Archive for the ‘Ken – Misc.’ Category

Feldstein called it: Stocks are headed for a fall …

February 9, 2018

“The Fed’s easy monetary policy has led to overvalued equities”
==========

A couple of weeks ago, we posted Feldstein: Stocks are headed for a fall …

Now that the stock market has “corrected” by over 10%, it feels like time for a flashback.

Feldman called it … and, decades ago, I had researched (and confirmed) the basis of his forecast.

So, did Iact of Feldstein’s prognostication?

Of course not …

===========

Let’s start by taking a stroll down memory lane ….

Over 40 years ago, an economist-wannabe co-authored a study in the Journal of Finance titled “The Supply of Money and Common Stock Prices”.

clip_image001

The article summarized an econometric study (think: big, hairy financial model) that demonstrated a tight link between the amount of money floating around and, on a slightly time-delayed basis, the price of stocks.

That is, when the Fed adds liquidity into the market (think: “quantitative easing”), much of money flows into the stock market – rocket-boosting stock prices.

And the opposite is true. When the Fed tightens, stock prices fall back into earth orbit.

OK, fast forward to today.

(more…)

Feldstein: Stocks are headed for a fall …

January 18, 2018

“The Fed’s easy monetary policy has led to overvalued equities”

==========

Let’s start by taking a stroll down memory lane ….

Over 40 years ago, an economist-wannabe co-authored a study in the Journal of Finance titled “The Supply of Money and Common Stock Prices”.

clip_image001

The article summarized an econometric study (think: big, hairy financial model) that demonstrated a tight link between the amount of money floating around and, on a slightly time-delayed basis, the price of stocks.

That is, when the Fed adds liquidity into the market (think: “quantitative easing”), much of money flows into the stock market – rocket-boosting stock prices.

And the opposite is true. When the Fed tightens, stock prices fall back into earth orbit.

OK, fast forward to today.

(more…)

Why did the stock market get over valued?

August 28, 2015

This was a week that market analysts retroactively tag “a long anticipated correction”.

Yeah, right.  That’s what you guys have been saying.

DJIA 08-24-15 5 years
====
This week’s market dynamics beg a bigger question:

Why, given a sluggish economy and DC disarray, did the stock market keep marching forward to record highs … that met their come-uppance this week?

Easy.

Let’s start by taking a stroll down memory lane ….

(more…)

Why does the stock market hit record highs despite a sluggish economy?

November 15, 2013

Yesterday, the stock market soared to a new high, again.

image

====

Why, given a sluggish economy and DC disarray, is the stock market still moving higher??

Easy.

Let’s start by taking a stroll down memory lane ….

(more…)

Why did the stock market hit record highs despite a sluggish economy?

September 19, 2013

Yesterday, the stock market soared when Bernanke announced the continuation of the Fed’s Quantitative Easing program … that is, the Fed plans to continue pumping $85 billion dollars per month into the economy.

stocks surge on Fed action

====

So, why did the market reach record highs?

Easy.

Let’s start by taking a stroll down memory lane ….

(more…)

Why has the stock market has been strong despite a weak economy?

August 14, 2012

Back about 40 years ago, an economist-wannabe co-authored a study in the Journal of Finance titled “The Supply of Money and Common Stock Prices”.

image

The article summarized an econometric study that demonstrated a tight link between the amount of money floating around and, on a slightly time-delayed basis, the price of stocks.

OK, fast forward to today.

Now, when the Feds expand the money supply, it’s called “Quantitative Easing” … or QE, for short.

Recently, Jason Trennert of Strategas Research Partners published a revealing chart that visually relates stock prices (the S&P 500) to the recent periods of quantitative easing.

Hmmm.

Looks like the supply of money and common stock prices are still related.

Partially explains why the Dow is over 13,000 despite a sluggish and uncertain economy.

image

>> Latest Posts

“Day of the Locusts – The Sequel” … Dylan gets knighted.

June 5, 2012

Earlier this week, President Obama honored Bob Dylan with a Presidential Medal of Freedom award.

image

Brought  back memories of my Princeton graduation.

It was during the Viet Nam War days … no academic robes, — just “together for peace” armbands … honorary degree recipient: Bob Dylan.

It was was a year of locusts in New Jersey ..  and, they were chirping loudly.

That provided inspiration for Dylan’s commemorative song : Day of the Locusts:

As I stepped to the stage to pick up my degree
And the locusts sang off in the distance
Yeah the locusts sang such a sweet melody
Oh, the locusts sang off in the distance
Yeah, the locusts sang and they were singing for me.

I put down my robe, picked up my diploma
Took hold of my sweetheart and away we did drive
Straight for the hills, the black hills of Dakota
Sure was glad to get out of there alive

Man, that was a long time ago.

>> Latest Posts

Ken makes the big time: cited in Wikipedia … what can possibly be better than that?

June 15, 2009

It was pointed out to me (by a Homa Files reader in the U.K.) that my posts have earned the ultimate external validation: cited in Wikipedia as part of George W. Bush’s bio.  (Look under “economic policies” and check out footnote 79)

Here’s the link to the article.
http://en.wikipedia.org/wiki/George_W._Bush

After Wiki, all else will pale in comparison