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Reports of Large Corporate Share Repurchases
London’s Financial Times is reporting this morning that a number of U.S. corporations have engaged in large share repurchases this week. Frankly, this soothes the soul as I have been complaining since late 2010 that businesses ought to be deploying their excess cash to earn higher rates of return. One area of return that they seem to have been avoiding is repurchasing shares of their own stock. But reportedly Morgan Stanley, Chiquita Brands, General Motors, United Continental (airline), Corning, Yellow Media and others have all...
read moreJobless Claims Improve Again
Amidst the filth and the fury of stock market rises and falls this week economic data have kept chugging away. Yesterday the Department of Labor reported that initial jobless claims data have improved again, falling by 7,000 this week to a level of 395,000 claims. Economists had expected 400,000 new unemployment claims to be filed. Analysis: It is economic gospel that jobless claims below 400,000 indicate positive net, new job creation in the economy. So any figure below that critical threshold is considered a plus. However, initial...
read moreEquity Risk Premium Drill Down Indicates Bizarre Investor Behavior
Earlier this week in my post entitled, “Adjusting the Scale of the Selloff to Demonstrate Its Absurdity,” I spent quite a lot of time talking about this thing called the “equity risk premium” and some of the interesting data I had calculated based on this measure. Today I wanted to drill down into that equity risk premium data because it indicates some bizarre investor behavior over the last 46 years. So what is the equity risk premium? It is based on the understandable theory that investing in the stock...
read moreA New Measure of Real Economic Growth
I have spent some time with historical economic data over the last several days to try and establish a new measure of real economic growth. The work, which I will be sharing below, is something that, philosophically, I have been working on for many years. Back in my undergraduate economics education I would hear about gross domestic product (GDP) as a measure of a nation’s economic growth. Shortly thereafter you learn that GDP figures are always adjusted for inflation so as to better measure actual growth, not just growth on an...
read moreBrief Update About Mood of the Financial Markets
Today saw the Dow Jones Industrial Average close up 429.92 points, or up 3.98%. Meanwhile the broader stock index, the S&P 500, closed up 53.07 points, or 4.74%. Given this surge, let me provide a brief update about the “mood of the market.” While there was clearly a reversal of fortune today, it’s still my feeling that there are many investors that feel queasy; investors that are waiting for the next precipitous fall. That said, it feels like a large majority of folks who were queasy are either exhausted, or...
read moreAdjusting the Scale of the Selloff to Demonstrate Its Absurdity
Yesterday I discussed the absurdity of the stock market sell off in response to the credit downgrade of the United States by Standard & Poor’s. This prompted an interesting comment from the What My Intuition Tells Me Now blog’s most loyal reader. Because of the depth of the thinking behind his comment I feel like it deserves a public showing, along with my response. My response adjusts the scale of the financial market sell off to demonstrate its absurdity. Here is the comment in its entirety: “Hello again...
read moreU.S. S&P Credit Downgrade
By now you have heard that ratings agency Standard & Poor’s downgraded the credit rating of the United States to AA+ from its vaunted AAA. Investors around the world seemed to take this opportunity and this moment to sell, sell, sell their equities. In fact, the Dow Jones Industrial Average closed down today 634.76 points, or a 5.55% loss. Similarly, the Standard & Poor’s 500 Index fell 79.92 points, or 6.66%. From multiple perspectives this sell off looks over done to me. Here’s why: U.S. government debt...
read moreApplauding BNY Mellon’s Move on Excess Cash Balances
Late Thursday night there was a potentially important development in terms of righting the U.S. economic ship. Bank of New York Mellon (BNY Mellon) moved to charge extra fees on its clients that hold more than $50 million in cash deposits with the bank. Why is this significant? As I have been tracking on the blog for some time (see last year’s “It’s Chickens That Sit On Eggs” and more recently “Cash On Balance Sheets Is Big Concern”), U.S. corporations are not spending their profits. Instead they...
read moreUpdate on the Financial Market Mood
I promised yesterday that I would continue to monitor the “mood of the market” until there was some sort of cohesion. Friday’s close on the Dow Jones was up 60.93 points. However, the index shot up as many as 170 points, only to then see a decline of 240 points midday before settling at the close of 11,444.61. So what is the mood? Largely relieved, is the answer. The Department of Labor jobs report, and the news that the European Central Bank would consider buying distressed Italian and Spanish debt, mostly settled...
read moreEuropean Central Bank Acts to Stem New Debt Crisis
One of the massive catalysts for yesterday’s large financial markets fall, which I covered in “Are You Scared of Stock Market Falls,” was the decision Thursday by the European Central Bank to only include the debt of Ireland and Portugal in the European bailout-package-authorized sovereign bond buyback program. Realizing its mistake, the ECB stated Friday that it would consider adding the debt of Italy and Spain into the buy program. Recall that this program is designed to create demand for these bonds so that there...
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