Inflation is the talk of the town right now, and it sure seems to be enjoying its time in the limelight after many years sitting out. But how worried should we be? The Consumer Price Index (CPI), a measure of the prices we are paying for goods and services, was up 4.2% in April from...Read More

The Situation Now seems as good a time as any to take a break from virus news and economic projections, so let’s talk about LIBOR. The London Interbank Offered Rate (LIBOR) has long been the benchmark on which collateralized mortgage obligations (CMOs) are based. This benchmark rate is used for more than just CMOs. Many...Read More

We’re halfway through another week of lockdowns and quarantines, and it seems some portion of the population is entertaining themselves by buying stocks.  The optimism in the stock market over the last three weeks leaves many of us scratching our heads.  No matter the news (today we learned that the U.S. economy shrank by an annualized 4.8%...Read More

Who could have imagined a scenario where weekly unemployment applications exceeded 6 million and the stock market yawned?  We are now in the second week in a row of these numbers.  For reference, the week of March 15 had 282,000 initial jobless claims (versus, again, this week’s 6,606,000). These kinds of extremes have become commonplace over the last several...Read More

This week we crossed the line from simple stock market selloff to complete financial market panic. Stocks kept dropping with even the usual bargain hunters staying away. The rush for cash started, which means even U.S. Treasury bonds were being sold. Surprising? Yes. Alarming? No. This initial stage of panic will pass. U.S. Treasuries remain the safest investment option...Read More

Never underestimate the ability of the stock market to overreact.  As we enter the week with news of further spread of the Chinese coronavirus, it seems the Dow Jones Industrial Average and S&P 500 are going to attempt to get halfway to a correction in just one day.  A stock market correction is defined as a drop of 10%...Read More

In the last week we have seen major moves in the stock market (which most people notice) and, subsequently, the bond market (which most people don’t). Most of these moves are due to concern over how the virus outbreak in China will affect the world economy. Why, you may wonder, would a virus affect the economy? The virus itself...Read More

This is the way the expansion ends, “not with a bang but a whimper.”[1] Though T.S. Eliot’s oft-quoted poem isn’t actually about our economic expansion, its final line does ring true in this case.  As we mentioned in our last letter, this interest rate cycle has been a wimp itself, so it is no surprise we...Read More

Business cycles are a normal part of the economic machine. A period of expansion is followed by a period of stagnation or contraction. The current expansion of 121 months far surpasses most other expansion periods, besides that of the 1990s (120 months). The average length of an economic expansion between 1945 and 2009 was just...Read More

Thirteen has always been an evocative number.  To this day, an estimated 85% of tall buildings don’t label the 13th floor as such, to prevent problems with superstitions or luck.  And now we find ourselves, thirteen years out from the last time the Treasury yield curve inverted, back in the same position.   Prior to...Read More