November 25, 2013

Thoughts on the threat of inflation, disinflation and deflation

We often hear in the post-Lehman era that governments are printing money, and this must bring rampant inflation. Yet in reality, the evidence points in the opposite direction. A slew of recent data releases confirm a trend of disinflation, not inflation: Australia, Canada, Germany, Sweden, the Netherlands and the United Kingdom have all reported that key inflation measures are falling. Add to this list the United States, where the latest monthly rate of consumer price inflation was negative.

What is happening here? If the big central banks are printing money as fast as they can, where is the inflation? When will we see it?

November 13, 2013

Stock bubble fears: guarded vigilance or obsessive compulsive disorder?

When will the bubble burst? Cable business networks are filled with a sort of death watch for equities. The market is up 23% year to date, and the press is asking if this is too far, too fast.

Is the stock market revisiting “irrational exuberance”? Typical in these discussions are references to the run-up to the financial crisis of 2008–2009. I do believe that investors are well advised to reflect soberly on those days when bubbles burst and the average stock portfolio suffered severe damage.

Is the market rising only on the Fed’s fumes? We often hear the lament that the upward moves of stock prices are entirely due to the accommodative monetary policies of the US Federal Reserve and other central banks.