Category Archives: Finance

The Crank Report, Issue #1 (29 March 2015)

In this weeks issue: But who’s issuing the newly created money? Bank Capital: Déjà vu September 2008 The Austrian True Money Supply Weekly – 19 years of inflationary policies The U.S. Stock Market – Catch me if you can When the Monetary Crank Gets His Will – Take-off for Eurozone Monetary Base and Money Supply U.S. Economy: Say No to Thrift!   Download the pdf version.

The Short Version of the “Austrian” True Money Supply (TMS), as of 17 November 2014

This report is published weekly on EcPoFi. The short version of the Austrian True Money Supply for the U.S. increased 0.26% on last week for the week ending 17 November 2014. At $10.4593 trillion, a new high for the third consecutive week, the money supply is now up $576.0 billion, or 5.83%, year to date. The money supply has now increased $5.0370 trillion, or 92.89%, since Lehman Brothers filed for bankruptcy on 15 September 2008. The 1-year growth rate in the money supply of 7.29% for the week was unchanged from last week….

A Leading Economic Indicator and The Stock Market – Disconnection Taken To New Highs

Can it really be the case that the stock market is independent of economic developments? I admit, I’m starting to sound a bit like a broken record, but better safe than sorry. The truth is yes, the stock market can act independently for a while as low interest rates and an ever increasing money supply channels return-starved funds to the stock market casino away from the more risk averse options.    But the reality of the real economy hits Wall Street with a big hammer from time to time, knocking…

The U.S. Stock Market Risk Indicator, October 2014

The U.S. stock market risk indicator climbed 2.1% during October to reach the highest level of risk ever recorded based on data starting in 1986. The index currently signals the probability of poor future stock market returns have never been higher during the period covered. Following a choppy slide during the first couple of weeks of October, the U.S. stock market turned around and ended the month with a gain of just under 2.3% taking the S&P 500 to a new record high. Higher stock prices leading to a yet higher…

The U.S. Stock Market is Running Out of Monetary Rocket Fuel

On Wednesday the Federal Reserve announced it would taper its asset purchases by another $10 billion starting next month. Fed monthly asset purchases will by then have been reduced from $85 billion a month in December last year to “just” $15 billion from October, a reduction of 82.4%. This Fed taper is greatly reducing the overall monetary stimuli. The  U.S. stock market is now therefore rapidly running out of the monetary rocket fuel that contributed to its rather smooth, and ever continuing, surge since March 2009. Adding the increases in…

The U.S. Stock Market Risk Indicator, August 2014

According to this stock market risk indicator, developed by combining insights from the disciplines of Value Investing and Austrian Business Cycle Theory, the risk of a future U.S. stock market decline (or the probability of poor future returns) became even bigger during the course of August. The indicator now signals the U.S. stock market has never been more risky to invest in (i.e. go long) than it is today based on data going back to 1986. The increase in risk during August was largely driven by a stock market that…

Combining Austrian Business Cycle Theory and Value Investing: This U.S. Stock Market Risk Indicator is at an All-Time High

Strict value investors focus on company fundamentals and price vs intrinsic value and pay little, or no, attention to macro economic data and developments. Though focusing on fundamentals, and buying at an attractive price, is of the greatest importance, even great value stocks will fall during larger stock market corrections (though perhaps by less). Keeping an eye on where we are in the financial cycle driven by central bank policy and fractional reserve banking is therefore also of great importance in my opinion. As I consider myself a value investor…

U.S. Money, Credit & Treasuries Review (as of 2 April 2014)

According to data released yesterday by the Federal Reserve, the U.S. monetary base closed at USD 3.8850 trillion for the bi-weekly period ending 2 April 2013, leaving the base USD 134 billion, or 3.6%, higher than year end 2013. Compared to the same period last year, the base increased 30.1%. This is a tremendous increase even by Japanese standards. With the Fed tapering now starting to bite combined with a higher denominator than last year, the year on year percentage increase was the lowest since the bi-weekly period ending 21 August…

Lessons Worth Remembering: Who Predicted the Bubble? Who Predicted the Crash?

Mark Thornton some 10 years back wrote an article titled “Who Predicted the Bubble? Who Predicted the Crash?” where he discusses who predicted the 2000/2001 bubble and crash. On pages 22 to 24 he writes the following which is worth noting given the current lofty price of the S&P 500 (even though it has fallen a bit during the last month) and the Fed’s expansion of the monetary base and keeping interest rates low: In general there were two categories of correct predictions. The first group was based on analysis of valuation. Using standard…