogers Want an indication of just how bizarro today’s environment of zero percent interest rates (“ZIRP”) is? Investors just accepted a negative interest rate on short-term German bonds: In an...Read More
[Editor’s Note: lots of deals(!) equal few(er) posts.] A prolonged period of very low interest rates will decapitalize defined-benefit pension funds”both private and public”throughout the country. In California, for example, pension actuaries presume a yield on their asset portfolios of about 7.5% just to break even in meeting their annuity obligations, even if they were fully funded....Read More
Ben Bernanke, Flame-Thrower In an ideal world, investors would allocate capital to the stock market because the potential returns were attractive. Not because The Federal Reserve had obliterated all the alternatives. Yes, the Fed’s announcement that it would keep interest rates at zero through 2013 arrested the markets’ free fall (and has the added, noxious...Read More
