Blog

03 Nov 2006 Will More Jobs Bring More Inflation?

Posted at 16:05h in The Friday Brief by Sam Bass Jr.

This economy continues to surprise analysts with its resilience in the face of circumstances that have crushed previous expansions. The government announced today that the unemployment rate fell to 4.4%, its lowest level since May 2001. The report also showed that service sector activity accelerated as housing declined.

27 Oct 2006 Soft or Hard?

Posted at 16:07h in The Friday Brief by Sam Bass Jr.

Just before landing an airplane, the pilot flares back, slowing its speed by transitioning into a stall attitude. After slowing down, he changes pitch into a landing attitude shortly before touching down. The stall essentially drops the plane onto the runway. Stall too early and you get quite a bump. Contents in the overhead bins most definitely shift, if not fall. Stall just right and the plane gently touches the runway, its speed no longer sufficient to keep it aloft. Airline captains get applause when they land a plane like that.

13 Oct 2006 Is This Market For Real?

Posted at 16:11h in The Friday Brief by Sam Bass Jr.

If you had been given a glance into the future by reading a few of this week’s headlines, would you not guess that stocks would be fall rather than chase new highs? North Korea claims that it detonated a nuclear device, Fed governors threaten further rate hikes, housing continues its retreat, a plane crashes into a Manhattan high-rise, and option scandals at major corporations abound. And aren’t we in the midst of the historically weakest time of the year for stocks – September and October? We have to marvel at the new highs being made.

29 Sep 2006 Bonds Say Hard Landing – Stocks Say Soft?

Posted at 14:25h in The Friday Brief by Sam Bass Jr.

As the Dow nears its all-time high, the economy is slows. The Commerce Department reported today that personal income increased again in August by .3%, consumption increased by only .1% following a .8% increase in July. But after adjusting for inflation, spending actually fell.

22 Sep 2006 How Gentle Our Landing?

Posted at 15:11h in The Friday Brief by Sam Bass Jr.

No one doubts the economy is slowing, but there is mounting debate as to how fast; will we get the “soft landing” that is hoped for or something more disruptive? Just a month or two ago the worry was that continued economic growth combined with tight labor might spark inflation. So far that has not happened. The most recent report of prices paid at the producer level released Tuesday showed a drop of .4%, well below expectations.

08 Sep 2006 On Hold for Now

Posted at 15:35h in The Friday Brief by Sam Bass Jr.

Everybody’s on hold; from the Space Shuttle Atlantis, to the Federal Reserve. While NASA hopes to launch today at 11:40 after a three year hold, we hope it will take considerably less time to re-launch the economy. The Fed has decided to hold further rate increases until it gets a better picture of the economy’s health. The Bank of Japan, the Bank of England and the Bank of Korea announced a similar strategy this week. Even OPEC is expected to hold oil production steady when they meet next week to see what happens. Doing so would help avoid a supply-driven run-up in prices. So the world watches the economic data to learn just how fast the US and the global economies are slowing.

01 Sep 2006 Is the Fed Listening to the Markets?

Posted at 15:40h in The Friday Brief by Sam Bass Jr.

Three weeks after the Federal Reserve ceased its 17^th straight quarter point interest rate hikes debate continues as to whether they are finished, even among Fed officials. Minutes released from their latest meeting reveal that members expect core inflation “to decline gradually” and that pausing was a “close call.” Many believe that more increases may well be needed even while saying “the full effect of previous increases in interest rates on [economic] activity and prices probably had not yet been felt, and a pause was viewed as appropriate to limit the risks of tightening too much.”

18 Aug 2006 Will Inflation Spoil the Party?

Posted at 15:42h in The Friday Brief by Sam Bass Jr.

Back in mid July we suggested the Fed might pause at its August meeting. On August 8^th they held their benchmark lending rate at 5.25%, while saying that consumer prices will “moderate over time” because of their 17 prior rate increases, surging energy prices and a cooling housing market. In the eyes of many the move was a bold one for new Fed chief Ben Bernanke. Inflation hawks (those who believe inflation is worse evil than slow economy) immediately criticized his decision as a gamble that could jeopardize the Fed’s credibility as an inflation fighter. Yet, as the data have come in, the decision seems all the wiser. Both the Producer Price Index and the Consumer Price Index showed that inflation unexpectedly dropped last month. Housing starts slid 2.5% last month for the fifth time in six months. And yesterday, Conference Board said its index of leading economic indicators dropped in July.

28 Jul 2006 Will Inflation Recede With Slower Economy?

Posted at 16:12h in The Friday Brief by Sam Bass Jr.

Growth of the U.S.economy was less than half that of the first quarter, according to the Commerce Department in its first estimate of second-quarter Gross Domestic Product. GDP increased at a seasonally adjusted 2.5% annual rate April, compared to 5.6% in the first quarter and also well below economists’ estimates of 3.2%.

21 Jul 2006 Is the Fed Posturing for a Pause?

Posted at 16:14h in The Friday Brief by Sam Bass Jr.

“Economic moderation seems to be underway” which “should help to limit inflation pressures over time” said Fed Chairman Ben Bernanke in his prepared comments to the Senate Banking Committee on Wednesday. He noted the importance of “forward-looking” and taking a “longer-term” view as rate increases take time to affect the economy. It may be that Mr. Bernanke and his Fed may have raised rates as far as they are going to for the foreseeable future.