This Isn’t Your Grandfather’s Expansion

This is the first of two back-to-back posts on US business cycle expansions and contractions. That the current expansion, which began in June 2009, is now, at 108 months—one year shy of besting the record from March 1991 to March 2001—makes good copy, if nothing else. For those who are statistically inclined, the National Bureau of Economic Research is overflowing with data. The NBER is still somewhat subjective, though, in the parameters it uses in defining the business cycle. For example, rather than stipulating dogmatically that a recession requires two consecutive quarters of decline in real GDP, it specifies that a recession is a “significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” This subjectivity rises to the fore in the next post.

For the moment, we will attempt to sketch thumbnail comparisons among the five longest expansions since the beginning of the 20th century with the one the matters most to us, the current expansion. Continue reading “This Isn’t Your Grandfather’s Expansion”

Baseball & Waiting for the Fat Pitch

Since 2002, I’ve found great joy writing birthday letters to my seven grandchildren, now ranging in age from 8 to 21. Most of the content is about them, a mental snapshot of who they are at that point in our lives that often morphs into a painfully long narrative for anyone under 25! Somehow, I manage to sandwich in an object lesson or two with which they might resonate a decade or two later. What follows is an excerpt from a letter to my baseball-loving grandson on the occasion of his eighth birthday. Continue reading “Baseball & Waiting for the Fat Pitch”

Recession on the Horizon?

In a March 23, 2018 New York Times editorial, Robert Shiller was true to himself. Understating to overemphasize, he matter-of-factly observed: “When it comes to big shifts like a recession, economists aren’t very good at predicting them.” True to form, the behavioral economist and winner of the 2013 Nobel Prize in economics, unlike most pundits, had done his homework. Complementing his own research dating back to 1987, he referenced data produced by the Federal Reserve Bank of Philadelphia from 1968 to 2017. From studying the surveys he concluded: “While professional forecasters as a group have had some ability to assess the probability that GDP will decline in the next three months, they have exhibited no ability to do so a year in the future.” Continue reading “Recession on the Horizon?”

Debt, Loans, & Credit Quality: The Devil is in the Details

Every Fed tightening cycle eventually exposes and leads to the collapse of the bubbles de jure. One such bubble may well be in a seemingly unlikely place. With corporate taxes being cut to 21% from 35%, corporate profit margins before the tax relief already near record highs, and the window open to tax-efficiently repatriate foreign earnings, one would logically conclude that corporations should be in robust financial health. Continue reading “Debt, Loans, & Credit Quality: The Devil is in the Details”

There’s Never Just One Cockroach in the Kitchen

Tuesday, February 6, was a disaster for an untold number of speculators. For anyone holding an electronically traded product ( ETP ) tracking the inverse of the VIX index, the end of the low volatility regime that was 2017 obliterated their allocated positions. As various commentators have warned, an 80% increase in the index could trigger liquidation of the respective funds. Given the more than 100% rise in the VIX, such provisions were indeed triggered and internet message boards are abuzz with speculators licking serious financial wounds from their overexposure.

Continue reading “There’s Never Just One Cockroach in the Kitchen”

Excuse me…but this calls for a cartoon

A local artist was commissioned to draw the cartoon below during the bust. It appeared again in writings in early 2007. It made its most recent appearance in the closing chapter of A Decade of Delusions. It seems apropos that it appears here at this moment in history. It has the added appeal of reducing the average word count. 🙂 Since the cartoon is copyrighted, simply send me an email if you wish to reproduce. Continue reading “Excuse me…but this calls for a cartoon”

Letters to the Fed & the Importance of Productivity

Seven years ago, on November 15, 2010—less than two weeks after QE2 was announced—a group of prominent, nonconformist and thought-to-be forward-thinking economists, investors, and political strategists sent a letter to then Fed Chairman Ben Bernanke. They did not equivocate. The open letter, under the letterhead of the Hoover Institution, succinctly outlined concerns about undesirable side effects of QE. No attempt was made below to emphasize any words, phrases, or sentences that might distract the reader. Continue reading “Letters to the Fed & the Importance of Productivity”