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By , Nerd’s Eye View , 03/31/2015

MarketMinder's View: A great explanation of the fiduciary standard’s origins and how the blurring of the line between investment sales and service, not the fact that sales people don’t have rules requiring them to consider clients’ interests first, is the real trouble: “Perhaps the better solution to the blurring of the distinction between investment advisers and brokers is not to subject them all to a single uniform fiduciary standard as ‘financial advisors,’ but instead to simply re-assert the dividing line between them. Let advisors be [investment] advisers (subject to the fiduciary rule that already exists), brokers be the sales people they legally are, and rather than mixing the two let each hold out as such to the public – where brokerage salespeople are called brokers and investment advisers are called financial advisers – so consumers understand the true choice being presented to them. In other words, consumers don’t deserve a choice between fiduciary and suitability; they deserve a choice between advisers and salespeople.” For more on the fiduciary standard see our commentaries here and here.

By , Brookings Institution, 03/31/2015

MarketMinder's View: Hey, look, our former Fed head has a blog! In this, his second post (and part two in a series on low interest rates), he tackles “secular stagnation”—that fear productivity gains have topped out, driving investment and growth lower. He argues it isn’t a thing, which we fully agree with, but the evidence is a mixed bag—and therefore worth diving into. One, it assumes the Fed has more influence on long-term interest rates than the market, largely ignoring the impact of supply and demand on bond prices (long-term government yields are the reference rate for corporate bonds and bank loans). Two, while bulldozing the entire Rocky Mountain range might indeed be “profitable” if financed at low or negative interest rates because trains and cars would save on fuel by not climbing steep grades, we reckon the lost commerce at ski resorts, mountain hamlets, national parks and bike trails would more than offset it. Three, all available evidence suggests credit recovered slowly after the crisis not because markets were scarred, but because the yield curve flattened (a result of quantitative easing). Four, the “restrictive fiscal policies” known as the sequester didn’t dent private-sector growth.

By , The Wall Street Journal, 03/31/2015

MarketMinder's View: Once again, rumors of the dollar’s impending demise as a global reserve currency have been greatly exaggerated—its share of allocated foreign exchange reserves rose in Q4 and 2014 overall. Bully! While that is a slight change from the past decade-plus of declines—which happened as the total number of dollars held in reserve rose—we would hesitate to call this a sea change. The total amount of reserves held globally fell, which about mirrors Russia’s falling reserves, so most of this appears tied to their efforts to defend the ruble. Most likely, other currencies continue gaining share slowly and steadily over the very long term, as international capital markets continue developing. This is good for the world. For more, see Elisabeth Dellinger’s column, “The Tale of the Dollar’s Demise.”

By , Financial Times, 03/31/2015

MarketMinder's View: How so? Because competing on deposit rates requires banks to take risk, which theoretically zaps the state-owned banks de facto government guarantees, and most agree some safeguard is thus necessary to prevent bank runs. Insuring deposits up to RMB 500,000 ($80,600) will bring China in line with the US, UK and much of the developed world, and if officials follow through with freeing up deposit rates as pledged, that’s a big step in China’s ongoing modernization. Though, as this piece notes, it remains an open question whether officials will take a fully market-oriented approach, allowing banks to fail if they overextend themselves, markets have long known Chinese reform will be a fitful, gradual process. 

By , CNBC, 03/31/2015

MarketMinder's View: Yes, S&P 500 earnings and revenues are expected to fall year-over-year—but that’s largely due to Energy, where earnings are expected to fall -64.2% y/y and revenues -38.2% y/y. Excluding Energy, revenues and earnings are expected to rise. None of this implies stocks are out of touch with reality. Stocks are well aware falling oil prices create winners and losers. Energy stocks, logically, are suffering. The winners, like Consumer Discretionary, are doing fine.

By , EUbusiness, 03/31/2015

MarketMinder's View: For the second month running, higher energy prices were responsible for the slower annual deflation rate. How so, if oil fell in March? Welp, the euro weakened, jacking up imported fuel costs. Stripping out rising energy and food prices, core inflation slowed to 0.6% y/y. Hence deflation dread persists. The eurozone’s inflation rate will probably bounce around a while longer as higher oil prices slowly drop out of the base comparison later this year and the euro wiggles, but we wouldn’t read much into any of it. Over a century’s worth of data show you can’t get destructive deflation if broad money supply is rising swiftly—eurozone M3 money supply growth has accelerated 10 months straight and hit its fastest growth rate in nearly six years last month. For more, see our 1/9/2015 commentary, “Read Past the Headline.”

By , Bloomberg, 03/31/2015

MarketMinder's View: Yippee! But the third revision of GDP’s growth last October – December is totally backward-looking, not a factor for stocks looking forward. This is just confirmation of growth stocks have already priced in. Not that we’re pooh-poohing the UK economy, which is in dandy shape. We just think investors are better served by forward-looking indicators, like The Conference Board’s Leading Economic Index (up two straight months in Britain, resuming its longer-term rise).

By , The Wall Street Journal, 03/31/2015

MarketMinder's View: Why? Because April is the Dow’s best month since 1950! And the S&P 500’s second-best month! Folks, tune it all out. Alleged seasonal patterns are trivia, nothing more. They are widely known and don’t predict returns. Keep a longer perspective—we’re in a bull market—and don’t get hung up on potential short-term wobbles.

By , The Wall Street Journal, 03/30/2015

MarketMinder's View: A year ago, a bad winter weighed on Q1 US growth, and stocks (particularly in Tech and Biotech) had a short-term pullback. This year, stocks are wobbling amid not only a yucky winter, but also lower oil prices and a stronger dollar—and since these weren’t issues in early 2014, “the trouble could be longer-lasting.” Well, maybe, or maybe stocks have already discounted the very widely discussed fears of an earnings slowdown. Falling oil prices are terrible for Energy firms’ earnings, but they’re a boon for most other firms. The stronger dollar does hurt export revenues, but it also reduces import costs, which partly offset each other on many US firms’ balance sheets. Plus, all similarly liquid markets are largely equally efficient. Stocks price in currency and oil price swings concurrently. You can’t use either one to predict stocks from here. Anyway, some short-term bumpiness isn’t fatal for bull markets, and we have no reason to think the current bull’s end is nigh.    

By , The Telegraph, 03/30/2015

MarketMinder's View: While we award a point for the pun-tastical title, we suggest tossing this advice in the junk mail bin. One firm pointing out that some unconventional asset classes (like stamps or coins) did better than one country’s narrow stock index over the past 10 years doesn’t mean you should cash out your portfolio and invest in a page of original Inverted Jenny stamps. Now sure, companies fail and bonds default—no asset is guaranteed to retain its value. But while you buy a stock to get a slice of a company’s future earnings—which can grow—a rare stamp’s market value depends on the next buyer. The collectibles market’s illiquidity is also problematic for investors who need to withdraw from their portfolio in a timely manner. Like art, wine or sports cards, stamp collecting makes for a fine hobby, but we don’t recommend building a financial strategy around it.   

By , The Wall Street Journal , 03/30/2015

MarketMinder's View: Err … why not? The can didn’t go anywhere, last we checked, and there is still more road. And everyone involved still has feet. Now don’t get us wrong, we also tire of reading about all the squabbling, blathering, hand gesturing and drawing of lines in the sand. But just because Greece’s reform list is “not there yet” doesn’t mean an agreement can’t be reached at the 11th hour (or perhaps a little later), as has been the case for much of Greece’s recent history. Both Greece and the eurozone have a vested interest in staying together, and the most likely outcome is another sort of compromise, in our view. For more, see Todd Bliman’s column, “1,896 Days Ago, Greece Was a Mess.”

By , Bloomberg, 03/30/2015

MarketMinder's View: This take has both some sensible and misperceived points. On the one hand, while earnings are expected to fall for three straight quarters, results could beat expectations. That is a thing that happens all the time. Also! Excluding Energy, earnings are projected to rise. And stocks are already well aware of Energy’s long-running problems. On the other, here is one pundit’s mostly sensible take: “If you have a few quarters of negative growth rate because of things like currency and energy falling out of bed, I’m not sure that has any lasting impact. It may be a trigger for a correction, but it’s not a deal breaker.” We would add that anything could cause a correction, which are normal during a bull market. For more, see our research analysis, “Quick Hit: ‘Corporate Profits Recession’ and Stocks—There Is No ‘There!’ There.”

By , MarketWatch, 03/30/2015

MarketMinder's View: Well, jobs move months after the economy does, so it is no shock that jobs gains are still cruising months after US growth accelerated. Q4’s slowdown, to the extent it even has an impact, likely wouldn’t register until later anyways. But more broadly, using backward-looking data—whether it’s the monthly employment report or the second revision of economic data from October-December 2014—won’t tell you where the economy is going next. These data also don’t indicate where forward-looking stocks are headed, either. Nor do anecdotal, narrow indicators like retail sales, manufacturing PMI and durable goods orders. For more, see our 3/27/2015 commentary, “Pundits Already Lowering Expectations Bar for Q1.”

By , CNN Money, 03/30/2015

MarketMinder's View: When considering an investment in any country, it’s important to consider economic, political and sentiment climate. In the case of Russia, perhaps investor sentiment isn’t as dour as it was in December during the ruble’s plunge. But, the country is still a political basket case beholden to the whims of a single man, whose temporarily unknown whereabouts recently caused the sort of stir one typically sees in places like Cuba, Venezuela and North Korea. And its economy is still a one-trick pony dependent on global oil prices, which don’t seem likely to shoot up any time soon. Some recent hot performance doesn’t cancel out any of these longstanding drivers.   

By , The Telegraph, 03/30/2015

MarketMinder's View: “Perhaps the greatest lesson from the data is that trying to call annual winners can be a costly game.” Hear, hear! But that sensible tidbit gets overshadowed by calls to avoid an overvalued US market and look for opportunities in “undervalued” markets like Brazil—valuations don’t determine future market performance. Plus, this analysis covers stocks, bonds and property, tacitly encouraging investors to eschew a long-term strategy. Don’t get caught up in asset classes’ short-term swings—it’s an exercise in futility. Stay disciplined and focused on your long-term goals. For more, see our 1/13/2015 commentary, “It’s a Big World After All.”    

By , The Grumpy Economist, 03/27/2015

MarketMinder's View: So eliminating maturities on US debt and making them all interest-bearing notes that extend into perpetuity is not the worst idea in the world, but we are struck by the pesky thought that it is a solution seeking a problem. The Treasury debt market works just fine today and we see no real reason to change it. However, we are fond of the argument presented by Bloomberg’s Matt Levine: “One other thing that I like about this proposal is that you sometimes hear claims from politicians that the U.S. can't keep borrowing forever, that it needs to pay down its debt, etc. These claims are straightforwardly false -- the normal condition of national debt is for it to get rolled over and go up over time -- but that is not especially intuitive. Making the debt perpetual would make it more obvious. ‘We need to pay back our debt,’ a politician would say, and you'd say ‘No, actually, look, it says it right here in the contract, it never needs to be paid back, it's cool.’”

By , Bloomberg, 03/27/2015

MarketMinder's View: Well, whoop-de-doo. Here is what she actually said, with some emphasis in bold we added: “The Committee's decision about when to begin reducing accommodation will depend importantly on how economic conditions actually evolve over time. Like most of my FOMC colleagues, I believe that the appropriate time has not yet arrived, but I expect that conditions may warrant an increase in the federal funds rate target sometime this year.” That is a lot of hedging! But it also overtly says the decision will be data-dependent. She also later said hikes and policy aren’t on a preset course. Oh and remember she is only one of 10 votes. And as we’ve written many times, there is no history of initial fed-funds target rate hikes roiling stocks. Here’s a messy chart that gives you more actionable information than Janet Yellen’s speech.

By , The Telegraph , 03/27/2015

MarketMinder's View: This article snakes through 1,145 well-crafted words of prose to deliver the following message: The Middle East is not a stable region politically. To which we say, thank you, but we and nearly every investor who has bought a stock since long about 1947 is aware. Suffice it to say, this is a truism that didn’t need “exposing.”

By , The Wall Street Journal, 03/27/2015

MarketMinder's View: This is yet another article discussing analysts slashing estimates of profit growth, presuming this is somehow surprising and failing to acknowledge that sentiment matters a lot to stocks’ direction. Look, folks, even if you know exactly what S&P 500 profit growth will be in Q1—and analysts don’t, you can rest assured of that—it doesn’t mean you know what stocks will do, because fundamentals alone do not determine market direction. What’s more, if this is correct and the outlook is brighter in spring due to warmer weather and no West Coast Port Labor dispute, aren’t forward-looking stocks likely to do what they did in 2014 and see right through it? Why would this support the conclusion that “…share prices may get squeezed?”

By , CNN Money, 03/27/2015

MarketMinder's View: So this is the only thing you need to read to understand what this article argues: “Here's the bottom line (literally): Earnings (aka the bottom line) are what drive the market. If earnings aren't growing much, it's hard to imagine how stocks can do that well.” The rest is a bunch of dour gobbledygook meandering from acknowledging most of the downward revisions to earnings estimates center on one sector to presuming all this is ever so terrible for market direction. Here is the thing: The sentence we just quoted is actually wrong. Earnings are one fundamental factor driving stocks. But they are not the only factor! Sentiment counts, too! And guess what? Estimates have broadly been ratcheted lower, and media sentiment is increasingly similar to the dour take here. That means the bar for corporate earnings must top to positively surprise is lower! Easier to clear! Bullish! For more, see today’s cover story, “Pundits Already Lowering Expectations for Q1.”

By , The Wall Street Journal, 03/27/2015

MarketMinder's View: The cyclically adjusted price-to-earnings ratio (CAPE), cited here as the indicator alluding to these low returns for years ahead, is not predictive of short- or long-term returns. Nothing can predict returns more than, say, 30 months ahead reliably often. The CAPE is also an extraordinarily flawed valuation gauge, weighing earnings from 10 years ago, bizarrely inflation adjusting them and then applying the result to stock prices. Suffice it to say, there is little reason to think that earnings depressed by the 2008 financial crisis and recession will predict returns in 2018, but that is exactly what citing a high CAPE does. As for this new era of low returns, we think we’ve heard that song-and-dance a few times before. How did that play out? While that cited different drivers, forecasting long-run returns is wrongheaded no matter how you slice it.

By , The Wall Street Journal, 03/27/2015

MarketMinder's View: Here is Japanese monetary policy in a nutshell: “The beatings will continue until morale improves.” With Japanese core CPI (excluding last April’s sales tax hike, energy and fresh food prices) hitting 0.0% year over year in February, many are calling for more BoJ action. Yet the BoJ’s is the largest quantitative easing program as a percentage of GDP, and it is largely responsible for flattening the yield curve, which discourages bank lending—deflationary pressure. In Japan, noflation isn’t the same as it is in say, Britain.

By , The Wall Street Journal, 03/27/2015

MarketMinder's View: This is the wrong lesson. As is the advice from the hedgie quoted herein that, “[he] can’t tell you what will happen when the Fed tightens this time around.” Look, maybe the Fed hike does cause a sell-off. But the fact is there is nothing so unusual about this expansion and bull market that makes a 0% - 0.25% fed-funds rate so necessary for an economy with average unemployment; GDP, consumer spending and business investment at all-time highs; and forward-looking indicators suggesting continued growth. But either way, raising cash “just in case” has another name for long-term investors: Asset. Allocation. Error. The only time to significantly alter allocation based on market outlook is when you believe a big, surprising negative is highly likely to occur—one others miss. Few investors aren’t watching the Fed closely, and there is no data-driven reason to think the economy would be roiled by a rate hike today when it hasn’t been roiled by an initial hike historically. 

By , Financial Planning, 03/27/2015

MarketMinder's View: Well, there is a lot of misdirection in some brokerage firms’ marketing—like giving salespeople and brokers the title, “Financial Advisor”—a clear attempt to align them with Registered Investment Advisers, who are held to a fiduciary standard. And some advertising is a wee bit questionable, although some of these seem like quite a stretch. Oh and finally, the guiding light here seems to be that these folks believe the fiduciary standard is a gamechanger, affecting recommendations and product sales pitches and so on, which seems like a stretch to us.

By , The Wall Street Journal, 03/26/2015

MarketMinder's View: There is no real divide here—they are all active investors. That is the only thing this study proves, as the numbers don’t actually tell you which group is better at timing (or whether they are equally bad). The only way you could even begin to measure this is if you were to compare a fund’s dollar-weighted return to its time-weighted return (and even that says next to nothing)—this study compares each fund’s dollar-weighted return to its category’s average total return. That is not an accurate comparison, and it basically tells you nothing. Then again, even comparing one fund’s dollar-weighted and time-weighted return wouldn’t tell you anything about investors’ actual behavior, because it lacks a counterfactual. What if they rotated into something that did even better, and their personal performance was better? The only way you can track this in real-life is by studying individual investors over time, tracking every transaction, and then evaluating the timing in hindsight. And even that wouldn’t be perfect, because you still wouldn’t have a control group. Anyway, that’s all academic—the simple takeaway here is that no, investing in an index fund doesn’t mean you are automatically smarter, more disciplined or a better trader. People are people.

By , MarketWatch, 03/26/2015

MarketMinder's View: Well, the conclusion here is correct, in our view: Today’s Nasdaq nearing 5,000 bears little resemblance to 2000’s Nasdaq at the same level. And yes, valuations (the second point of three included) are very different between now and then. We would suggest, though, that comparing inflation-adjusted index levels (point #1) is an unnecessary and wrongheaded comparison, because an index level will never show whether investors are euphoric or not. You must analyze economic and market fundamentals and then compare those to sentiment to do that. As to sentiment, we aren’t seeing actual debates on widely watched cable TV suggesting that “bust” has been eliminated (leaving just “boom”—we reckon the “and” was collateral damage), or that we are in a new economy that has rendered profits an obsolete metric, or that there are no fears. Those are your hallmark signs of euphoric sentiment, and they are basically absent today.

By , Bloomberg, 03/26/2015

MarketMinder's View: Here is a very interesting article regarding a widely overlooked feature of the US economy in 2014: “Corporate spending on research and development rose 6.7 percent in 2014, almost twice the previous year’s gain and the biggest advance since 1996, according to Commerce Department data. The pickup was capped by a 14 percent fourth-quarter surge that signals additional increases are on the way. … ‘CEOs wouldn’t be paying all these researchers -- which is where the R&D budget primarily flows to -- unless they thought that there was something really interesting going on,’ Jason Cummins, chief U.S. economist and head of research in Washington for hedge fund Brevan Howard Inc.” said.

By , The Wall Street Journal, 03/26/2015

MarketMinder's View: An alternate headline that summarizes the story more accurately: “Bank of Spain Sees Deflation Stimulating Demand, Growth.” Granted, forecasts by central banks can be revised … or just wrong. But the projection here seems to us to at least acknowledge the fact deflation in the eurozone isn’t likely to cause a downward spiral. Consumers seem likelier to respond to lower prices by consuming more.

By , Bloomberg, 03/26/2015

MarketMinder's View: That US stocks (as measured by the S&P 500 price index) haven’t had back-to-back gains since mid-February is a trivial, myopic and silly observation. This is inferring an awful lot from a lack of movement in US stocks year-to-date. Volatility is just volatile sometimes.

By , CNBC, 03/26/2015

MarketMinder's View: Markets move in anticipation of widely known events. The likely tapering of quantitative easing (QE) was widely known beginning in May 2013, and stocks did pretty darn well that year. They also had a good year in 2014, after the taper began. Are we to suddenly believe that now, after the end of QE has been a known quantity for nearly two years, now QE’s end will hurt stocks? Heck, even if you disagree with our view that QE didn’t help but hindered the economy and stocks, consider: The amount of QE hasn’t been reduced—it’s all still there on banks’ and the Fed’s balance sheets—it simply isn’t increasing.

By , Bloomberg, 03/26/2015

MarketMinder's View: This claims to show what happens “once the Fed starts hiking rates” on a sector basis. But the tables don’t show that—table one shows sector returns from the first to last hike, which is years long. The second shows what happens in selloffs that occurred either before or after the Fed hiked rates, and there are just three data points. Either way, no sector consistently outperformed, so this wouldn’t be much use even if the time windows were logical. Our advice: Don’t get swayed by gimmicky rate-hike-navigation advice. The first rate hike in a tightening cycle has no history as a meaningful market driver. Bull markets that were in progress before the Fed hiked continued. Ditto for bear markets.

By , The Washington Post, 03/26/2015

MarketMinder's View: This is a review of John Tamny’s new book, Popular Economics: What the Rolling Stones, Downton Abbey and LeBron James Can Teach You About Economics, and most of the discussion is sociology. But it is also a wonderful reminder of the power of capitalism and technology to cure many of the world’s economic problems (real and perceived). It’s a healthy dose of optimism and refreshing palate cleanser amid the media’s typical gloom.

By , The New York Times, 03/25/2015

MarketMinder's View: Maaaaaaaaaybe? Though the evidence that a defection is even happening is quite thin. As is the evidence large financial sectors reduce a country’s economic growth (we read the paper, and it is a lot of interesting observations, fuzzy math and correlation without causation). And anyway, it’s not like a few people switching from finance to tech means the financial industry is even shrinking. To the extent new grads prefer tech over finance (also thinly supported—employment trends among Harvard MBAs hardly reflect all of America), it’s just backward-looking confirmation of the fact tech has outgrown finance during this expansion. If this means America’s finest minds are now in Silicon Valley, maybe that does drive more innovation, but that is also impossible to quantify and prove (no counterfactual). Look, we appreciate the optimism here, but we wouldn’t cite this as a reason to be bullish. It’s just some interesting theorizing. (For an enjoyable alternate take on this topic, check out Matt Levine’s morning roundup on Bloomberg.)

By , Bloomberg, 03/25/2015

MarketMinder's View: China is lobbying the IMF to add the yuan to its Special Drawing Rights system, which would give it more credence as a global reserve currency. The yuan’s ascendance is something folks broadly fear, yet as this shows, it would be a big benefit for the global economy. Including the US! “A new push to establish the renminbi as one of the world's reserve currencies … would confer prestige, take America down a peg and attract more investment. Viewed that way, Washington should fear the yuan joining the ranks of the dollar, euro, yen and British pound, right? Wrong. Increased use of the yuan internationally will force China to restructure more radically than its leaders may realize. It also could stabilize the country's rickety financial system, to the benefit the U.S. and the rest of the globe.” It would essentially force Chinese leaders to follow through with all the reforms they have promised but implemented fitfully, with many delays and U-Turns, ultimately bringing the country much more financial stability (to the degree stability exists—it wouldn’t abolish the business cycle, but you know what we mean). It would also integrate China more fully into the world economy, providing more investment and trade opportunities for American people and businesses.

By , Financial Times, 03/25/2015

MarketMinder's View: Why not? High fees, low to no liquidity, no transparent pricing and no way to know what the underlying investments actually are. “Do not buy an unlisted real estate investment trust” is indeed the financial equivalent of “never eat yellow snow.” For more, see our commentary, “The Perils of Non-Traded REITs.”

By , The Wall Street Journal, 03/25/2015

MarketMinder's View: Speaking of non-traded REITs! Nearly half are apparently “zombies,” which are slashing dividends, aren’t making money and can’t or won’t sell their distressed properties to make investors whole. Some redemptions have been delayed. With no secondary market, shareholders are stuck. If a listed REIT were in this situation, shareholders would at least have the chance to sell to an investor willing to take a flyer on the hope things would eventually turn around. Not so with the unlisted variety. We are fairly certain paying double-digit up-front fees for a shaky, opaque product whose dividend can go at any time—and that could end up superglued to your portfolio—is just not a wise move for anyone.

By , The Wall Street Journal, 03/25/2015

MarketMinder's View: Word to the wise: If headlines galore spend a year claiming an industry is in a bubble, it is probably not in a bubble, because all those fears are priced in—along with all the other opinions about that particular category. That probably goes double if the Fed head is one of those people claiming the sector is in a bubble, as her opinions are quite widely discussed. Biotech valuations are actually lower today since bubble chatter escalated a year ago, which would imply sentiment isn’t running away from reality. Prices soared, but earnings soared higher (trailing earnings for the MSCI World Biotech Index are up 69% since last February, according to FactSet). Is that really irrational exuberance?

By , Fortune, 03/25/2015

MarketMinder's View: So we are darn sure some investors are buying unconstrained bond funds in a hunt for yield and overlooking the composition of these funds, increasing their overall portfolio risk. This article, in that way, is a good reminder for investors that chasing yield is a horrid idea, particularly when you own bonds (as the article notes) to dampen volatility. But we contend that this is a relative rarity today, and the evidence here supports our assertion. According to the article, “Between the beginning of 2010 and the end of 2014, the assets under management in the top 10 ‘nontraditional bond funds’ have quintupled from $16 billion to over $80 billion.” Which sounds really big! But $80 billion is less than the market capitalization of 78 stocks in the MSCI World Index. According to the Federal Reserve, US bond funds hold more than $4.8 trillion of debt—even if you look only at funds (not ETFs, not individual bond holdings, just funds)—that quintupling drove holdings up to less than 2% of fund holdings in the US. Worth watching? Sure. A sign bubblicious sentiment is here now? No.

By , Bloomberg, 03/25/2015

MarketMinder's View: Let’s judge these nine alleged consequences one by one, shall we? 1) No. See Japan, 2001 – 2006. 2) No. Financial markets don’t reliably jump on QE announcements. See Japanese markets’ reaction to last October’s announcement, which resulted in a one-day-long bounce. 3) No. Consumer confidence doesn’t reliably predict consumer behavior. 4) No. Is there any actual evidence of this? The US and UK, two of three QE countries before the ECB announcement, didn’t need reforms. Japan has needed reform for decades—politicians waffle because that is what politicians do, not because the BoJ did some bond buying. 5) No. This is fancy language for “low interest rates create winners and losers,” which is true enough but doesn’t have the results highlighted here. 6) No. Bubbles aren’t related to QE. See 2000 for an example. 7) Come on, this is just #4 listed again. Still No. 8) No. This doesn’t mean anything. 9) No. This isn’t an effect of QE. Politicians have virtually always wanted to politicize central banks. Whew. Any questions? Then read this.

By , Los Angeles Times, 03/25/2015

MarketMinder's View: Not great news, but durable goods orders are always volatile, and they aren’t a perfect indicator of total business investment. The series has endured longer slides during this expansion without derailing overall growth.

By , The Telegraph, 03/25/2015

MarketMinder's View: Well gee. Why might eurozone officials and Greece believe the currency union can withstand a Greek default? Ummmmm … let’s see … maybe because it withstood two of them in 2012?  And the first one went so smoothly that barely anyone even noticed the second one? Look, we get that things there are bad. Greek banks are hurting, and if they’re cut off from their remaining ECB lifelines, Greece probably doesn’t have enough cash to stanch the bleeding. That brinksmanship continues anyway doesn’t mean everyone thinks a Greek banking implosion and euro exit would be a cakewalk. This is just how negotiations work. It is how all the Greek negotiations have worked since this saga began in late 2009. Both sides have been very good at bending at the last minute, and they look very bendy this time, too.

By , EUbusiness, 03/25/2015

MarketMinder's View: Well, more like sources say the ECB wrote some letters to strongly encourage Greek banks to stop buying Greek bonds. On the one hand, that seems like sensible, friendly advice considering Greek bonds are junk and at high risk of default. On the other, it also seems like a negotiating ploy considering Greek banks are the government’s only buyers, so if they stop, no more cash. Will this goad Greek leaders into complying with creditors’ demands? Or will it spark another round of angry name-calling? Your guess is as good as ours. Though, ultimately, they’ll probably compromise and kick the can again, because that is just what they do.

By , The New York Times, 03/25/2015

MarketMinder's View: The market impact of a Ukrainian default is quite limited, considering the country is tiny and its financial issues are widely known. But it is interesting and worth watching as a test of how the US court ruling in favor of holdout creditors from Argentina’s default will impact potential holdouts in Ukraine. Will they see the ruling as an incentive to holdout for full repayment from Ukraine’s government? Or will they view the reality (despite the ruling, Argentina’s holdouts still haven’t received a penny) as an incentive to agree to restructuring for the sake of getting some money rather than none? The answer could be telling for future sovereign debt restructurings.

By , Bloomberg, 03/25/2015

MarketMinder's View: While we guess this requirement would increase transparency, which is nice, the wording seems a bit off to us. It should actually read, “I am not a fiduciary. Therefore, I am not required to reasonably believe I am putting your interests first or to disclose potential conflicts of interest and the steps I take to mitigate them. I am allowed to recommend investments that may earn higher fees for me or my firm, even if those investments may not have the best combination of fees, risks, and expected returns for you—oops, looks like I am now required to tell you about my potential conflicts of interest!” We’ve no quibbles with the intent here, we are just darned skeptical it will at all improve the quality of brokers’ product recommendations. They could bury that statement deep in the client agreement, and clients who don’t read fine print would be none the wiser. Heck, they could print it in big block letters on a single sheet and decorate the border with glittery puffy-paint, make sure every client reads it four times, and then make a very impassioned case for why a non-traded REIT or variable annuity is a smashing choice for that client. This initiative changes nothing. For more, see our recent commentaries, “The DOL Gets a Homework Assignment” and “A Winning Standard?

By , The New York Times, 03/24/2015

MarketMinder's View: While we’re overall ambivalent about this piece and the challenges to the SEC and Labor Department’s efforts to apply a uniform fiduciary standard to brokers, we found this point striking: “But just saying a broker owes a fiduciary duty does not mean investors will avoid risk or be shielded from losses. Bernard L. Madoff’s firm was registered with the S.E.C. as an investment adviser, so it operated under the fiduciary duty standard, yet thousands of its clients’ financial lives were destroyed. There is no way to know how profitable an investment will be, so whether recommendations will cost investors money because brokers do not owe them a fiduciary standard is speculative.” Rules, no matter who makes them, can be broken. For more on the fiduciary standard, see our 3/18/2015 commentary, “A Winning Standard?”

By , MarketWatch, 03/24/2015

MarketMinder's View: Well, actually, it’s impossible to say what China’s shift from infrastructure and manufacturing to services and consumption means for commodity markets over the next couple decades, because the far-future is unknowable. Could other developing nations offset falling Chinese demand? Maybe! Could Chinese demand remain firmer than many believe as its massive rural population continues migrating to cities? Maybe! Could commodity producers work through their supply glut and adjust to whatever market conditions materialize? Maybe! Is any of this an issue for investors today? Nope. Markets usually price in what’s likeliest over the next 30 months, not further out. In that timeframe, it’s hard to envision things changing materially (pun intended) for Materials firms, as it takes a long time for miners to cut production after prices fall. Given new mines’ high up-front costs, producers have a big incentive to keep them going and reap some revenue, rather than no revenue at all. Commodity cycles tend to be long. Whatever happens with demand in the long run, now is probably not the time to go bottom-fishing in the Materials sector.

By , The Guardian, 03/24/2015

MarketMinder's View: Mostly good things! Pensioners will benefit because annual state benefit payments increase by the higher of inflation, average earnings or 2.5%—currently 2.5% is the winner. Savers benefit because purchasing power won’t fall. Consumers win for obvious reasons. As this also points out, debtors would take a hit if deflation persisted, Japan-style, but that risk is overstated here. Oil’s impact on inflation is temporary—higher prices will soon fall out of the year-over-year comparison. So while employers do indeed consider real wages when competing for workers, we are probably talking about a very short window where flat/deflation has the potential to pull down wage hikes. The overall supply of and demand for labor will be far bigger drivers.

By , Reuters, 03/24/2015

MarketMinder's View: So this Fed person said what many in the media have suggested: Unless markets price in an eventual fed-funds rate hike, they could crash when the Fed finally makes its move. To which we’d ask: Where is the evidence markets haven’t already priced in something so widely discussed? Markets are pretty darned efficient. The Fed has spent over half a year jawboning about this, and the media hype has lasted even longer. Is there really any chance markets haven’t already discounted this chatter? Plus! Why must the reaction automatically be bad? When the Fed announced the tapering of quantitative easing—a similarly widespread (false) fear—stocks rose. Moreover, what stocks do over a day, week or month really doesn’t matter in the long run. What matters is whether a Fed rate hike would end the bull market. History and the current economic landscape suggest this is extremely unlikely. For more, see our 3/20/2015 commentary, “Pundits Forecast Fed, Prove Forecasting Fed is Folly” and Elisabeth Dellinger’s 3/18/2015 column, “Fed People Write Words, Draw Dots.”

By , The Wall Street Journal, 03/24/2015

MarketMinder's View: Not much at all, as this shows: The Energy sector employs fewer workers than Tech did in 2001, it represents a smaller share of business investment, its recent returns are hardly bubbly, and its outstanding corporate bonds represent a fraction of total credit. The spillover potential here is minimal, particularly because what is so bad for Energy firms (low oil prices) is so good for many other firms. Plus, Tech’s bubble popped when investors were broadly euphoric. It wasn’t that Tech’s problems were contagious. It was that the entire economy was turning, equity supply was off the charts, and no one noticed because they were too caught up in “new economy” hoopla.

By , Reuters, 03/24/2015

MarketMinder's View: Well great, but this is all just the same song and dance we’ve heard since Greece and its creditors signed the bailout extension on February. Greece agrees in theory to make reforms, then proposes reforms its creditors don’t accept, then everyone throws a fit, tabloids report hyperbolic stories about fraying tensions, then everyone makes nice and starts over. Will the magical list Greece promises to present Monday be any more tenable than its prior supposedly magical lists? Who knows. The merry-go-round could make a few more turns. Ultimately, though, everyone involved has an amazing knack for doing exactly what is needed to get Greece just enough money to avoid catastrophe at just the right time. Given both sides have strong incentives to keep Greece in the euro, they’ll probably find another convenient can-kick this time around.

By , Bloomberg View, 03/24/2015

MarketMinder's View: Those five charts are: retail sales, consumer confidence, Citigroup’s Economic Surprise Index, loan growth and expected inflation. Only two of them really mean anything, considering consumer confidence is a lagging indicator, the Economic Surprise Index doesn’t fully capture sentiment and inflation expectations are largely meaningless. But hey, lovely to see folks catching on to improving consumption and credit markets! All that said, though, this stems from the false perception that you couldn’t get a sense of Europe’s health from financial markets, as if currency swings and a year’s worth of past performance mean anything today. Folks, eurozone stocks are outperforming these days. Economic data simply show why that performance isn’t irrational.

By , CNN Money, 03/24/2015

MarketMinder's View: By “slump,” they mean March’s HSBC flash manufacturing PMI fell into contraction at 49.2, down from February’s 50.7 (readings over 50 indicate expansion). But this isn’t some earthshattering development.  This index (which doesn’t reflect broad industry, as it focuses on smaller private firms) has wavered between a slight expansion and slight contraction since 2011, yet Chinese growth decelerated just modestly and the bull continued. Nothing has really changed to make us believe it’s different this time.

By , The Washington Post , 03/23/2015

MarketMinder's View: Literally? Nowhere—the Federal Reserve is a building. As for where Fed policy is heading, that’s unknowable today. It probably is true that markets don’t have as much confidence in current Fed Chair Janet Yellen as they did in former Chair Alan Greenspan, but that probably has more to do with just how darned long he was at the helm and how little he said. He was the Yoda of central bankers—speak not, just do, and follow you, markets will. Yellen, by contrast, is new and says a lot, which requires frequent backtracking, which tends to erode confidence. But that doesn’t mean markets are more vulnerable to a rate hike now—that depends always on the conditions at hand, and it’s hard to argue a growing US economy can’t handle rates north of zero. Yes, we know this says higher interest rates wreck “credit-sensitive sectors,” but the real danger comes from an inverted yield curve, not higher short-term rates alone, and it usually takes several rounds of hiking before that happens. For more on initial Fed rate hikes, see Elisabeth Dellinger’s column, “Fed People Write Words, Draw Dots,” and Todd Bliman’s column, “What Does This Messy Chart Say About Rate Hike Fears?”      

By , Vox, 03/23/2015

MarketMinder's View: There are several sensible tidbits here: Diversification is important, long-term investing term requires a lot of discipline, and you should take advantage of any benefits you get, like if your employer matches your retirement account contributions. And sure, “save more!” is sensible (if clichéd) advice, too. But we have some qualms with other suggestions listed here. Like the notion low fees and expenses should be the most important criteria for an investment. Or that arbitrarily constructed target date funds make the most sense for novice investors. Or that your portfolio’s asset allocation should be based on your age, regardless of your  long-term goals. Or that bonds are “safer” than domestic stocks, which are “safer” than international stocks. Or that passive investing is a real thing. Folks, most of those are industry myths, and heeding them could lead you to a suboptimal place. For some sensible retirement advice, see Chris Wong’s column, “Four Tips for Retirement Investing.”   

By , The Telegraph, 03/23/2015

MarketMinder's View: This “secular stagnation” theme—that we’ve reached the limits of technological and productivity gains—is old and tired. It was wrong when it was coined in the 1930s, and it is probably wrong today. Some cite ultra-low long-term interest rates in this expansion as evidence it is real, arguing demand for investment capital is down, but that ignores supply and demand. The real reason long-term rates are low is simple: Bond demand is sky-high, particularly among banks, and supply isn’t quite keeping up. As for the technology side of things, we think the professor quoted here nails it: “The ‘golden age of technical progress also saw periods of slow productivity growth, notably when new network technologies were being rolled out but the economy had not yet adapted to their availability,’ said Barry Eichengreen, of University of California, Berkeley. Inventions such as the internal combustion engine and electricity took at least a century to be fully exploited. In each generation, applications of new technologies have been ignored, such as the potential for television to replace the radio. … ‘This is an argument for not making too much of the slowdown prior to 1995, when adaptation to the availability of computers and the internet first got under way, or of slow productivity growth now, when we are potentially on the eve of a robotics and human genome revolution.’” Also, whether or not secular stagnation is a thing, cyclical factors often trump structural, so either way it wouldn’t mean much for stocks.

By , The Wall Street Journal, 03/23/2015

MarketMinder's View: We see the logic of the argument—a strong dollar hurts US multinationals’ export revenues when they convert foreign currencies. But this misses the other part of the equation: A rising dollar also makes imports cheaper, which reduces costs for all US firms importing parts and raw materials. Given most multinationals export and import, the currency effect is largely zero sum in the long term. If this weren’t true, the biggest US firms wouldn’t have beaten most everyone else during the late 1990s, when the dollar soared. Also, Q1 numbers here are analysts’ forecasts—for most of this bull, analysts have ratcheted down their forecasts as the quarter’s end approached. Then reality beat their too-dour expectations. For more about the strong dollar, see our Research Analysis here.

By , Bloomberg, 03/23/2015

MarketMinder's View: For your up-to-date Greece coverage, Greek Prime Minister Alexis Tsipras and German Chancellor Angela Merkel met in Berlin on Monday—launching another Critical Week for the Euro™. A government spokesperson said, “Nobody should expect solutions from today’s meeting, from an inaugural visit,” and we agree. For as many twists and turns this saga has seen since February, and as many times headlines have warned us Greece is seconds away from bankruptcy, everyone involved is extraordinarily adept at dithering and kicking the can. We wouldn’t be surprised if several more rounds and a few more can-kicks ensued. Regardless of how the plot turns next, we’ve seen some version of this movie before—and a “Grexit” or “Grexident” isn’t likely.   

By , The Wall Street Journal, 03/23/2015

MarketMinder's View: All right party people, what time is it? It’s once again time to put your political biases aside and consider the dangers of further politicizing the Fed, which is what this article effectively advocates. Now sure, we certainly agree the Fed isn’t infallible—its economic knowledge isn’t necessarily superior and it can be (and has been) wrong. Though, we’d point out that this article’s historical evidence for the Fed’s wrongness is suspect, as the Fed wasn’t the sole culprit for high inflation in the 1970s—the principal driver was Nixon’s price controls, which included capping interest rates. That’s political intervention! See Russia, Turkey, Hungary and Brazil for more prime examples of why politicized monetary policy usually does more harm than good. Politicians tend to act in their best, short-term interests, and that can mean doing things like cutting rates when inflation is rising just to get a quick economic boost before an election.

By , The Wall Street Journal, 03/23/2015

MarketMinder's View: And corporate cash balances (and capex) rose, too! Firms are returning capital to shareholders without denting rainy-day funds or investment. They are also kindly reducing stock supply, which Econ 101 tells us drives prices higher.

By , Bloomberg, 03/20/2015

MarketMinder's View: In case you needed more reasons to underweight Energy stocks, here goes: Beyond just weak earnings, continued oversupply of oil and rising production while prices fall, add heavy equity issuance diluting shareowners' stake and increasing stock supply in the sector. Don’t discount that last point. The former factors affect short-term Energy stock demand; the latter longer-term supply. In our view, it is premature to think this sector sharply snaps back soon.

By , The Wall Street Journal, 03/20/2015

MarketMinder's View: This is really something of a sign of the times. The small local bank noted here is only the second bank to receive approval to launch in the last five years. “Before the financial crisis, regulators approved the opening of numerous new banks every year. From 2000 to 2007, the FDIC approved on average 159 applications a year.” In our view, this is likely an unintended consequence of regulatory increases, quantitative easing crushing the yield spread—which reduces banks’ loan profits, a sea of lawsuits against bankers and a general stigma. The irony is the banks best suited to weather all this are the biggest ones, which makes new entrants on the competitive landscape a rarity.

By , Bloomberg, 03/20/2015

MarketMinder's View: There is some good, some bad and some nothingness in this. But the point we find most salient—and rather rare these days—is this: "First, stop publishing the interest-rate forecasts of its policy makers. The so-called dot plot suggests a schedule that doesn't exist, conveys almost no useful information and is apt to be misunderstood by analysts intent on finding deep significance (preferably where there isn't any). It's noise more than signal, and better dropped."

By , Time, 03/20/2015

MarketMinder's View: The theory here is monetary policy is the only thing propping up stocks, which are still sleepwalking their way to disaster after the Fed’s statement was interpreted dovishly. It operates on this presumption: “Up until yesterday’s Fed meeting, America’s central bankers said they were going to be ‘patient’ about the timing of an interest rate hike, which most experts believe will ultimately result in a significant stock market correction.” We aren’t sure who these alleged “experts” are, but we’re wondering if they are aware initial rate hikes virtually never result in a correction (which we define as a short, sharp, sentiment-driven move of 10% or greater) or a bear market (lasting, fundamentally driven move exceeding -20%). We’re also wondering what they said about the Fiscal Cliff, sequestration, the Taper Terror and more. Most “experts” thought those would crush stocks, too. And what of the US private sector? The Fed isn’t “the only game in town” and it isn’t even remotely close to the primary driver of this expansion. That friends, is good ol’ Corporate America, which has rocked its way to record profits, rising sales, strong balance sheets and more. Folks, the world just isn’t in the dire straits this article suggests.

By , Fox Business, 03/20/2015

MarketMinder's View: Well, this one is a wee bit wide of the mark on pretty much every front. To focus, the central claim here is the economic recovery is imperiled because an oil price bubble burst, quashing Energy firms’ profits, future investment and employment plans. But contrary to the argument here, the domestic, private-sector portions of the US economy (consumer spending, business investment and real estate) accelerated in Q4, while oil prices cratered. Profits and revenues, outside Energy, are rising at a healthy clip. The Conference Board’s Leading Economic Index is rising. There is no sign of a negative macroeconomic impact in the here and now. Why? Because falling oil prices create losers (Energy) and winners (Consumer Discretionary firms, Industrials, etc.). Oh, and please don’t buy this theory that Energy was the only good thing going in the US economy since 2009. Consider this. Or the fact that while oil may have added “$300 - $400 billion” per year since 2009, the annual flow of US economic activity (otherwise known as GDP) is $17.7 trillion. (As an aside, it’s beyond bizarre the article opens with a quote from 2002 and claims it was made when “the housing bubble was ballooning, ready to burst.” Actually, 2002 was the first full year of economic expansion after the 2001 recession. The housing bubble burst in 2006. It also did not cause 2008’s recession, but that’s a blurb for another article.)

By , MarketWatch, 03/20/2015

MarketMinder's View: Are there conflicts of interest in the traditional broker model, in which products are sold for a commission? You betcha. Will enacting an industry-wide Fiduciary Standard prevent them? Nope, not really. Will it save investors the “$17 billion lost last year” as the White House study alleges? Not a chance. First, the figure is based on ridiculously flawed math. Second, the Fiduciary Standard will not identify qualified individuals, those with experience, resources and expertise. Quite literally all it says is: Your adviser must reasonably believe they are putting your interests first and disclose conflicts of interest. As we wrote here, here, here and here, this is not a panacea to cure all that ails Wall Street.  

By , The Wall Street Journal, 03/20/2015

MarketMinder's View: Sorry, options expiration being an extra-volatile day has always been mythological. This is nothing new. Statements like these presume there is a connection between volatility and volume, but other than starting with the same three letters, there is no relationship: “The collision of so many contract expirations happens once a quarter, and tends to boost stock-market volumes as investors adjust positions. On each quadruple-witching day over the last three years, stock-market volume has surpassed the monthly average. For example, 10.3 billion shares traded on Dec. 19, higher than December’s monthly average of 6.7 billion.”

By , EUBusiness, 03/20/2015

MarketMinder's View: “European Commission chief Jean-Claude Juncker urged Greece to grab 2.0 billion euros in unused EU development funds as it struggles with a cash crunch and a battered economy.” And it isn’t to simply pay back the EU! Rather, it seems like a strategy change for the EU, encouraging the anti-austerity Greek government to spend these funds to quell Greece’s domestic humanitarian crisis brought by the massive recession. Our guess is this is an effort to allow Greece to save face in a small victory before a bigger deal follows later. But that is only a guess, and we anticipate more wrangling over things like hand gestures before then.

By , The Economist, 03/19/2015

MarketMinder's View: We’re a bit ambivalent about this one. The global economy has been moving towards freer trade thanks to smaller, country-to-country or regional pacts, and as this piece points out, this is a positive. But we don’t think grander plans like the Transpacific Partnership (which would connect 12 different countries in Asia and the Americas) must replace smaller deals for the world to get a boost. One, free trade is free trade. Two, it’s pretty difficult to get two countries to agree on terms, let alone 12, which is why global deals stall out, get watered down and usually don’t accomplish a whole lot immediately. Rather than a big negative, the lack of global trade deals is the absence of a long-term positive—yet the world has still been trending towards freer trade overall thanks to those smaller deals. Also! Most of the quantitative analysis here rests on long-term forecasts and lacks a counterfactual, so the evidence supporting the thesis is darned thin.            

By , Bloomberg, 03/19/2015

MarketMinder's View: This isn’t a big surprise, as pundits have been warning about lower Q1 2015 earnings and revenues as potential harbingers of trouble ahead. But that’s largely due to the Energy sector (and the big drop in oil prices over the past several months). Remove Energy, and earnings are growing nicely—and projected to keep doing so. Plus, analysts ratcheting down their projections makes expectations easier for reality to beat. Also, none of this is new—analysts have consistently lowered their estimates for years. That hasn’t ended the bull, and there is no reason it should be any different this time. For more, see our 3/10/2015 commentary, “Earnings Slip on Oil, and Other Obvious Puns.”  

By , The Wall Street Journal, 03/19/2015

MarketMinder's View: Low liquidity bond markets—particularly corporate bonds—is a long-running fixed income ghost story. We happily defer rebuttal duties to Bloomberg’s Matt Levine, who gutted the fear beautifully: “The big concern is the liquidity illusion: that big investors buy a lot of bonds thinking that they'll be easy to unload in a crash, but in fact they won't be easy to unload, and there'll be panicked fire sales that worsen the crash and lead to a real crisis. But how is that illusion tenable when everyone talks about it all the time? What big investor is suffering from the liquidity illusion? Presumably not all the investors who are quoted constantly in stories about the liquidity illusion, right?” Like stock markets, bond markets are pretty darned efficient and tend to discount widely discussed fears. For more, see his piece, “Bond Liquidity, Mortgage Lending and Merger Associates.”

By , MarketWatch, 03/19/2015

MarketMinder's View: Well actually, no, this isn’t what a tech bubble looks like at all. Cherry picking a couple of poor performers and citing frothiness in private markets suggests euphoric sentiment isn’t rampant—and euphoria is a key feature of a bubblicious environment. If you have to look someplace so narrow for euphoria, that’s a sign sentiment overall is benign.To see what the business environment is like during an actual bubble, take a look at University of Florida professor Jay Ritter’s IPO research, which shows how newly public companies compare historically vs. 2000 (when the Tech Bubble popped). And to get a sense of what sentiment is like during those conditions, see our commentary here on what a real bubble looks like.      

By , Time, 03/19/2015

MarketMinder's View: We have several major qualms with this piece. First, a market correction and a bear market aren’t the same thing. A correction is a sentiment-driven drop of -10% to -20% that can end as quickly as it arrives—a normal part of bull markets. A bear market (an extended market drop of -20% or more) starts in one of two ways: Investor sentiment reaches a euphoric top and reality can no longer match sky-high expectations. Or, a big, unforeseen negative wipes trillions off the global GDP, killing the bull. Now, could the Fed ending its “easy money” monetary policy cause a market correction? It’s possible—markets can be irrational in the short-term, so anything could roil sentiment and cause a market pullback or correction. But we don’t see a bear market forming because of “tighter” policy in the form of an initial Fed rate hike—that’s a false fear, and false fears are bullish. The first rate hike in a tightening cycle has little history of ending bull markets. We also don’t see much evidence money is “easy,” considering the discount rate is half a percentage point above the fed-funds rate, which is traditionally tight monetary policy. If the fed funds rate rose while the discount rate stayed at 0.75%, one could make a case that’s stimulus, penalizing banks less for circulating Fed liquidity.

By , Bloomberg, 03/19/2015

MarketMinder's View: The 11th increase in 12 months, but slower than 2014’s second half, and some warn that means economic growth will slow, too. Maybe it will, but you can’t really determine that from the Leading Economic Index’s (LEI) fits and starts. Temporary LEI slowdowns and even occasional mid-expansion drops often stem from LEI’s more volatile and backward-looking components. That was the case in June, when jobless claims and the manufacturing workweek were the primary drags. The two most consistent components, the interest rate spread and the Leading Credit Index, contributed at a higher rate in February. Our advice: Don’t overthink LEI’s wobbles. Just focus on the trend, as no recession in LEI’s 55-year published history has begun while the index was high and rising.

By , The Telegraph, 03/19/2015

MarketMinder's View: In a rather bizarre twist on the job-stealing robot fears, some fear the UK government’s plans to allow “smart” ATMs that can accept cash and check deposits will cannibalize bank branches and destroy tellers’ jobs. Yet these ATMs are all over America—frequently attached to bank branches, whose lines stretch out the door anyway. This seems like a false fear to us.

By , Time, 03/19/2015

MarketMinder's View: We have several major qualms with this piece. First, a market correction and a bear market aren’t the same thing. A correction is a sentiment-driven drop of -10% to -20% that can end as quickly as it arrives—a normal part of bull markets. A bear market (an extended market drop of -20% or more) starts in one of two ways: Investor sentiment reaches a euphoric top and reality can no longer match sky-high expectations. Or, a big, unforeseen negative wipes trillions off the global GDP, killing the bull. Now, could the Fed ending its “easy money” monetary policy cause a market correction? It’s possible—markets can be irrational in the short-term, so anything could roil sentiment and cause a market pullback or correction. But we don’t see a bear market forming because of “tighter” policy in the form of an initial Fed rate hike—that’s a false fear, and false fears are bullish. The first rate hike in a tightening cycle has little history of ending bull markets. We also don’t see much evidence money is “easy,” considering the discount rate is half a percentage point above the fed-funds rate, which is traditionally tight monetary policy. If the fed funds rate rose while the discount rate stayed at 0.75%, one could make a case that’s stimulus, penalizing banks less for circulating Fed liquidity.

By , The Telegraph, 03/19/2015

MarketMinder's View: Well, what he said was that in his opinion, the chance of a rate cut or a rate hike being the BoE’s next move is about equal. Now, he’s just one member of the Monetary Policy Committee, so that doesn’t mean they cut. But considering just how much BoE governor Mark Carney has jawboned about a rate hike—and how sure investors have been that rates would rise this year—this is pretty striking evidence of forward guidance’s shortcomings. People change their minds.

By , Financial Times, 03/19/2015

MarketMinder's View: Indeed. It’s less tech-heavy, valuations aren’t extreme, and the quality of companies included is far higher. It might be back at 2000’s high, but this isn’t a bubble.

By , Financial Times, 03/19/2015

MarketMinder's View: A measured look at the backlog of incomplete shale oil wells, which some wonderfully clever people have dubbed the “fracklog,” and doesn’t that warm your heart? Anyway, as this shows, it’s hard to pinpoint exactly how many wells are stalled, and there are competing implications for oil supply—the fracklog lowers production growth now, but it could boost supply later if higher prices incentivize more production, and some firms have an incentive to complete wells and begin pumping sooner, if they need the revenues to cover upcoming debt payments. Overall, though, there really isn’t anything new here, and the issue is already widely known. Nothing here should make you want to bottom-fish in Energy stocks today.

By , The Yomiuri Shimbun, 03/19/2015

MarketMinder's View: So Japan has been one of the best-performing markets lately, and investors are totally gung-ho. However, we see no evidence anything has fundamentally changed there. Sure, the economy is growing again, but economic reform remains the swing factor—and it isn’t happening? Why? One, Prime Minister Shinzo Abe doesn’t seem keen to take on the entrenched interests opposed to labor-market and other unpopular reforms. Two, he has a finite amount of political capital, and he is spending it on unrelated matters, like his lifelong ambition to restore Japan’s military might and rewrite the constitution’s anti-war clause—a dream he inherited from his grandfather, former PM Nobusuke Kishi. This has been an issue since his first turn as PM, and he has remained distracted since taking office again in 2012. We often say actions speak louder than words. While Abe talks a lot about economic reform, his actions are concentrated in military matters, as described in this insightful article.

By , The Washington Post, 03/19/2015

MarketMinder's View: While the conclusion here is a bridge too far, this is an otherwise good look at why stock buybacks aren’t the scourge some believe they are. They don’t detract from business investment—buybacks and capex have risen hand-in-hand since 2009. There is just one missing piece, which explains how capex could hit all-time highs last year even as shareholder payouts roughly equaled corporate profits: Firms finance a lot of this stuff with debt. That’s a fun factoid the anti-buyback crowd often ignores.

By , The Washington Post, 03/18/2015

MarketMinder's View: We’ve seen a lot of coverage of S&P’s 2014 SPIVA Scorecard, which tracks persistence in mutual fund performance, and like this piece, most of it uses the data to argue active management is inferior to passive (which we are fairly certain isn’t a thing, but that is a topic for another day). But that’s actually beside the point of SPIVA. The point here isn’t that mutual funds rarely beat the market over short or long periods. The point of a persistence report is to track the consistency of individual funds’ returns, and the results simply show that picking a fund based on past performance is rarely productive. Hot funds go cold. Cold funds go hot. To pick a fund—or any active manager, if that’s your cup of tea—you must discover how returns good and bad were generated. What’s the strategy? Investment philosophy? Mandate? Research process? For more, see Cory Forbes’ column, “Predicting Past Performance.”

By , Reuters, 03/18/2015

MarketMinder's View: The Internet is full of politicized opinion pieces (and, um, fashion coverage)  on the UK’s 2015 budget, debating who it helps and hurts among UK citizens and political parties. And we get it, because the budget basically kicks off the campaign. That much was clear in Chancellor George Osborne’s speech and opposition leader Ed Miliband’s response. Lost in the shuffle is that the actual budget is just a series of incremental changes that probably lack meaningful economic impact and create a few winners and losers—along with a side of largely useless long-term forecasts. That’s why we like this factbox, which takes the Sgt. Joe Friday approach. As a political event, the budget is big. For the UK economy and markets, probably not so much.

By , Financial Times, 03/18/2015

MarketMinder's View: Wheeeeeeeeeeeee! But high dividends alone don’t make any category a winning investment—high-dividend stocks lead and lag like all the others. Despite what some momentum-hunting analysts quoted here claim, small cap has plenty of headwinds these days, like the fact this bull market is aging—a time when investors tend to prefer the perceived earnings stability typical of large cap. Also, while the history here is limited, since the late 1990s, it has been normal for Russell 2000 dividends per share to rise as the market cycle progresses. Nothing today is really out of the ordinary, and this doesn’t make small caps uniquely attractive now compared to past cycles.

By , The Telegraph, 03/18/2015

MarketMinder's View: Will savers get tired of rock-bottom interest rates in their bank accounts and revolt en masse? Uh, maybe? Anything’s possible? But really, what people care about is purchasing power, so we have trouble seeing low interest rates coupled with low and occasionally falling prices causing a social firestorm. If high rates were the key to social stability, Brazil wouldn’t be awash in protesters calling for their President’s impeachment right now, angry over sky-high inflation and a stagnating economy (with a hefty slice of corruption, granted). All in all, we’re just a little wary of theories equating low interest rates with “Let them eat cake.” (Which, by the way, Marie Antoinette never said.)

By , The Wall Street Journal, 03/18/2015

MarketMinder's View: And you will see rates remain on hold, Fed people no longer see a need to be patient, they don’t think they’ll hike in April (but you never know), and they’ll look at a lot of data. That’s all nice, and don’t take any of it to the bank. Not just because you can’t deposit a Fed statement in your bank account—we are being metaphorical, people—but because they could change their mind on all this next month. Or hold a conference call next week and hike rates then. None of this is carved in stone.

By , The Wall Street Journal, 03/18/2015

MarketMinder's View: Why not? Because it would give Congress latitude to influence monetary policy, which is no bueno. The Fed is already quite transparent, opening its books to the world real-time, testifying before Congress and releasing detailed minutes of every meeting two weeks after the fact. And releasing transcripts of every meeting, albeit at a five-plus year delay. Though, that’s where this piece falls short, arguing this is a negative and a “cautionary tale” about the dangers of probing the Fed. Yes, it’s clear from transcripts that Fed people do read from a script when they present at meetings, but there is lots of lively debate, too. Like, we’re fairly certain Ben Bernanke and his cohorts weren’t censoring themselves when they spent several pages’ worth of September 2008 meeting transcript arguing over the inclusion of one adverb and then writing the whole thing off as marketing spin. We’ve read all these transcripts, and these guys and gals seems to forget the tape recorder is on plenty. For more, see Elisabeth Dellinger’s column, “Congressmen Attempt to Invite Monetary Error, Fail.”

By , The Telegraph, 03/18/2015

MarketMinder's View: While we’ve long thought the push to “rebalance” the UK’s economy from service toward manufacturing exports is a solution in search of a problem—and the accompanying “unbalanced recovery” fears off-target—this is an otherwise sound look at why strong currencies don’t dent growth and efforts to engineer a weaker exchange rate can do more harm than good. “In the end, the exchange rate is what it is and should be accepted as such. The stronger pound is basically a response to higher demand, and is therefore something very much to be welcomed. Britain has spent many decades attempting to devalue its way out of trouble, and it has never worked.”

By , The Wall Street Journal, 03/18/2015

MarketMinder's View: Well this is fun! In their quarterly report, which we poked a few blurbs ago, the Bank for International Settlements also used 140 years’ worth of newly available data on prices and growth in 38 countries to investigate whether deflation really drags down consumption and growth. Their findings? It doesn’t. While deflation and stagnation/contraction did coincide during the Great Depression and Japan’s lost decade(s), turns out those are the exceptions, not the rule. In every other case, there is a “weak association” at best. Now, this loses steam in the second half, arguing “asset price deflation” foretells bad times, but that’s really just an odd way of acknowledging that bear markets typically precede recessions, which the world has long known. But the first half is a breath of fresh air.

By , EUbusiness, 03/18/2015

MarketMinder's View: So some European nations have signed on to the Asia Infrastructure Investment Bank, a $50 billion institution launched by China, Brazil, Russia and India. Those four presumed the Asian Development Bank, World Bank and IMF weren’t doing enough to boost developing-world growth, so they decided to try their luck. Bully for them. While some European participation might give this a veneer of credibility, we rather doubt an institution run by four governments with significantly more corruption (and less money) than the pre-existing supranationals will have any more success at ending poverty. So the US doesn’t really lose anything by not joining up, contrary to the taunts in China’s state-run press. It doesn’t jeopardize trade with Africa or Asia. This issue is pure pageantry and entirely political.

By , Financial Times, 03/18/2015

MarketMinder's View: While this is surely nice for workers, it hardly means Shinzo Abe’s “Abenomics” agenda is finally bearing fruit. If firms were hiking pay because they had to in order to remain competitive in a free labor market, that would be one thing. But a negotiated, nationwide hike in annual wage negotiations (in which the government participates) reveals more about Japan’s inefficient, byzantine labor code than anything else. If Abenomics were working and Japan were really becoming a global economic dynamo, this article probably wouldn’t exist.

By , China Daily, 03/18/2015

MarketMinder's View: Continuing its efforts to establish transparent municipal bond markets, China’s government announced its new guidelines for general obligation bonds. The plan, if it goes according to plan, will give markets more insight into municipal finances—and give regional governments more direct accountability to investors. It probably won’t ease jitters over China’s (widely discussed) pile of opaque, shadow-financed local government debt, but it should foster a gradual transition to a more sustainable model, allowing reality to continue beating dour expectations.

By , The New Yorker, 03/17/2015

MarketMinder's View: Short selling (when investors borrow an asset to sell it in hopes of buying it again for a lower price) often gets a bad rap—particularly when markets plummet, as the alleged “bear-raiders” are pilloried for driving markets down. But as this piece shows, short selling has a long history of making markets work better, not worse:  “All kinds of forces conspire to push stocks higher: investor confidence, corporate puffery, and Wall Street’s inherent bullish bias. Shorting helps counterbalance this, and it contributes to the diversity of opinion that healthy markets require. In 2007, a comprehensive study of markets around the world found that ones where short selling was legal and common were more efficient than ones where it was not. And a 2012 study concluded simply, ‘Stock prices are more accurate when short sellers are more active.’”

By , CNBC, 03/17/2015

MarketMinder's View: Why? Because the “extraordinary measures” to fund government without issuing new debt are set to expire around when the current spending bill expires, September 30. Which, call us crazy, sounds like a repeat of 2013, when the two coincided and the government shut down. So the allegedly worse outcome this time would be … the same? And didn’t that event occur during one of the S&P’s best years in recent memory? Are we nuts, or does this all seem bullish? Also, who knows whether this even becomes so contentious. Congress isn’t split this time, and while we don’t underestimate any party’s penchant for intra-party bickering, the scenario in this article isn’t a foregone conclusion.  And, public service announcement, none of this will result in a default. See our commentary from 2013 for more—little has changed since then.  

By , The Washington Post, 03/17/2015

MarketMinder's View: Setting aside the issue of whether investment products are tied to the Dow Jones Industrial Average—which is largely beyond the point—this is an easy-to-follow explanation of why being a price-weighted index makes the Dow so wackadoodle and an inaccurate gauge of corporate America. For one, it requires a lot of mathematic gymnastics to prevent stock splits and changing components from impacting the average. Two, “To give you an extreme example, for the Dow a $1 move by [Company A’s] 331 million shares is equal to a $1 move in [Company B’s] 10.04 billion shares. If [Company B] rises a buck and [Company A] falls a buck, the S&P, which measures stock market value, would show a $9.7 billion gain. The Dow, by contrast, would be flat.”  

By , Bloomberg, 03/17/2015

MarketMinder's View: The scramble includes rolling over €1.6 billion in short-term debt, going after delinquent tax payments, transferring bank bailout money to the state, and requiring pension funds and public entities to buy Greek bonds. The latter three go before Parliament tomorrow, and the last one is particularly…um…interesting. Greece’s creditors called the package a nonstarter, and they didn’t mince words, which implies these plans don’t meet the terms agreed to last month. But negotiations have to start somewhere, right? Also, we have to wonder if sticking pensioners with Greek bonds will really endear voters and cement Syriza’s popularity—and how it will muddy debt restructuring talks with the ECB and eurozone leaders.  

By , The New York Times, 03/17/2015

MarketMinder's View: We’ve occasionally highlighted Chinese leaders’ often conflicting goals of injecting more market forces into their economy and ensuring their country continues growing at a decent clip. In this episode, a leading property developer—struggling amid the plunge in property sales and at risk of failure—has just received $16 billion in emergency funds from a few state-owned banks, which we are inclined to call a bailout. This highlights a couple things. One, China’s shift to a more market-driven economy—which will require the occasional over-extended financial institution to fail—will be a long, gradual process. Two, Chinese leaders remain dedicated to limiting the fallout of the troubled property sector, whose problems are very widely known. Nothing here means a hard landing is likely. For more on this topic, see Joseph Wei’s commentary, “China’s Balancing Act.”

By , The Wall Street Journal, 03/17/2015

MarketMinder's View: The argument here doesn’t amount to very much, and the evidence hardly suggests investors are girding en masse. One data point in the Exhibit shows some bets (Eurodollar) on a rate hike are rising in March, although they are far below levels seen in mid-2014. A rate hike did not follow. Others cited here, specifically, fed funds futures, are down from a month ago. The rest of this is odd, backwards stuff like the notion foreign investors are flocking to Treasurys because the dollar is strong, when the dollar is strong because folks are flocking to Treasurys. (Investors tend to gravitate towards higher yield.) And then it closes with unfounded speculation about the pace at which the Fed will hike when it ultimately does start hiking. Folks, all of this is unknowable, and it’s largely beside the point when you consider the first rate hike in a tightening cycle has little history of ending bull markets.

By , Financial Times, 03/17/2015

MarketMinder's View: So this is all largely anecdotal and not terribly meaningful for stocks globally, but it is a fun look at how Ireland’s recovery is becoming more broad-based. As EU nations emerge from recession, we’ve seen occasional chatter about city centers (Dublin and London in particular) supposedly leaving the rest of their respective countries behind. What’s going on in Galway—the city highlighted in this article—isn’t unlike improvements in Wales, Scotland, many of Spain’s regions, Germany outside Frankfurt and Berlin and so on. For all the talk of deflationary depression, large swaths of Europe are in far better shape than most perceive.

By , The New York Times, 03/17/2015

MarketMinder's View: In the latest Fed-related Emerging Markets ghost story, some supranational organizations are concerned over how the stronger dollar will impact Emerging Markets governments and countries with dollar-denominated debt—all else equal, a stronger dollar makes debt service more expensive. However, we don’t see much evidence this issue is anywhere near as big as it’s made out to be. One, the argument here appears to play fast and loose with data points: The article is about Emerging Markets dollar debt, yet the cited figure is for total global debt excluding the US. That includes Europe, Japan, Canada, Australia and developed Asia/Pacific nations, which have no small amount of dollar-denominated debt. Two, most Emerging Markets nations have huge piles of dollars in their foreign exchange reserves for this very reason. Three, it seems odd to assume companies don’t have dollar reserve piles as a hedge. Korean firms, for example, are well-known to have massive reserves in both foreign and local currency.

By , The Wall Street Journal, 03/17/2015

MarketMinder's View: This piece isn’t perfect, but it does highlight a huge risk of quantitative easing (QE) in Europe, and it’s one Japan is learning the hard way. Boosting inflation for inflation’s sake does no good if wages aren’t rising accordingly. If wages stagnate while prices rise, as happened in Japan, it means real wages fall, making households worse off and countering the overall goal of QE (faster, broader growth). Now, in Japan, there were external factors, like last April’s sales tax hike. But the broader point—that firms might not be keen to pass their (in all likelihood temporary) export profit gains from the weaker currency on to workers—is as true in the eurozone as it was in Japan. This is overall another reason QE isn’t a net benefit.

By , The New York Times, 03/16/2015

MarketMinder's View: Well, we certainly agree with the message here: Being well-diversified means you’re likely going to dislike at least a part of your portfolio. But like it or not, global diversification increases your ability to manage risks like political risk and currency fluctuations. Diversifying by sector and country will also help you manage specific risks—for example, the risk Energy stocks face from falling oil prices, being so brutally illustrated now. For more, see our 12/15/2014 commentary, “Hey, Hey USA Stocks All the Way?

By , Bloomberg, 03/16/2015

MarketMinder's View: Look folks, volatility didn’t go anywhere—it’s, you know, volatile. It doesn’t announce when it comes and goes on a predictable schedule. This notion that the Fed’s action overpowered typically volatile markets is a bit off base, when you consider we had quantitative easing in 2010, 2011 and 2012, and we had corrections (short, sharp, sentiment-driven drops of -10% or greater) in each year. Sure, markets could be bumpy in the short-term due to uncertainty about Fed monetary policy, as they were when former Fed chair Ben Bernanke telegraphed a “taper” of the Fed’s quantitative easing program in May 2013. But markets could be volatile for any number of reasons—or even none at all. And taper terror amounted to about a -5% down move over a couple weeks—we’ve seen -5% moves on many occasions in this bull market. We don’t think there is anything about this bull market that is particularly abnormal (whatever that means).

By , The Wall Street Journal, 03/16/2015

MarketMinder's View: As economies get more and more globally integrated—as they are today—currency strength/weakness becomes less of a factor. Yes, a weaker euro may make exported goods cheaper, but imports become more expensive—the effect is largely zero sum. As the economist quoted in this piece (Edward Lazear) put it, “currency depreciation ‘doesn’t affect trade very much.’ Economic models that look at the determinants of trade point to geographical distance, the income of importing countries, and productivity of exporting countries as the strongest drivers of trade, Mr. Lazear said. ‘The fourth, and a distant fourth, is the currency,’ he said.”

By , The Washington Post, 03/16/2015

MarketMinder's View: We agree something is weird here, namely, the notion the US economy is “messed up” justifying zero percent interest rates. Some questions: Does GDP being well beyond its pre-recession peak qualify as “messed up”? How about growth that topped the postwar average in four of the last six quarters? Or surging demand as measured by business investment, consumer spending and real estate investment? What of unemployment at below-average rates? How about S&P 500 corporate earnings that stand at an all-time high? Yeah, we get it—the eurozone hiked too early in 2011. But even they have grown seven straight quarters. And if you want to argue Japan has been too tight with interest rate policy, well, we don’t know where to begin with that one. Maybe just look at this chart? Or this one? (Japan is the blue line folks—the trouble ain’t lofty interest rates.)

By , The Wall Street Journal, 03/16/2015

MarketMinder's View: Irish GDP grew 4.8% in 2014, a solid clip by virtually any developed economy’s standard and a trivial, backward-looking factoid we offer as merely more evidence that the eurozone is not, in fact, mired in a deflationary depression. Enjoy. Oh, and it is also St. Patrick’s Day tomorrow, a holiday we rather enjoy.

By , The Washington Post, 03/16/2015

MarketMinder's View: “The fear of technological job loss is real but, I suspect, exaggerated, because it occurs after a period when deep employment losses for other reasons - the financial crisis and Great Recession - have made people extra sensitive to any threat to their livelihoods. In this climate, the specter of hordes of job-destroying robots seems realistic. History suggests skepticism; strong job creation (11.5 million since 2010) is a real-world rebuttal.” No, not everyone will uniformly benefit from technological advance—some workers will be displaced. Some entire industries, maybe. But this has always been true and doesn’t suggest the need for new fear of robots and other technologies today. In any economy, the unfortunate truth is the greatest innovation in the world will cause economic harm to some. For example, if we cured cancer, the economic and societal gain would be enormous. But some people employed in the medical support industry would likely have to find new work.

By , Financial Times, 03/16/2015

MarketMinder's View: Here is an interesting update about Spain, which has gone from one of the eurozone’s economic laggards to one of its leaders. We do have some quibbles: Falling oil prices and the weaker euro are beneficial for Spain, but probably not as much as this piece presumes. However, it does appear Spain’s labor law reforms are helping boost its private sector’s competitiveness. That’s a benefit to the country’s long-term economic prospects—and a signal of the influence such economic reforms can have.     

By , The Wall Street Journal, 03/16/2015

MarketMinder's View: So this is all talk at this point, but how the debate over Chinese steel “dumping” plays out is worth watching. Some protectionist moves of a very minor nature have popped up in places like Aussie and Singaporean real estate taxes targeting foreign investors, and these rumblings have the potential for a bigger measure. As ever, we think tariffs are a bad idea, risking a response from an important trade partner in an increasingly globalized world.

By , Associated Press and Fox News, 03/13/2015

MarketMinder's View: Sunday, the US debt ceiling returns from a year-long hiatus, and the misperceptions about its impact and potential remedies are already flowing. This article does a poor job of assessing the debt limit’s actual effect, quoting wrongheaded statements from politicians on both sides of the aisle. Namely, Senate Majority Leader Mitch McConnell’s (R-KY) suggestion failing to raise the debt ceiling would trigger a default and House Minority Leader Nancy Pelosi’s (D-CA) suggestion that failure to prevent a “catastrophic default” … “would have savage impacts on American families.” Folks, the debt ceiling is a purely political device that has long been used to politick and posture. The likelihood of a default is basically zero, when you consider the government has easily enough tax revenue to cover interest payments on the debt and is required to prioritize debt payments first based on the government’s interpretation of the 14th Amendment’s public debt clause. Don’t believe the hype. Besides, the likelihood they don’t lift the ceiling is basically nil. In our view, this one likely plays out one of two ways: A new limit is installed either quietly or noisily. The debt ceiling’s economic and market impact is tiny.

By , The New York Times, 03/13/2015

MarketMinder's View: So here we are to believe the 18%-ish of global GDP that is the eurozone is going to drag down the 25%-ish that is America by exporting their alleged economic woes to us via weakening their currency relative to the dollar. Now, never mind that both regions are growing. And never mind that there is no chance Greece will send its byzantine labor laws and bloated public sector on a transatlantic voyage. This all rests on the theory of export competitiveness—that a cheaper currency drives better growth. But in a globalized world, few products are produced 100% domestically with no imported components. A strong dollar makes businesses’ costs decline, helping offset the relative difference in export prices. Is that too theoretical for you? Ok. Try this: In the 1990s, the dollar was strong from 1995 – 2000. We had a boom led by US multinationals. Why would it necessarily be different now?

By , The Telegraph, 03/13/2015

MarketMinder's View: Ok, Greek posturing and debate continues, which is to be expected, in our view. Here the new fear is an “accidental Greek exit from the euro”—which German Finance Minister Wolfgang Schaeuble labeled a “Grexident.” This is extremely unlikely, as about three-quarters of Greek citizens support the euro and the party in charge is pro-euro (anti-austerity, though). In all likelihood here is what you get: Sound, fury and a eurozone that still includes Greece.

By , Bloomberg, 03/13/2015

MarketMinder's View: The IEA is forecasting oil demand will continue rising in 2015—and by 75,000 more barrels per day than their previous forecast—which may seem bullish for beaten-down Energy firms’ outlooks. Except supply is rising faster, and the reason oil prices have cratered in the last six months is surging supply, particularly in the US. Not that we would take an IEA forecast to the bank, but you don’t need to: Actual data show US production is still rising and inventories are up massively of late.   

By , Bloomberg, 03/13/2015

MarketMinder's View: Related to the previous story, US oil CEOs are noticing that West Texas Intermediate crude oil—the primary US benchmark—is selling for more than $10 less per barrel than the global benchmark. Those CEOs want to be able to sell the US oil at those higher international prices, but they’d have to export it to do that. Which law dating back to the 1970s’ oil crisis prohibits—hence the CEOs lobbying the Obama Administration to change course. This is all squarely in the “still just talk” stage presently, but it’s an interesting story worth following nonetheless.

By , Financial Times, 03/13/2015

MarketMinder's View: So this article claims the eurozone is supplanting Japan as the model for economic malaise, based on the fact it has even lower interest rates and some negative consumer price index (CPI) readings lately. However, those low CPI readings are driven largely by falling energy prices, which aren’t a negative for the eurozone. And the bloc (which has grown seven straight quarters) is a combination of 19 nations. A free-trade and movement of people combination, which is a stark contrast to closed, protectionist Japan. In addition, not all those 19 eurozone nations are struggling to compete.

By , Bloomberg, 03/13/2015

MarketMinder's View: This isn’t what the Fed will do at all. The entire article is about what the Fed might say, which frequently doesn’t overlap with their actions. What’s more, speculating about the Fed’s actions is a fruitless endeavor for investors. For more, see Todd Bliman’s column, “What Does This Messy Chart Say About Rate Hike Fears?

By , Reuters, 03/13/2015

MarketMinder's View: Well, this article places too much confidence in regulatory examinations’ ability to identify in advance which firms are at risk and which are not, and it veers a bit too far into bank-bashing territory for our tastes. But, positively, it does highlight how arbitrary “qualitative” examinations can be—and the fact banks seemingly face them from myriad sources (in this case, both the Fed and FDIC). While in the near term, we doubt this is terribly problematic, we’d suggest it doesn’t take that much creativity to see how regulators could use these arbitrary powers to enforce anything they want—including ill-conceived regulations that wreak unintended havoc. For more, see Elisabeth Dellinger’s column, “Congressmen Attempt to Invite Monetary Error, Fail.”

By , MarketWatch, 03/12/2015

MarketMinder's View: It’s true small cap value stocks have outperformed over the long run, but that outperformance is concentrated in a handful of really, really great years. Small cap typically leads big early in bull markets—they get over-punished in the bear market, so they bounce highest. As bull markets age, that sentiment-driven pop fizzles, and larger stocks usually lead—and large caps lead the majority of the time. This is easy to see if you view annual returns over these 87 years. In the first year of the 13 bull markets that began since 1926, small cap outperformed large cap by 26.3 percentage points—huge. But if you exclude those 13 years, in the other 74, large cap outperformed by over one percentage point (annualized). To do great with small cap you must be either extraordinarily disciplined, hanging on through the worst bear markets so you can capture that bounce, or the world’s greatest market-timer. We think folks are just best off not adhering rigidly to any one style—everything has its time to shine. For more, see Elisabeth Dellinger’s commentary, “The Myth of Small Cap’s Superiority.”

By , USA Today , 03/12/2015

MarketMinder's View: Retail sales fell -0.6% m/m, though they fell just -0.1% if you exclude volatile auto sales. Predictably, some are lamenting the fact consumers have been “slow to spend” their gasoline savings, but this report doesn’t give much insight on consumers’ behavior. It doesn’t include service spending, which comprises most of total household spending. Also, as this piece points out, this data point is skewed heavily by nasty winter weather in much of the US.

By , The Wall Street Journal, 03/12/2015

MarketMinder's View: After some last-minute alterations to their capital plans, 28 of the 31 largest US bank holding companies got the green light to pay dividends and buy back shares, one got a yellow light and two got red lights—as usual, for undisclosed “qualitative” reasons. One of them failed even though it passed last week’s quantitative test with a 35% Tier 1 capital ratio under the “adverse scenario,” so we can see why this will “stoke criticism that the Fed’s process is too opaque and designed to find shortfalls at banks rather than ensuring they can build up the necessary capital to absorb losses.” That said, while these stress tests are a headache for banks, banks have also figured out how to pass them while goosing loan growth and staying profitable, so they aren’t a big headwind for Financials.

By , The Washington Post, 03/12/2015

MarketMinder's View: Philosophically, this mostly makes sense. Well-run, profitable companies tend to be places people enjoy working. But looking at the companies in question, the alleged connection between workplace satisfaction and stock outperformance doesn’t really hold up. Yes, we know they crunched the numbers, but these companies are pretty concentrated in Tech, Consumer Discretionary, Consumer Staples and Health Care, all of which have done fairly well during the last six years—which is too short to draw any meaningful conclusions anyway. That sector skew probably bears most of the responsibility for the outperformance of this list. In short, we wouldn’t recommend investing in “best place to work” recommendations, rebalancing it annually and calling it a day.

By , CNN Money, 03/12/2015

MarketMinder's View: We’re pretty ambivalent about this one. On the one hand, it shows why fears a rate hike will kill this bull market are overwrought—the US is growing solidly enough to handle rates north of zero, and the stronger dollar creates winners as well as losers. On the other hand, it still rests on the underlying assumption rate hikes are normally inherently bad, and the only reason we’re spared this time is because growth looks especially strong and the Fed is so “transparent” that there is no chance a rate hike can surprise anyone—implying stocks would suffer otherwise. Yet there is zero history of the first rate hike in a tightening cycle ending a bull market. There is also zero evidence this bull market is “addicted” to easy monetary policy—actually, there is a mountain of evidence suggesting policy was tighter than usual this time around.

By , The Telegraph, 03/12/2015

MarketMinder's View: After the UK government reformed pension tax rules to remove the de facto requirement for most retiring Brits to buy an annuity, there was some blowback from folks who’d already been forced into annuities years ago and wanted out—many didn’t appreciate that the benefits would go to new retirees only. So the government is mulling solutions, and one appears to be creating a secondary market for annuities. As in you sell your annuity to a business who pays a lump sum in return, then collects the payments you would have received. It’s an interesting idea, and it would theoretically benefit anyone who wanted more financial flexibility and actual ownership of their retirement savings. But those who purchase annuities will probably do so only for a profit, paying a lump sum that’s lower than the total expected lifetime value of the annuity payments. No free lunch. Anyway, if you’re impacted here, and this becomes a thing, make sure you consider all the pros and cons, costs and benefits, and all other potential alternatives.

By , MarketWatch, 03/12/2015

MarketMinder's View: Why? Because they supposedly inflate earnings-per-share, they steal capital from other endeavors (like dividends and capex) and even though they’re intended to boost stock prices, bought-back stocks sometimes fall, too. Look, we’ll buy the broader thesis that a stock buyback isn’t always a wise financial decision—sometimes, CEOs make unwise decisions. But the evidence falls flat. Yes, buybacks boost earnings-per-share, but that isn’t the only reason earnings are up. Total S&P 500 net income has risen 19 straight quarters through Q4. Total revenues are rising, too. As for capital thievery, by comparing the total amount spent on buybacks with S&P 500 firms’ total earnings, this ignores the vast quantity of debt-financed buybacks. Capex is rising, too. And given companies have a fiduciary duty to shareholders, it’s questionable whether they’d believe paying a special dividend is better for most than buying back shares, considering dividends are often taxed at ordinary income rates. Finally, by cherry-picking five companies whose stocks fell after buybacks, this piece is relying on a smidge of anecdotal evidence and ignores the obvious counterfactual: Would these stocks have fallen further absent buybacks? All else equal, buybacks shrink supply. That is generally good for prices. Not a scam.

By , Financial Times, 03/12/2015

MarketMinder's View: Here is Exhibit 4,320 in the mountain of evidence that sentiment toward Japan is too high. It argues Prime Minister Shinzo Abe’s economic revitalization plan is working even without structural reform because—drumroll—“disinflation may be a prelude to demand-led inflation.” As in weak CPI plus wage hikes will cause real wages to rise for the first time in years, driving consumption and creating a virtuous cycle of economic growth and rising prices. But this ignores the elephant in the room, which is that wage hikes are largely coming because of government pressure, not because companies are suddenly free and efficient. This is a byzantine, broken system. It might grow in the short run, but it is structurally incapable of meeting the very high expectations Japanese stocks have priced in since Abe became PM in late 2012.

By , The Telegraph, 03/12/2015

MarketMinder's View: This nifty study illustrates why basing fears of economic weakness on headline employment data is a fool’s errand more often than not. In addition to being a late-lagging indicator, broad employment trends just don’t tell you much. In this case, UK pundits have puzzled for years over the rise in self-employment, often arguing it was a sign of economic weakness, businesses not hiring and a recovery about to wither. Yet, it turns out it was really just the over-65 set starting their own businesses after retiring, taking advantage of longer life expectancy, technological advancement and an overall thriving economy. That casts the last few years’ job gains in a different light. Not so detached from reality after all.

By , ValueWalk, 03/11/2015

MarketMinder's View: Here is a fact-packed, concise explanation of why pundits’ incessant attempts to call a bottom in oil prices’ slide are so foolhardy. There are simply too many variables, some of which are skewed by (unpredictable) human influence, and efficiency gains make once-loved indicators like oil rig-count antiquated relics with little predictive power in the shale era. All we know is production is still growing faster than demand. As long as that continues, prices probably won’t shoot radically higher.

By , The Washington Post, 03/11/2015

MarketMinder's View: So this is all very political and sociological, and depending on your views of the Consumer Financial Protection Bureau (CFPB) and its leaders and champions, you will probably have some very strong opinions. We suggest you put all that aside and read this with objective eyes, because the long-awaited revelation of the CFPB’s opinion on consumer class action lawsuits and arbitration proceedings could have consequences downstream. The CFPB clearly favors lawsuits, which is their opinion, and everyone is entitled to one of those! And for now, it’s all just sociology. But the CFPB is a powerful agency, and if its opinion bleeds into regulation, potentially with the abolition of arbitration clauses in consumer financial firms’ contracts (think credit cards and bank accounts), it could impact banks’ finances. Legal and regulatory costs would rise, as public court proceedings are typically costlier than arbitration—administrative expenses are higher, and the incentives to settle are greater. (Which raises the question of whether those incentives are skewing the data, making it appear justice is weaker in the arbitration system, but that’s all sociology.) That would probably make banks even more risk averse than they already are, and risk-averse banks are less eager to do all the things banks traditionally do to support our economy, like lend. This is all very up in the air and could take ages to sort out, but it is a potential risk.

By , The Telegraph, 03/11/2015

MarketMinder's View: And Germany says “Uh, no.” Which is basically how this debate over the repayment—with interest and inflation adjustments—of Greece’s forced loan to the Nazis during WWII has gone for months, the only difference now being some grandstanding in Greece’s Parliament over creating a “reparations committee.” That book was closed decades ago, by all the Allies, and the likelihood it reopens rounds to zero. As for the whole asset seizure thing, that’s just politicking—heck, the favorable court ruling cited as grounds for asset seizure by Greek Justice Minister Nikos Paraskevopoulos dates to 2000, has been contested and applies to property in one small Northern Greece village. Oh and the ruling states that the money would go to relatives of the deceased, not the government. Such threats probably play well with Greek voters who were put off by their anti-austerity government’s many compromises and crossed red lines, but does anyone think Greece would really just seize its biggest creditor’s assets?

By , The Wall Street Journal, 03/11/2015

MarketMinder's View: This probably overstates that impact of quantitative easing (QE) on Japanese stocks, which still don’t look great in our view. Yes, unlike other QEing central banks, the BoJ is buying stocks. So is Japan’s giant government pension fund. But the BoJ’s planned annual purchases total 0.7% of the MSCI Japan’s investable market cap. The pension fund is set to buy 2.5% over some undetermined period. This is tiny, folks. Both are also very well-known, making it exceedingly unlikely markets haven’t discounted the impact. Yes, they’re a source of demand, but for every buyer there is a seller. Plus, for all the talk of these institutions blunting volatility, Japanese have underperformed the world when measured in US dollars since the BoJ started buying. Do yourself a favor and don’t let feel-good pieces like this article drive you headlong into Japanese stocks—the best opportunities likely remain elsewhere.

By , Financial Times, 03/11/2015

MarketMinder's View: Like his regional Fed bank counterparts Jeff Lacker and Richard Fisher, St. Louis Fed head James Bullard is jawboning about rate hikes. Some say this is all part of an inside conspiracy to prep markets, but who knows, and even if that’s true, it doesn’t mean the Fed automatically hikes in June, because they can always change their minds. That’s what people do, and they are people, we think. But all that aside, the broader argument makes sense: With a bustling economy among the world’s strongest, the US can probably handle rates somewhere north of zero. For more, see Todd Bliman’s column on Equities.com, “Fed People Say America Can Take a (Rate) Hike.”

By , The New York Times, 03/11/2015

MarketMinder's View: More like Russia, Brazil and Turkey lose their luster as their very long-running problems become more acute, and raise your hand if you are surprised by that. Anyone? Bueller? Look, we aren’t arguing everything is rosy in Emerging Markets. Greece is an Emerging Market, folks. But it’s also shortsighted to assume the entire category has severe issues just because four countries are struggling. This piece even admits as much, highlighting positive developments in India, Taiwan and the Philippines. We’d add relative strength in Mexico and South Korea to that list, among others. Emerging Markets haven’t moved like one big bloc for over 15 years. Like any broad category, it will have risks and opportunities. The risks get more ink, but the opportunities are plenty if you’re interested in that category, where sentiment is overall too dour.

By , Reuters, 03/11/2015

MarketMinder's View: They also got over half a billion in emergency funding from the ESM, giving them $1.8 billion to pay the bills and roll over short-term financing over the next few weeks. Fears of imminent default are running high, but Greece has always been great at finding money between the sofa cushions. Right now, officials are apparently rooting around in the big cushy sofas that are Greece’s national pension funds and state-owned assets. Hey! Maybe that’s why they’re so opposed to privatization! Anyway, these are all the same funding theatrics we saw in 2011 and 2012. They didn’t drive Greece out of the euro then and probably won’t now—nothing has fundamentally changed.

By , Financial Times, 03/11/2015

MarketMinder's View: Yes, China’s January/February economic data slowed from last year (the months are combined to remove Lunar New Year skew), but some perspective in order. We’re still talking growth of 13.9% y/y in fixed asset investment, 6.8% y/y in industrial production and 10.7% in retail sales. In an economy whose leaders hope it will slow from 7.4% GDP growth to 7% this year. Property investment is falling, sure, but that isn’t new, and China has already proven capable of growing swiftly anyway. Is the country problem-free? Heck no. There are supply and capacity gluts galore, as you’d expect in a command economy that lacks market-driven cost controls and efficiency gains. But these issues are very widely known, as is slowing growth, and China still contributes a ton to global GDP at its slower growth rates. That’s what ultimately matters for global investors.

By , The Washington Post, 03/11/2015

MarketMinder's View: Exchange-rate parity is the currency world’s equivalent of a round number—an arbitrary milestone with trumped up significance that actually doesn’t mean anything. Ok that’s not entirely true, all this means something for Americans buying things in euros and eurozone people trying to buy things in dollars, but other than that! Currency swings don’t predict market returns or drive (or impede) economic growth. They create winners and losers, and often the two offset. Which means the US isn’t losing a currency war here. Heck, US consumers benefit, because imported goods are cheaper. Manufacturers see plusses and minuses, as their imported components get cheaper, helping offset the stronger dollar’s impact on exports. They handled all that just fine in the late 1990s, when the dollar was stronger than it is today relative to a broad basket of currencies. Which didn’t include the euro, because the euro was not a thing until 1999, making most of this discussion moot. How “historic” can something really be if we’re talking about a 16-year timeframe? Actually, just over a 12-year timeframe when you figure parity was last seen in December 2002.

By , The Telegraph, 03/11/2015

MarketMinder's View: Would UK folks benefit from more competition in banking? Probably! Choice is bound to be limited when four banks control 85% of the market. But we have a hard time envisioning bank breakups restoring competition with zero collateral damage. The slower solution—reducing barriers to entry—is probably more beneficial over time. That said, this debate is probably just academic, considering the UK parliament is heavily gridlocked and probably stays that way after May’s election. Reports like this might weigh on sentiment toward UK Financials, but the industry doesn’t appear to actually have an axe over its head.

By , The Wall Street Journal, 03/11/2015

MarketMinder's View: Actually, these data don’t explain anything at all. You can’t gauge whether share buybacks are good or bad for companies based on the average amount spent on buybacks and capex as a percentage of operating cash flow across every S&P 500 firm invaded by activist investors over a 10-year period. Nor can you even make the claim capex is down, as this seemingly tries to do, because this graph doesn’t even give dollar figures. These are just some overly smoothed random numbers trying to support a straw-man debate. Last we checked, buybacks and capex don’t have to be opposing forces. They can occur simultaneously. Whether either is good or bad is company-specific and depends on the long-term return on both. Firms can make poor decisions on both as easily as they can make wise decisions.

By , Bloomberg, 03/10/2015

MarketMinder's View: Indeed it isn’t—it’s normal for S&P 500 earnings and broader US corporate profits to fall as bull markets mature. It doesn’t mean companies are weakening. It just means year-over-year comparisons are harder to beat. It also isn’t irrational for investors to continue buying stocks under these conditions. It’s not like companies are hemorrhaging cash and racking up losses. Investors can quite rationally believe profits will resume growing as companies find efficiency gains and grow off more favorable bases. That’s all totally normal for markets to price in as investors gain confidence. Plus, this analysis appears to be based on gross operating profit margins, not earnings after tax and accounting gimmicks. It’s normal for gross margins to become more variable late in a bull—that’s when investors seek out the beefiest and bid them up, believing (correctly, usually) that’s where most earnings stability comes from. That’s usually a big tailwind for the world’s biggest companies as a bull matures. For more, see today’s commentary, “Earnings Slip on Oil, and Other Obvious Puns.”

By , US News, 03/10/2015

MarketMinder's View: It’s baaaaaaaaaaaaaaack. One year ago, Congress suspended the debt ceiling, kindly giving us a break from the related theatrics during an election year. It will be reinstated on March 16, when it will be set at whatever level gross public debt is that day. Which means no more new borrowing unless Congress raises or suspends the limit again, requiring the Treasury to use “extraordinary measures” to keep paying the bills if lawmakers dither. While Congress isn’t split, unlike the last few debt-ceiling dust-ups, it is also not a foregone conclusion they pass an increase immediately—intra-party bickering is a thing, too. Congressional leaders are already warning it could take some time. But, that doesn’t mean the US “risks default.” Extraordinary measures (e.g., delaying pension contributions and other less-timely obligations) can last quite a while, and the Supreme Court interpreted the 14th Amendment as requiring the Treasury to pay debt interest—something the nonpartisan Government Accountability Office likes to remind officials of during these debates. Interest payments are fairly easy to prioritize, considering they are about 7.8% of tax revenue. If you’d like to steel yourself for potential debt-ceiling screaming, check out our coverage from 2013’s debt ceiling fight, “Defaulty Logic,” “Tick Tick Boom?,” and “Detonate Your Debt-Ceiling Fears.”  

By , The Wall Street Journal, 03/10/2015

MarketMinder's View: Here is an excellent, insightful look at how the Fed’s stress tests have snowballed from a confidence-building exercise in 2009 to the be-all, end-all of the Fed’s regulatory power today. It is increasingly clear these exercises, which govern whether banks can return capital to shareholders, have supplanted traditional capital requirements as the Fed’s primary big-bank regulatory tool. If this all made banks safer, that would be one thing, but there isn’t much evidence this is the case—the exercises are too opaque and arbitrary for anyone to know whether they much resemble real-world problems. They also, as this shows, impede banks’ traditional businesses by incentivizing risk management over lending, and they’ve forced banks to staff-up their regulatory and compliance units—all in an effort to figure out how to comply with the Fed’s unknown “qualitative” measures of bank solvency. Transparency is a beautiful thing, folks, and these exercises aren’t. It just isn’t clear any of this is a net benefit for investors. Markets are used to it—that’s the silver lining—but don’t be fooled into believing any of this makes for a better banking system.

By , The Fiscal Times, 03/10/2015

MarketMinder's View: In our experience, when an argument is this complicated, it has some holes. This argument has some holes. It claims markets are down because a killer jobs report means labor markets are tight, cueing up a rate hike and rising wages, which will in turn hike up businesses’ costs, drive down earnings and whack stock buybacks, siphoning the bull market’s fuel. As evidence, it offers a general statement that strong wage growth typically coincides with “a collapse in profit growth.” But there is a late-1990s sized hole in this claim. As in, wages rose, earnings rose, and stocks rose. As for buybacks, while they aren’t the only thing driving this bull, they don’t automatically stop when rates rise. Companies look at both sides of the equation, the investment and the return. If the return is worth their while—if the earnings yield exceeds the interest cost—then there is no reason why they wouldn’t keep at it.

By , The Financial Times, 03/10/2015

MarketMinder's View: This piece is less about stimulus and more about China’s efforts to rein in shadow-bank government financing. Officials are raising the caps on municipal bond issuance, giving regional governments a more transparent source of financing. This move should also offset some of those Chinese fiscal cliff concerns that surfaced last week, when the official budget included a big gap in public financing. It also lets local governments roll shadow-bank debt into something legit, which probably carries lower interest rates. And, yes, it fosters more infrastructure spending, easing fears about a collapse in fixed investment. Once again, rumors of China’s hard landing have been greatly exaggerated.

By , The Telegraph, 03/10/2015

MarketMinder's View: In breaking news from 2012, Greece’s government is threatening to hold a referendum on austerity—we mean the structural reform plans attached to last month’s bailout extension agreement. The rhetoric and brinksmanship back then weren’t any tougher than they are today, and the incentives to compromise remain strong on both sides. These politicians will probably continue talking a big game, spooking investors with their “hazardous” comments, but they’ve long since proven this is all theater. They’ve all bent, rolled over and crossed red lines before and will probably do so again.

By , The Wall Street Journal, 03/10/2015

MarketMinder's View: And the number of quits—workers voluntarily leaving jobs—rose to 2.8 million, a sign workers are gaining confidence in labor markets and the prospect of better jobs and better pay elsewhere. While employment is a late-lagging indicator, this is a nice confirmation of recent growth, countering fears of a slowdown as last year closed.

By , Financial Times, 03/10/2015

MarketMinder's View: China’s consumer price index rebounded in February, but the producer price index (PPI)—wholesale inflation—plunged 4.8% y/y, deteriorating from January’s -4.3% y/y. PPI is considered a leading indicator of consumer prices, so voila, deflation dread. But said dread ignores why manufacturers’ prices are down: commodity prices! Chinese manufacturers’ inputs are far more commodity heavy than developed-world manufacturers’, so China’s PPI is far more sensitive to copper, iron ore, steel and nickel. All of which are down big, compounding falling oil prices. This is the same sort of “good” deflation in the US and UK. Not evidence of crashing demand or money supply.

By , Euromoney, 03/10/2015

MarketMinder's View: The Basel III global bank capital standards haven’t even taken effect yet, and regulators are already mulling over a potential Basel IV—this time focused on synchronizing the mechanism for risk-weighting assets on banks’ balance sheets. Heaven help us if that includes some sort of global mark-to-market accounting standard or some other pro-cyclical troublemaker, as some bank execs cited here fear. In theory, creating a more transparent global banking system is a fine thing. But regulators have a very long history of missing the target. As this points out, Basel I wasn’t “good enough,” so they made Basel II, which was deficient, so Basel III, and now maybe this. Even though the world’s financial system functioned just fine for decades before any of this global coordination began. Much of this is a solution in search of a problem, though on the bright side, changes usually happen glacially, giving banks plenty of time to adapt pre-emptively and markets ample time to discount the changes and discover potential unintended consequences.

By , Associated Press, 03/09/2015

MarketMinder's View: We are pretty ambivalent about this take on the bull market’s sixth birthday. It shares some interesting historical reference points and has some tasty nuggets showing how sentiment today doesn’t resemble a bull market’s euphoric peak. But it also gives too much credit to the Fed’s low interest rates, ignoring how stocks can rise (and fall) in both “loose” and “tight” monetary conditions. And it misperceives how bull markets end. Saying they end amid a recession (or anticipation of one) is oversimplified. Bull markets usually end one of two ways. They run out of steam after climbing all the way up the wall of worry, when reality can’t meet euphoric investors’ lofty expectations. Or they get whacked by some huge negative no one sees until it’s too late—something surprising and big enough to knock a few trillion off global GDP. A recession often results from those two things, but it is wrong to call it the proximate cause. For more, see Elisabeth Dellinger’s column, “Six Years on, the Bull Stays Strong.”

By , The Wall Street Journal, 03/09/2015

MarketMinder's View: How? By building a “weatherproof” portfolio of broad equity and fixed income index funds, cash “and other items that can rise in good markets and limit declines in bad ones”—in theory making you less spooked when markets fall, putting you in the right mental state to buy more stocks near bear market bottoms. Yet we are told to do this because studies show humans trade too much and at the wrong times. Soooo, the solution to too much trading is … more trading? Why should we believe people will be any better at timing markets at the bottom than at the top? What if they’re more apt to buy at the first sign of a discount in stock prices—or wait so long for a better deal that they miss the rebound? This tactic also relies on perfect discipline—why would a blended portfolio instill that any more than an equity-only portfolio? People are people. Emotional. Buying a couple of broad index funds and leaving your portfolio alone might sound easy. But will you remain disciplined during market correction, when stocks drop 10-20% quickly and unexpectedly? Will you stay in during the throes of a bear market when pundits predict major indexes are heading to zero? Kudos to you if you can, but many investors have proven they can’t. Equally problematic, this piece ignores the importance of asset allocation, assuming bizarre market-timing tactics are all anyone needs to reach their goals. Last we checked, strategic asset allocation—the mix of stocks, bonds and other securities you own over time—is more important. And that should be a function of your long-term goals. Not driven by gimmicks. For more, see Todd Bliman’s column, “This Is Your Brain on Markets.”   

By , The Wall Street Journal, 03/09/2015

MarketMinder's View: Apparently, all the foreign money flowing into US bonds and money markets is being balanced by domestic dollars going back to foreign markets as investor sentiment improves in the eurozone and Japan, and weaker currencies are “restoring competitiveness” in Europe and Asia. So strong dollar = good (for now) but could yet turn bad, whatever that even means—it isn’t defined here. This is a pretty bizarre thesis, given currency cycles have no correlation with economic or market cycles and simply create winners and losers out of importers and exporters. Many firms are simultaneously winners and losers, because they import components and export finished goods. Overall, this seems to be an attempt to divine meaning where none exists—periods of currency strength and weakness fluctuate and, over time, are zero-sum. For additional information about current misperceptions about the strong dollar, click here.   

By , The Washington Post, 03/09/2015

MarketMinder's View: Ok party people, what time is it? Time to set aside your political preferences! Fed-bashing is a popular sport on both sides of the aisle right now, and both parties appear to want to meddle in its daily operations—both on the monetary policy and regulatory fronts. Regardless of your political affiliation, this piece presents some sound reasons why these calls to subject the Fed to further political scrutiny are misguided. For one, the Fed is already pretty transparent, especially compared to the past—its balance sheet is publicly available, and you can access Fed governors’ speeches, testimonies and press conferences if you so wish. But also, the Fed was designed to be politically independent—though near-impossible in practice, formally removing that degree of separation sacrifices the Fed’s credibility in the eyes of markets. It also invites poor decision-making, like cutting rates at the wrong time to placate politicians seeking re-election. Look, the Fed isn’t perfect—no institution is—but politicizing it would likely lead to more problems, not less, in our view. For more, see our 10/1/2014 commentary, “Independent for a Reason.”

By , Financial Times, 03/09/2015

MarketMinder's View: This is all based on one firm’s proprietary econometrics, called “nowcasts,” which aim to give a real-time GDP growth snapshot. But the commentary here doesn’t tell you anything different than Q4’s GDP reports—US slowing, UK steady, eurozone accelerating, Emerging Markets mixed. It also ignores the impact of higher imports—a sign of domestic demand—and weaker inventories on US GDP, and in the process misses that private-sector components accelerated. So we don’t see much evidence the stronger dollar is “redistributing global activity away from the US.” We’d view all this a different way: The global economy is chugging along, not with every country in lockstep, but that’s normal. Given reality is better than many investors believe (see dour sentiment toward the eurozone, which has grown for seven consecutive quarters, and Emerging Markets), the bull likely has plenty of room to run higher. For more, see our 3/4/2015 commentary, “A Second Glance at Growth.”    

By , MarketWatch, 03/09/2015

MarketMinder's View: Here are six good reminders addressing fears the bull may run out of steam soon, whether due to age, valuations or some external force (like government). We won’t repeat them here, but consider this closing line: “… if you are waiting for the ‘perfect’ time to be in the market—when you are comfortable, confident and worry-free—you’re never going to find it.”

By , The Yomiuri Shimbun, 03/09/2015

MarketMinder's View: The second estimate of Q4 2014 Japanese GDP still confirms the country exited recession, albeit at a weaker rate than first estimated—from 2.2% annualized to 1.5% annualized, largely due to leaner than projected private sector inventories. Annual GDP for 2014 also fell into negative territory for the first time since 2011. Now, these data aren’t evidence of future weakness, but the economic cycle isn’t much of a swing factor for Japanese stocks these days. Investors hopes for economic reform appear more impactful, and given Japan continues relying almost exclusively on fiscal and monetary policy to solve its economic woes, we don’t see reality matching investors’ very lofty expectations any time soon.

By , The New York Times, 03/06/2015

MarketMinder's View: Quite simply: An excellent article on the subject. Our only quibble is we would have preferred added perspective regarding price-to-earnings ratios, which a) aren’t predictive and b) aren’t widely overinflated. But that is a super minor quibble. Here is a snippet, but please, read the whole thing: “Of the top 20 Nasdaq companies by market capitalization in 2000, only four … remain in the top 20 today. Eight no longer exist as independent companies, most as a result of bankruptcy or acquisition, and several are shadows of their former selves. The current Nasdaq composite index has only about half as many companies as it did in 2000. ‘Joseph Schumpeter was spot on when he said capitalism is all about creative destruction,’ said Richard Sylla an economics professor at New York University’s Stern School of Business…”

By , Bloomberg, 03/06/2015

MarketMinder's View: So on the heels of today’s strong jobs report, Richmond Fed President Jeffrey Lacker suggested the time for a rate hike may be nigh, which is only pretty what the consensus has been suggesting for months. Perhaps he’s right and the Fed does hike then. Here is the thing: There is zero, zippo, nada, nil history of initial rate hikes automatically causing havoc for stocks. And this time? We are pretty sure an economy with below-average unemployment, healthy domestic demand, record-high GDP, consumer spending and rising LEI can handle rates somewhere north of zero to 0.25%. Here is more on that.

By , The Wall Street Journal, 03/06/2015

MarketMinder's View: Above and beyond any specific comment from an analyst or analysts, the general tenor here is to look beyond these results to next week’s, in which banks’ dividend plans will either be approved or denied. Stress tests in tenser times were a source of much handwringing, now little attention is paid—a sign of morphing sentiment. For more, see today’s commentary, “Bank Investors Are Stressing Much Less.”

By , Real Clear Markets, 03/06/2015

MarketMinder's View: This is a very unusual and interesting read on the subject of unemployment that makes the valid point that claiming unemployment is high due to a lack of available jobs is not always the correct explanation. Labor is a good like any other, and wages are the price. There are no doubt some unemployed workers who are simply not willing to lower the price of their work to the level businesses are offering. This isn’t something we think you can quantify, but it’s an interesting point and one worth considering on the subject.

By , The Wall Street Journal, 03/06/2015

MarketMinder's View: While it isn’t particularly great news exports and imports fell in January, it’s also neither particularly surprising nor hugely meaningful. Several major factors render these data near useless: One, a West Coast dockworkers’ labor dispute that is now over delayed movement of goods into and out of the American west. And two, oil prices have a big influence on import and export values. We’d suggest chalking this one up as too dirty to rely on.

By , Bloomberg, 03/06/2015

MarketMinder's View: We felt like we were sucked through a hole in the space-time continuum when we read this article. It is virtually the exact same as this one, written last year. With that in mind, here is how we debunked tech and biotech bubble fears last year (they called them “momentum stocks”). Most of these still apply, so feel free to reapply now.

By , The Telegraph, 03/06/2015

MarketMinder's View: Yeah, the UK parliamentary election is 61 days away, but the main parties’ manifestos still aren’t out, so it’s premature to assume these polls mean all that much. But even so, the likely result from the messy election described here is a hung parliament and gridlock, which is the exact scenario we had from 2010 to now. Stocks and the UK economy have done quite well, thank you very much, because a highly competitive, capitalist economy like Britain’s is often harmed more than helped by a very active government. Less is more, people.

By , MarketWatch, 03/06/2015

MarketMinder's View: Well, this article starts from a fallacious point—that enacting a uniform fiduciary standard would benefit investors greatly, which is vastly overstated (as we’ve written here)—and spews a series of incorrect assumptions thereafter. For one, the DoL and SEC proposals are both regulations, not legislation. Congress won’t have a vote, so no, gridlock won’t kill these proposals. Next, while costs are no doubt a concern in investing, we’d humbly suggest they aren’t the only important factor. And this article tacitly accepts that too, by assuming asset allocation is a given. Then, the article miscasts the DALBAR study as a fee issue. (Also, not to be nitpicky but DALBAR is all caps, people—trust us on this one.) It’s not at all about fees—it’s about whether you stick with your allocation long enough, period. This is the same point raised later in the piece regarding frequent trading detracting from returns, writ large. Are there a slew of slimeballs on Wall Street? You betcha. Are markets highly volatile and unpredictable in the short run? Yup. But this isn’t an argument to eschew markets or invest on your own, it’s an argument for due diligence and proper expectations.

By , The Wall Street Journal, 03/05/2015

MarketMinder's View: While some are calling China’s projected RMB 1.4 trillion drop in government borrowing a liquidity-zapping “fiscal cliff,” as this piece shows, reality is more benign. This isn’t a huge planned pullback in public investment or liquidity squeeze. It’s an attempt to shift from public financing to private, where officials believe lending decisions will be more judicious and investment more productive. Time will tell whether they’re right—execution matters—but they appear to have a system in place to continue financing infrastructure and development. And if it doesn’t work, leaders there have a long track record of saying one thing and doing another, as needed, to shore up growth and job creation. We rather doubt China will really find itself “stuck in the fiscal mud.”

By , The New York Times, 03/05/2015

MarketMinder's View: Look, we don’t think Dodd-Frank was some magical bank safety-enhancing, crisis-ending panacea either. But the metrics used here to evaluate it are just bizarre. Bank profits as a negative? Last we checked, profits are a sign of health, and banks have retained most of those earnings to shore up capital levels. Supposedly high financial services fees as evidence of a lack of competition? We have a hard time seeing that one in an industry with tens of millions of customers. Bank dependence on short-term funding? That assumes retail depositors—all of us normal folks—don’t flee when things look dicey. Take a peek at Greece if you need proof that assumption is incorrect. Overall, we don’t see much (if any) evidence the financial industry is merely a “money-extraction machine, enriching itself while endangering society as a whole.” If that were the case, why would capital be flowing freely from banks to businesses? Banks are investing in the real economy, folks.

By , CNBC, 03/05/2015

MarketMinder's View: Well, we respectfully disagree with the thesis that a bubble limited to select private firms—not publicly traded stocks—is actually a bubble. Simply, bubbles are caused by widespread euphoric sentiment overlooking negative fundamentals. The number of investors diving into these private firms is extremely small, and even if you presume their valuations are wacky (we have no way to verify that), that isn’t a sign of widespread euphoria. Folks, the tech sector was 30% of the S&P 500 when the tech bubble was at its zenith. Now, these private firms might be a fad, like small “momentum stocks” were in early 2014. But global economic and market fundamentals today appear overall better than sentiment appreciates, which does not a bubble make. Finally, we are not 100% convinced the blog post that inspired this article wasn’t ironic.

By , Financial Times, 03/05/2015

MarketMinder's View: This claims to prove fees matter more than asset allocation (the mix of stocks, bonds, cash and other assets you use), but it does no such thing, because the method of proving the point herein is totally flawed. For one, it’s a simple backtest of various portfolios using results from 1973 – 2013. That might seem sufficient to draw major conclusions, but you should really use Monte Carlo analyses for this, because the past won’t predict the future order in which returns occur, perhaps throwing the entire basis for drawing conclusions off. E.g., would any of this be the same in 2009? Or 1999? Answer: No. Additionally, the evidence of the influence of fees is demonstrated by simply subtracting returns (1.25%  - 2.25%) from very same strategies outlined. Which is a self-reinforcing feedback loop. You cannot calculate the impact of fees this way and prove anything other than the fact you can do basic mathematics. It also does not at all address how you arrived at the allocation in the first place, which is crucial because no matter what you pay, your allocation darn well better match your goals. Said differently, if two identical bond portfolios had different fees, that would be the deciding factor. But it wouldn’t say anything about whether or what percentage you should put in bonds in the first place. Finally, these are all inflation-adjusted returns and the inflation adjustment used is neither explained nor described. This is really just a bizarre comparison of various strategies, not a study showing fees matter more than asset allocation.

By , The New York Times, 03/05/2015

MarketMinder's View: Some more details on the ECB’s quantitative easing program, if you’re into that sort of thing. Also some words about Greece, whose banks would like some ECB financing. Chief Mario Draghi isn’t turning on the spigots yet, as Greece hasn’t met conditions, but he’s ready and willing once they step up. How nice. We wouldn’t read much into any of this, but there are plenty of interesting nuggets.

By , The Telegraph, 03/05/2015

MarketMinder's View: The UK’s benchmark interest rate has been at 0.5% for six years now, and that has done some things to some markets. This piece captures some of those things, like the rock-bottom returns on savings accounts. But it incorrectly suggests causality with some other things, like low mortgage rates and more volatile loan growth (which we can’t even verify, from the data here, since the chart doesn’t go back before 2008). Mortgage rates are influenced by long-term bond rates, not short-term. Loan growth is influenced by the yield curve, not short-term rates alone. UK long rates fell for years, bounced in 2013, then fell again. The yield curve flattened, steepened, then flattened again. That explains most of the movement in mortgage rates and loan growth. Oh, also, none of the commentary about inflation tells you when rates will rise. The BoE’s guidance has been all over the map, and weak inflation stems from falling commodity prices, and none of that tells you anything about when they’ll act.

By , MarketWatch, 03/05/2015

MarketMinder's View: Well, first, we disagree with the definition of correction used here. In this, it states that “There’s no shortage of warnings that US stocks are overvalued and we’re due for a correction of 20% or more.” To us, 20% or more is a bear market (assuming it has any staying power). A correction is a short-term, sentiment-driven movement of more than 10% but less than 20%. But also, the sentence immediately preceding that one says, “The forward P/E hasn’t been so high since early 2010, when investors were leery of investing in stocks.” There was no bear market in 2010 after valuations rose higher than today’s. And also, if there is “no shortage of warnings,” aren’t plenty of investors still leery of investing in stocks? Bear markets usually begin with euphoria, not lots of leeriness. And P/Es won’t predict bears or corrections. Besides, Q4 earnings are over and stocks look forward.

By , The Wall Street Journal, 03/05/2015

MarketMinder's View: That there is wide dispersion in valuations among sectors and categories, leaving some “cheap” while the overall market looks “pricey,” would be great news for stock pickers if, indeed, “cheap” stocks always outperformed “pricey” ones. The markets’ valuation being above average might also be “bad news” if this were the case. However, that’s all fallacious—picking cheap stocks (a value approach) isn’t a path to permanent outperformance. Value isn’t superior, it is a style—sometimes growth leads. Also, above-average valuations can easily get much more above the average. Valuations, simply, don’t predict outperformance or market direction. Sorry.

By , Bloomberg, 03/05/2015

MarketMinder's View: Here is a fun look at why economists’ forecasts are notoriously terrible—and where economists do and don’t add value to modern life and science. For investors, it’s a good reminder not to invest based on mathematically modeled economic forecasts alone. Real-world indicators, along with a broad analysis of the political environment and investor sentiment, need careful attention.

By , Financial Times, 03/05/2015

MarketMinder's View: So we award a point for attempting to define the phrase “risk on, risk off,” which we have heard for years and never saw defined anywhere. This at least provides a plausible (if not believable) explanation, saying it means single macro events drive investors broadly in (risk on) and out (risk off) of stocks without much thought for economic fundamentals or other drivers. Except, we still aren’t sure that is actually a thing or even happened over the last six years. We’ve certainly seen big market reactions to things like eurozone collapse dread, but there is a buyer for every seller and vice versa, so we’re skeptical. We’re also skeptical low trading volumes were evidence of this phenomenon and the recent rise in volume means we’re back at normal. Or that movement in trading volume really means anything at all. In our experience, it isn’t a market driver. It doesn’t predict returns. It doesn’t show sentiment. And we’re pretty sure it doesn’t show whether markets are in a “healthier state of mind,” because that implies the last six years were unhealthy and therefore a bad time to invest. But we’ve had nearly six years of bull market now, with stocks globally at all-time highs and rising alongside rising earnings and a growing global economy. Seems kinda healthy, no?

By , The Wall Street Journal, 03/05/2015

MarketMinder's View: This presumes that the ECB’s quantitative easing (QE) program—unlike the programs used in Japan (twice), the US and UK—will be inflationary, causing yields to rise, despite the fact the ECB’s quantitative easing program hinges on buying long-term debt, which pushes yields down—referred to here as “the paradox of QE.” We have a different name for this paradox: Hogwash. This reverses cause and effect near totally and is a misperception at the heart of many QE fears. Fact: Low yields in and of themselves are not inflationary. Rising lending—money supply—is. But you won’t get much of that when long yields are depressed, reducing the spread between short- and long-term interest rates that is so crucial in determining bank’s profits from lending. Now then, markets do tend to move in advance of widely anticipated actions, so rates could rise simply because the fall has already occurred. But that isn’t the same as saying rising rates will happen because QE’s big success on inflation.

By , The New York Times, 03/04/2015

MarketMinder's View: Saving more? Nope. Evidently the real issue is that Wall Street is “bleeding savers dry” through high fees on actively managed mutual funds, putting retirees in jeopardy no matter how much they save. The proposed solution is a uniform fiduciary standard—previewed by the White House last week—which we are told would nudge every broker or investment adviser into selling or recommending index funds. Ipso presto problem solved. Except, we have our doubts. The fiduciary standard doesn’t require advisers to recommend the lowest-cost products. A broker or adviser who believes a higher-cost fund provides the best overall chance of reaching their client’s goals can recommend that fund and remain compliant. Rules don’t determine behavior, costs or returns. A firm’s values, resources, cost structures, philosophy and expertise do that. Heck, a fool held to the fiduciary standard may recommend an incorrect asset allocation, which slews of academic studies show matter much more then fees. Or maybe mix indexes within equities, resulting in subpar returns despite “indexing.” Folks, it ain’t all about the fees. For more, see last Tuesday’s commentary, “The DOL Gets a Homework Assignment.”

By , Bloomberg, 03/04/2015

MarketMinder's View: That the oil industry’s bizarre application of mark-to-market accounting has delayed writedowns of firms’ proven reserves is an interesting factoid. But it is very, very tough to imagine any investors being blindsided when producers finally begin booking losses in a few months. Markets pretty efficiently price in widely known information, and oil’s fall is extremely well-known. Not a surprise. And given how Energy stocks have suffered recently, markets are probably well aware of all this.

By , The Telegraph, 03/04/2015

MarketMinder's View: Basically, Austria’s Carinthia region—an Alpine hamlet—is the new Ireland and Detroit wrapped in one. It holds about €10.2 billion in bonds used to recapitalize failed lender Hypo Alpe Aldria, which lost its state lifeline yesterday, forcing losses on creditors and shareholders. So now it’s on the hook for the bank’s debts (Ireland) and on the verge of bankruptcy (Detroit). While it might be tempting to draw broader conclusions about Austria’s solvency and the eurozone, as this piece tries to do, we think that’s a bridge too far. Ireland didn’t break the eurozone—it was the first bailed out country to heal. The US economy and stocks have yawned over Detroit’s bankruptcy since it went bust in 2013. As this piece notes, Austria’s borrowing costs remain among the world’s lowest. This is a tempest in a teapot.

By , The Wall Street Journal, 03/04/2015

MarketMinder's View: Several pros seem to think the best way to navigate rising interest rates after the Fed hikes is to concentrate in short- and long-term bonds, because long rates probably won’t budge much (less interest rate risk), while short-term bonds (one year or less) can (theoretically) be continually rolled over at higher rates. To each their own, and we happen to agree long rates aren’t likely to jump this year. But it just seems odd to ignore total return at the short end and embrace it at the long end. For folks using bonds as a tool to mitigate expected short-term volatility in a blended portfolio, we’d suggest viewing fixed income more holistically and managing the entire bucket for total return, paying reference to risk and return at all segments of the yield curve and in all major categories.

By , Bloomberg, 03/04/2015

MarketMinder's View: As this piece chronicles, Chinese officials don’t set GDP targets because they want growth for growth’s sake. Rather, they want need employment to rise continually to improve living standards enough to keep the masses happy, ensure social stability and solidify their grip on power. They are also shifting China’s growth engine from manufacturing, where it takes a lot of growth to create jobs, to services, which are very job-intensive. A 7% growth rate creates as many or more jobs in hospitality, health care and the like than a 10% growth rate would have created in factories. The only thing we’d add is that China’s slower growth is a-ok for the world, as their contribution to global GDP rises as growth compounds off a wider base.

By , The Telegraph, 03/04/2015

MarketMinder's View: On the one hand, a two-speed net neutrality system—strict in the US and loose in the EU—merely creates winners and losers among Telecom and Internet companies. On the other, there are some protectionist rumblings accompanying this debate, which is not great. Now, talk is cheap, and it is far from certain either side will respond with actual trade or capital barriers. Most likely, this is all just jawboning. But it is a (very far-fetched, very unlikely) risk.

By , Bloomberg, 03/04/2015

MarketMinder's View: It comes as zero surprise that oil producers aren’t hiring. Between mounting layoffs and the lack of help-wanted ads discussed here, workers in that field have it very tough right now. But the US isn’t the oil industry. Our economy is diverse enough and growth is broad enough that overall economic and jobs growth can continue even as the Energy sector suffers.

By , The Wall Street Journal, 03/04/2015

MarketMinder's View: And here is some proof of the prior blurb.

By , The Telegraph, 03/04/2015

MarketMinder's View: Why? Because, according to one study, global debt (public plus private) has jumped 17% since 2007 to $57 trillion—$57 trillion the study suggests global governments and companies will never be able to repay, leaving the economy at risk of perpetual crisis as loans go south. Until they all default, which is apparently inevitable because they’ll supposedly never pay it off. Yet we’ve seen no evidence in history that countries must pay off debt to survive. The UK, for instance, did fine with outstanding debt attributable to the South Sea Bubble, Irish Famine and World War I. Over $1.5 trillion of current US debt ties back to World War II. But this ignores the elephant in the room: With a couple notable exceptions (ahem, Greece), interest rates globally are way lower post-2007 than pre. Most of the $8.3 trillion in new debt is cheaper than the $48.7 trillion that came before it. And a lot of that $48.7 trillion has been rolled over and refinanced at lower rates. That all suggests world debt is probably more affordable today, despite the gross increase. That isn’t what the start of a global crisis looks like—it’s just called leverage. Borrowing to finance growth and earn a net return on the investment is something companies do all the time. It works.

By , The Wall Street Journal, 03/04/2015

MarketMinder's View: No, the 1.1% m/m rise in January eurozone retail sales doesn’t mean Germany stole consumption from Switzerland after the Swiss franc skyrocketed. Perhaps some Swiss folks did cross into France and Germany to get more bang for their buck, but if we’re talking about Main Street sales, this is marginal—think Alpine and Rhineland villages and a couple French Geneva suburbs getting a bit more Swiss foot traffic. Plus, it’s not like Swiss prices suddenly shot up. This is really a false conflict. And it’s entirely speculative, considering Swiss retail sales data aren’t out yet. We’d instead chalk the eurozone’s sales growth up as the latest evidence falling prices aren’t denting demand—a counterpoint to the rampant deflationary spiral dread.

By , Bloomberg, 03/04/2015

MarketMinder's View: A bounce, which is nice, but it’s a bounce after a long stretch of declines tied to Brazil’s oil and mining industries. These still face big headwinds with commodity prices down, so best not to get too excited about Brazil’s near-term economic prospects.

By , The Wall Street Journal, 03/03/2015

MarketMinder's View: Much of this is sensible—namely, that it makes zero sense to create a special “small cap exchange” free of many listing requirements applicable to larger firms. The notion of having two standards of regulation is bizarre to us, and it’s highlighted as well by the Emerging Growth Company provision of the JOBS Act exempting small firms from SarbOx 404 requirements. Why not just gut SarbOx nearly fully, which would not legalize fraud, but would reduce the costs of listing and compliance?

By , Financial Times, 03/03/2015

MarketMinder's View: We reckon banks and investors alike would enjoy more transparency on how the Fed deems which banks are “globally systemically important,” aka too big to fail, and slapped with higher capital requirements as a result. While the quantitative factors are easy enough to decipher based on the Fed’s releases, the qualitative factors make the entire exercise too opaque—making it difficult for banks on the bubble quantitatively to plan. Financials stocks have done fine with the status quo, so this is more the absence of a potential tailwind than anything else, but still, we have to wonder how loan growth might improve at midsized banks if they knew where they stood.

By , Bloomberg, 03/03/2015

MarketMinder's View: Quantitative easing (QE) hasn’t even begun, and already folks fear tapering! Good grief. The ECB has said they plan to buy roughly €60 billion in long-term assets monthly through September 2016, adding roughly €1 trillion to their balance sheet. They have also said it might be open-ended, depending, and we all know from experience that central bankers are really good at changing their minds as conditions (and their interpretations of them) change. So who knows what will happen, but we think the eurozone will be better off the sooner QE ends. QE flattened yield curves in the US and UK, weighing on lending and growth. It probably has the same anti-stimulus effect in the eurozone, where yield curves are already quite flat. That said, the eurozone has already proven able to grow amid anemic lending and growth in the quantity of money, so QE shouldn’t derail the modest recovery.

By , The New York Times, 03/03/2015

MarketMinder's View: This has quite possibly the best graphic we have ever seen. And, quite sensibly, it encourages investors to judge advisers’ and brokers’ actions, not evaluate them based on which regulatory standard they adhere to. A few minor quibbles aside (i.e., it fails to differentiate between investment sales and service, and it doesn’t discuss how an adviser’s values and resources impact their ability to put clients first), this piece can help you separate client-focused investment professionals from those who are looking out for themselves first. For more on why this is necessary, see our 2/4/2015 commentary, “The DOL Gets a Homework Assignment.”

By , The New York Times, 03/03/2015

MarketMinder's View: This has quite possibly the best graphic we have ever seen. And, quite sensibly, it encourages investors to judge advisers’ and brokers’ actions, not evaluate them based on which regulatory standard they adhere to. A few minor quibbles aside (i.e., it fails to differentiate between investment sales and service, and it doesn’t discuss how an adviser’s values and resources impact their ability to put clients first), this piece can help you separate client-focused investment professionals from those who are looking out for themselves first. For more on why this is necessary, see our 2/4/2015 commentary, “The DOL Gets a Homework Assignment.”

By , The Wall Street Journal, 03/03/2015

MarketMinder's View: Maybe they aren’t—but using valuations and Fed rate hike projections to forecast corrections is a fool’s errand. Volatility is unpredictable, period. And valuations don’t much help predict longer-term performance, either. Some, like P/Es, are sentiment gauges. Others, like enterprise value as a percentage of earnings pre-tax, interest, depreciation and amortization, are just high-falutin’ ways to look at company balance sheets—not terribly meaningful for the market as a whole.

By , The Wall Street Journal, 03/03/2015

MarketMinder's View: That pace? 2.4% annualized, down from 3.2%. GDP growth slowed as falling business investment and exports partly offset a rise in consumer spending. Inventories also piled up, which is open to interpretation, but not good if it means production is outstripping consumption. Only time will tell whether that’s the case, though. Overall, it’s clear Canada’s commodity-heavy economy is feeling the effects of falling oil and materials prices, something investors should keep in mind. It has other industries that can contribute, to be sure, but one should expect some macroeconomic influence from oil prices, too.

By , The New York Times, 03/03/2015

MarketMinder's View: Look, consumers always had three options for whatever money they save at the gas station—spend it elsewhere, save it or pay down debt. And anecdotal evidence and personal experience both suggest Milton Friedman nailed it when he theorized that perceived temporary price changes don’t alter long-term consumption patterns since spending decisions are more a function of disposable income (and folks’ long-term expectations thereof). So it really isn’t surprising that core retail sales (excluding gas stations) aren’t off the charts. Plus, as this piece points out, retail sales omit spending on services, which is a huge share of the US economy. Data released yesterday show real spending on services rose 0.4% m/m in January. Total real consumer spending also rose 0.3%. Besides, our economy is strong and broad enough that it can grow fine whether or not consumers spend their gas savings at the mall.

By , CNBC, 03/03/2015

MarketMinder's View: This is all largely just theater. Greece was always going to have to renegotiate some sort of funding arrangement once the recent bailout extension expires in June, because otherwise, Greek banks would lose ECB financing, essentially forcing Greece out of the euro. Whether it’s an official third bailout, a provisional line of credit with conditions attached or something else, depending on whichever euphemism Greek and EU/ECB/IMF officials decide on, remains to be seen. It also doesn’t much matter, as the endgame—an arrangement that keeps Greece funded and in the eurozone—will (probably) be the same. Just expect a lot of politicking and rumors along the way.  

By , The Wall Street Journal, 03/02/2015

MarketMinder's View: Look, we understand Nasdaq 5000 may grab more eyeballs than Nasdaq 4236, but no price level will tell you where the index is going to go next. Unless you want to impress your friends by spouting off market trivia, myopically looking at big round numbers is a meaningless exercise for long-term investors. And looking at how quickly various indexes pierce and close above round numbers? Arguably even more useless, as it presumes such figures are “resistance” that is hard to get through when, in fact, they are just numbers. For more, see our 2/25/2015 commentary, “Around the World in All-Time Highs.”  

By , Bloomberg, 03/02/2015

MarketMinder's View: Yes, there are problematic pockets in the world, like Venezuela and Russia. But if “misery” = unemployment rate + change in the consumer price index, there is going to be a huge backward skew to the data. Like Spain or Portugal, which are only on this list because of unemployment, a vestige of past weakness. Spain, for example, is growing with falling prices—a sign of growing productivity and economic health. But also, we quibble with the conclusiveness of this list—where, for example, is North Korea?

By , CNBC, 03/02/2015

MarketMinder's View: On one hand, we understand where folks’ frustration with government gridlock comes from—people’s political biases lead them to believe their party is always right and the other side is very wrong, and so they despise it when Congress bickers and can’t get anything done. On the other, few see how positive gridlock is for stocks. A gridlocked government is unlikely to pass contentious, market-harming legislation—reducing uncertainty. With respect to the notion “political pressure and incompetent congressional leadership could bring back all those nightmares” from 2011 and 2012, we’d kindly point out economic growth and bull market continued throughout. And it wasn’t like we got less gridlocked in 2013 or 2014, friends. There is a reason stocks rise after midterm elections and in third years of president’s terms—the reason is gridlock brings inactivity.

By , Associated Press, 03/02/2015

MarketMinder's View: That double dose of positive news: February inflation fell less than it did in January (-0.3% y/y vs. January’s -0.6% y/y) and January unemployment fell to 11.2%, its lowest level in almost three years. In our view, the reaction to this news illustrates the dour sentiment toward the region. Lower energy prices have been the primary deflationary pressure, as core inflation was steady at 0.6% y/y and service-sector inflation accelerated to 1.1% y/y—and the hope the ECB’s quantitative easing program will help boost inflation seems misguided. Unemployment is a late-lagging indicator, so this is less positive news than, we don’t know, the seven straight quarters of positive GDP growth and overall rising leading economic gauges.

By , Xinhua, 03/02/2015

MarketMinder's View: China’s growth rate has been gradually slowing for years—this isn’t breaking news. And it is at least partly intended! The government has long since signaled its desire for a slower growth rate in exchange for more sustainable, market-driven, less credit-and-infrastructure boom reliant. And because the country is growing off a larger base, China’s contributions to global GDP are larger now than they were ten years ago, when China was expanding at a double digit clip. For more, see our 1/21/2015 commentary, “China’s Great Miss?”    

By , Reuters, 03/02/2015

MarketMinder's View: India’s central bank will now aim for an inflation target of 4%, give or take two percentage points—a positive, as inflation targeting has helped countries that have historically struggled with stagflation and hyperinflation (like Brazil). That there was no mention of a Monetary Policy Committee, which would indicate greater institutional independence for the central bank, is a disappointment, but this is still a positive move for India and speaks well of Prime Minister Narendra Modi’s ability to follow through on achievable structural reforms benefiting India economically in the long-term.