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With the count of dissenters now up to three, Janet Yellen is increasingly caught between policy and reality. The FOMC voted yesterday to do nothing yet again even though Federal Reserve officials continue to suggest that the economy itself demands something to be done. That they have been saying these same things for two years is entirely relevant if not the whole matter succinctly summed up in the same kind of indirect manner that permeates all types of bureaucratic incompetence.The more immediate problem for the committee is inflation. Despite trillions in balance sheet expansion, it…

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“Yeah, you’re a genius, everyone knows it, a goddamn genius, but that’s why you failed as a head coach - that’s why you’ll never be a head coach … some genius.” Those were the words of head NFL coach Bill Parcells to then assistant, and at the time once-failed (with the Cleveland Browns) head coach, Bill Belechick. Belechick had suggested a defensive scheme that Parcells ignored, only for Belechick to be proven correct. Parcells’ irritated reply revealed a view among some football types about Belechick; that while he was in possession of a brilliant defensive mind, he didn’t have the…

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It’s the 50th anniversary of the Credit Crunch of 1966, which roiled financial markets in August and September of that year. Group financial memory fades, so if you don’t know or remember that there was such a crunch, searing at the time, you are not alone. Yet it taught an essential lesson, again being re-learned right now, 50 years later: the Federal Reserve, and central banks in general, simply do not know what the right interest rate is.
Central to the events of 1966 was that the Federal Reserve set the maximum interest rates that banks could pay on their deposits. This was the Fed’s…

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“As a writer, I have readers who will have a range of political views. I don’t think they look to me for political guidance.”
–Alexander McCall Smith
Let me start by saying that I take the political journey toward the November election along with 130 million-plus Americans that will likely cast votes.
I have long held to the belief that the political views and beliefs of any talking head (and that includes me!) should be of no interest to anyone nor should personal political views be a part of any market commentary.
I only discuss that voyage in my Diary as the election outcome relates to…

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Voter guides are hitting doorsteps across California with a thud. Clocking in at over 220 pages, an inch thick, and weighing about 10 ounces, the 2016 guide is akin to an election novella. Its size reinforces the enormous responsibility Californians have when voting. Here’s a snapshot of some of the good, bad, and ugly on this November’s ballot.
The Good - Holding crony capitalists accountable: Propositions 67 and 65 may seem like esoteric environmental debates, but in reality they are about business manipulation of government policy for personal gain. The two measures relate to Senate Bill…

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“Every addition to capital gives to labor either additional employment, or additional remuneration.” - John Stuart Mill, Principles of Political Economy, p. 92
According to news accounts from last week, Americans got a 5.2% raise in 2015. Census bureau data revealed a median household income gain of $2,798 to $56,516. The responses from editorialists were fairly predictable.
On the left the earnings increases signaled President Obama’s supposed genius as an economic steward, along with increased labor leverage over management. Such analysis points to people who’ve never run a business. …

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Climbing the economic ladder can happen in two ways: you can move up the ranks relative to your parents (relative mobility) or you can benefit from economic growth that boosts everyone to a higher rung without changing their relative position. In a society in which relative mobility is not especially high, growth, or absolute mobility, takes on added importance. Thus, the recent slowdown in U.S. growth is more than a little distressing.What’s going on? First, labor force growth has been anemic because the population is aging and because even among working-age adults, men are dropping out of…

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e betting is that the Federal Reserve won’t raise interest rates at this week’s meeting of the Federal Open Market Committee, its key policymaking body. There are already complaints that the Fed, which cut short-term rates to near zero in late 2008, is waiting too long to reverse low rates. Last December, the Fed increased rates by a quarter of a percentage point. It hasn’t done anything since.
“The Fed will make a major mistake if it doesn’t raise rates,” says economist Mark Zandi of Moody’s Analytics. “The job market is strong and very close to full employment. Inflation is close to target…

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Do you know who Ann Twomey is, and what she is alleged to have done? No matter how you feel about unions conceptually, and no matter what you think about the very top union representatives and their true intentions, one thing is for certain: private sector unions are made up of largely hard working, blue collar American men and women who are just trying to do their best to support their families in dignity. Steel workers in Ohio, auto plant mechanics in Michigan, flight attendants in Illinois, or nurses in New Jersey, they are hard-working members of an enormously productive U.S. work…

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Fifty-four years ago, at the Economic Club of New York, President John F. Kennedy unveiled a dramatic tax-cut plan to revive the long-stagnant U.S. economy. He proposed lowering marginal tax rates for all taxpayers and reducing the corporate tax. He advised lowering the top tax rate from 91 to 65 percent and closing tax loopholes. Five times during the speech he used the word “incentives.”In perhaps the most famous line from that path-breaking speech, he said: “In short, it is a paradoxical truth that tax rates are too high today and tax revenues too low, and the soundest way to raise…

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In May 2009, the Organization for Economic Co-operation and Development (OECD) published an extensive, exhaustive report on the then-plentiful incarnations of fiscal “stimulus.” It was at the depths of the Great Recession and by then almost every country touched by it had to some extent responded to it. This was the first clue that it wasn’t ever going to work, yet the fact of globally ubiquitous economic damage (all “unexpected”, of course) was just set aside as if unimportant or irrelevant. The OECD publication itself only mentioned it in passing as just some further reason where “the…

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Urban planners seeking to stabilize neighborhoods are focusing on the critical role that “third places” can play in strengthening our sense of community. Third places is a term coined by sociologist Ray Oldenburg and refers to places where people spend time between home (‘first’ place) and work (‘second’ place). They are locations where we exchange ideas, have a good time, and build relationships.For young Americans, many third places are now virtual - from Facebook and chat rooms to group texts. But as Oldenburg notes, the most effective ones for building real community seem to…

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“Fubar. Ya’ll got that right.”
– Saving Private Ryan
The market’s mechanism is broken for now, with an important assist from volatility-trending and risk-parity strategies that allocate based on price and volatility rather than any intrinsic sense of value. Put simply, the quants have ruined our markets by exaggerating short-term price moves — and many market participants either underestimate or don’t understand the quants’ disruptive impact.
However, retail investors have responded to the market’s unpredictability by taking money out of U.S. equity funds, while institutional players have…

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In The Innovators, a mostly excellent book about the history of technological innovation, author Walter Isaacson unearthed a gem of a quote from Howard Aitken, a futurist from the past. Aitken was skeptical about the need for patents given his view that truly great ideas only appear great well after the fact. As Aitken put it about patenting presumed intellectual property, “Don’t worry about people stealing an idea. If it’s original, you will have to ram it down their throats.”
Aitken’s wise words have proven true - and without fail - for as long as there’s been commerce. The future is…

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You probably aren’t aware because it isn’t a topic that gets discussed much if at all on the outside, but increasingly even monetary policymakers are coming around to the idea that we are in a depression. What choice do they have, really, since practically any chart of any economic account in any economy shows as much. The gathering in Jackson Hole late last month was really an internal discussion in how to think about keeping current central bank frameworks alive in such a world. Earlier this week, San Francisco Fed President (and CEO) John C. Williams spoke in Nevada on just that topic,…

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