Short excerpts from articles I found interesting.
I may not agree with the author and the following material is not intended as investment advice.
- “The stock market actually hit a milestone for boring-ness last week, as big U.S. stocks traded in such a narrow range they appeared to barely move at all. The Standard & Poor’s 500 traded in a 12.3-point range, or just 0.49% from its top to its bottom, the lowest such percentage since 1972. Federal Reserve Chair Janet Yellen had something to do with that. She promised to bathe the stock market in boredom for the next several months, unwinding the Fed’s $4.5 trillion balance sheet so slowly and efficiently it would be as exciting as “watching paint dry.” Yellen and other Fed members also seemed more confident they’ll be raising interest rates in December, and the market is now pricing in a 63% chance of that.”
- “The Dow Jones Industrial Average rose 81 points, or 0.4%, to close the week at 22,349.59. The S&P 500 rose two points, or 0.1%, to close at 2502.22. The Nasdaq Composite fell 22 points, or 0.3%, to 6426.92…The Fed and other central banks have been the market’s training wheels for more than eight years, so investors were understandably concerned about the day when the wheels would come off. But the economy now seems strong enough to succeed on its own…”
- ”…Economist Robert Gordon has been a prominent dissenter in projecting the prosperous past of the U.S. into the future. He foresees productivity growth of 1.3%, well below the 2% achieved from 1891 to 2007. In his much-discussed 2012 paper, he concluded that the information-technology revolution of the internet and mobile phones hasn’t brought gains similar to those of the “second industrial revolution” (electricity, the internal-combustion engine, running water and indoor plumbing, communications, entertainment, petroleum and chemicals), which generated robust 20th century economic growth.”
- “In a 2014 follow-up, Gordon added that the U.S. economy faces four headwinds: demographics (baby boomers retiring, plus lower labor-force participation by people of working age); plateauing of educational attainment; growing income inequality; and increasing debt, which will force higher taxes or reduced transfer payments in the future…”
- “…To review the mechanics of monetary policy, when the central bank purchases securities, it pays for them with money created out of thin air, which then goes into the private economy. Conversely, when the central bank sells or redeems those securities, the real cash it receives is withdrawn from the economy. So, as the Fed allows it’s Treasuries and agency mortgage-backed securities to mature, Uncle Sam and his niece, Fannie Mae, and nephew, Freddie Mac, will have to replace those funds in private markets. Some of the $2.2 trillion of excess reserves sloshing around the banking system will probably be taken up in the process, which will still leave a surfeit for some time…”
- “…World markets seem to agree. Not only are domestic averages closing at record highs on a near-daily basis, but global stocks continue to head higher as well. The MSCI World Index, which tracks equity performance across 23 developed countries, is up 14 percent so far this year as of September 20. And just so we’re clear that emerging countries aren’t being left out, the MSCI Emerging Markets Index has gained close to 30 percent over the same time period.”
- “…We're officially in the second-largest bull market since World War II. Stocks have climbed roughly 270 percent from their March 2009 low, eclipsing the bull run from June 1949 to August 1956, according to data from LPL Financial…Toys R Us filed for bankruptcy. The toy retailer filed for Chapter 11 bankruptcy on Monday as a result of online competition and a huge debt load.”