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April 2011 – Monetary Policy Goes "All In" On A Weak Hand EDITION 2, SERIES 4
The Federal Reserve System operates monetary policy as if economic activity during the asset bubbles was representative of true economic potential. To the Fed, the Great Recession has pushed economic activity so far below that potential it can stimulate with zero interest rates and quantitative easing well into the future, even after two years of it already.
We believe the Fed is mistaken for the reasons contained in this report. Chief among them is that The Great Recession actually brought the economy back down toward its true potential. Further than that, it is likely that the current weak recovery is still running above true potential, and that is leading to a wide array of problems. Inflation pressures are the biggest.
February 2011 – From Cooke to Hoover to Bernanke EDITION 1, SERIES 4 The Fed continues to create money in the hope that creating inflation will be the same as an absence of deflation. The Fed makes so many mistakes because it is wedded to its models, the same models that have been wrong for forty years. Now that it has created inflation, another bubble is building. That inflationary bubble is keeping stocks up, but it is also causing widespread economic damage. Its end is nearer than what many are prepared for, and, depending on how the Fed reacts this year, could be stagflation or hyperinflation.
November 2010 – A Desperate Fed EDITION 6, SERIES 3
QE 2.0 is nothing more than a desperate act of forced monetary imbalance. It does nothing to address the massive loss of private income sources, the real trade deficit (an imbalance of wealth creation through foreign exchange), or real risk. Monetary policy has been the primary culprit behind the ongoing credit contraction. Since opposition to QE is growing within the Fed itself, the new bond purchases look increasingly like a distressed act.
September 2010 – Another Perfect Storm EDITION 5, SERIES 3
The panic of 2008 was a result of crushed expectations and forced liquidations. The sagging economy (soon to be contracting) will crush the expectations of the optimists. The structure of the stock market has changed significantly since the last panic, meaning forced liquidations will not be necessary this time around. Self-similarity has driven correlation farther than even the autumn of 2008. Finally, there is no comfort in market PE’s. History is pretty definitive in expecting PE’s to move in only one direction. All three of these combine into another bad market episode.
June 2010 – Why Quantitative Easing Cannot Work EDITION 4, SERIES 3
The more the Fed tries to replace organic funding with controlled Fed programs or asset purchases, the more uncertainty is created. That uncertainty more than counteracts the additional liquidity, causing failure. Worse yet, the liquidity programs themselves have harmful side effects, but the Fed will end up expanding its original QE program.
April 2010 – A Lasting Pandemic of Bias EDITION 3, SERIES 3
Confirming the March report through a different perspective: comparing 2010 with 1937 and 1931. Artificial economy + uneven liquidity = really bad.
March 2010 – Channel Distortions From the Fed EDITION 2, SERIES 3
The Fed creates bubbles, then refuses to admit mistakes. Fed policy is based on classroom, academic theory. Real world is more complex and is showing signs of distress, but these do not fit into the Fed’s model and are therefore ignored. (This report was done when the markets were moving higher and every “expert” was convinced the economy and markets would continue to roar ahead).
January 2010 – A Market Pause for Reality EDITION 1, SERIES 3
The stock markets had moved 70%+ since March 2009 and were due for a pause/correction. We analyzed the potential correction from a historical perspective, as well as gave our opinion on the fundamental value of the market.
November 2009 – Accounting Amok, Again EDITION 4, SERIES 2
Analyzing the potential effect of FAS 166 & 167 on the banking system, more trouble ahead. (Not long after this was published the banking regulators delayed the implementation of the new rules, demonstrating that our thesis was likely correct. These accounting issues are still going to cause problems into 2011).
August 2009 – An Overburdened Recovery EDITION 3, SERIES 2
An exhaustive report that defines, in many ways, our understanding of economics. We saw too many negative pressures for a real recovery to form (and explained why recoveries had fundamentally changed since the Great Inflation). The change in the mechanics of recoveries is one of the biggest problems we will have transitioning from a bottoming phase to a growth phase. It does not seem that fiscal and monetary authorities have grasped this change leading to seriously misguided and misaligned polices. We predicted a double dip recession for the second half of 2010.
March 2009 – A Market Divided Against Itself EDITION 2, SERIES 2
Analyzing the fundamental driver behind the market dive (the last segment). FAS 157 (mark-to-market) was distorting the financial system and would fundamentally alter market strategies in credit and stocks. We predicted a massive market rally as a result of a change in FAS 157, contrary to nearly every market opinion at that time.
January 2009 – Finding Profit in Corporate America EDITION 1, SERIES 2
Analyzing the actual mechanisms of a recession, and estimating where we were in that process. We predicted the economy would bottom in March and April 2009, contrary to nearly every market opinion at that time.
September 2008 – Has the Bear Market Finished Its Run? EDITION 5, SERIES 1
Stating our reasons why we expected a market panic just two weeks before it happened (our thesis of a panic was developed in July and August, but was published just two weeks before the panic occurred). The basis for our belief was that market expectations were seriously misaligned with reality, mostly due to grossly mistaken “elite” opinion.
June 2008 – The Fed Hits the Gas EDITION 4, SERIES 1
Demonstrating where inflation came from.
March 2008 – The Wealth Effect Defined EDITION 3, SERIES 1
Defining the multi-decade trend in consumer spending that was pivoting against the economy.
November 2007 – The Credit Crisis Deepens EDITION 2, SERIES 1
Following up on our August 2007 Special Report, adding more detail and granularity to our recession prediction: getting a better handle on the scope and scale of the potential damage. In our opinion, the economic contraction was going to be far worse than most were expecting, and we expected that the transmission mechanism would be money market funds.
August 2007 – Why the Shadow Credit Market is Failing EDITION 1, SERIES 1
Examining exactly what a credit derivative was and the flaws behind their construction. From that we saw a credit crunch (while the “experts” said it would be contained in subprime”), the collapse of institutions, and an eventual economic contraction (while the “experts” called for only slightly slowing growth).