Posts filed under “Inflation”

Secular Changes in Interest Rates

I really like the way this chart, by Joseph Ellis, presents this information:


Long-term interest-rate changes and the stock market

click for larger graph

W1303

Source:  Ahead of the Curve

>

Ellis observes:

Because of the inverse relationship between interest rates and stocks’ price-earnings ratios, rising interest rates from 1960 to 1982 contributed to a compound annual appreciation of only 2.9% in the S&P 500 Index.

Conversely, falling interest rates from 1982 to 2003 were a major long-term stimulus to the stock market, helping produce compound annual growth in the S&P 500 of 10.5%. Note that bear markets from 1960 to 1982 were more frequent and longer, whereas from 1982 to 2003 they were less frequent and shorter in duration.

Category: Federal Reserve, Inflation, Markets

New Column: The Street Gets Inflation Threat Backwards

Category: Employment, Federal Reserve, Inflation, Investing, Markets, Psychology

Sourcing the Greenspan Chatter

This is the article that the Greenspan quote came from that popped the market today; I don’t know how accurate it is (holographic image?) but

Gold price riding high on fear of terrorism, says Greenspan
Leo Lewis, Tokyo
February 09, 2006
http://tinyurl.com/98gdp

Excerpt:

"ALAN Greenspan, who stepped
down last week as chairman of the US Federal Reserve after 18 1/2 years, has
blamed the threat of terrorism for the high gold price, in his first private
sector speech since being let off the leash of officialdom.

According to
members of his audience of international investors – watching a holographic
image in Tokyo as he spoke in New York – Greenspan said the high cost of gold
did not reflect inflation or the strength of commodities, but rather a fear
among investors of a major geopolitical conflict. There were people who believed
that a nuclear weapon could be detonated within five years, the former American
central bank supremo said.

The low probability of such an event occurring would not necessarily avert a
spike in the gold price, he added.

Greenspan went on to discuss a range of topics, including the problems
created by a lack of investment in refining capacity by the oil industry. He
said this failure by the oil majors meant that the era of cheap energy was
almost surely over.

The former Fed chairman is also said to have indulged in a moment of
self-criticism over the central bank’s failure to prevent the market bubble in
the late 1990s.

That may explain Gold’s $20 whackage yesterday, but what about all the rest of the metals and commodities?

Also, if you missed this, you MUST read it:

GREENSPAN SENDS MIXED SIGNALS IN FIRST DAY AT HOME
Former Fed Chief’s Inscrutable Statements Baffle Wife
http://www.borowitzreport.com/archive_rpt.asp?rec=1307&srch=

Its a hoot!

and on the chance the article disappears, I’ll archive it after the jump . . .

Read More

Category: Federal Reserve, Inflation, Investing

The Street Get Inflation Exactly Backwards

Category: Commodities, Employment, Inflation

Chart of the Week: AVERAGE HOURLY EARNINGS

Category: Employment, Inflation

Jobs & Wage Data: the “Nuanced Economy”

Category: Data Analysis, Employment, Inflation, Psychology

Once Fed Hikes Stop, Markets Fall

Category: Federal Reserve, Inflation, Markets

3.4% Inflation is Worst in 5 years

Category: Inflation

Soft Spots Go Beyond Employment

Category: Earnings, Economy, Employment, Inflation, Real Estate, Retail

Has the Fed Kept Inflation in Check?

Category: Currency, Federal Reserve, Inflation