Blog: Is Equity Risk Declining? Or is it just wishful thinking? The falling VIX may be a sign that “fear” is declining. But risk has multiple dimensions and its other facets don't agree.
Blog: The Road to Stagflation Stagflation is a stop along the road from growth to recession. But it's still a nasty place, and it's now a strong possibility.
Newsletter: Liquidity and the MOVE Index - An Early Warning Signal of Financial Crisis Liquidity has been in the media a lot lately. It’s one of those things we take for granted, until it’s dried up. In Fractal Market Analysis (1994) I made the point that markets don’t exist to give you a fair price (an assumption of the Efficient Market
Blog: The Fed's Three Body Problem - Inflation vs. Employment vs. Financial Stability In physics, the “three body problem” involves predicting the motion of three objects, or bodies, when the bodies are attracted to one another by gravity. Newton solved the two body problem, but not the three body equivalent. The French mathematician, Henri Poincare, studied this problem in the late 19th century,
Newsletter: From Fragile to Turbulent - But "Minsky Moment" risks have passed The shift in the Market Uncertainty State Indicator (MUSI) from Fragile to Turbulent requires commentary this month. First, what the change in market state means, and second, why it happened. Fragile vs. Turbulent A shock can break a Fragile market. A Turbulent market will bend chaotically, but not break. Both
Blog: Hard, Soft or Aborted Landing? Aeronautical terms have been popular form of market jargon for a long time. These days, of course, it’s what type of recession we’re going to have: a “hard” landing (which is a nice way of saying, a crash) or a “soft” landing, where we glide in without disturbing
Blog: Bond Yields and Markets Before the "Before-Time" A phrase from Star Trek: The Original Show became popular during the 2020 pandemic, referring to the time before COVID-19 as the “before-time.” The phrase was lifted from a 1966 episode entitled “Miri.” The story took place on a planet of children where the adults had been killed off during
Blog: Groundhog Day (not the movie!) for the market Aspiring market pundit, Punxsutawney Phil, saw his shadow on Thursday, forecasting 6 more weeks of winter for the northeastern US, and a potential bear market. While there is no evidence that Phil, or any other groundhog has forecasting power, the media continue to follow the ritual as a matter of
Newsletter: The Released Balloon Theory of Inflation A released balloon can be deflating but still go up and down in an unpredictable way before collapsing. Inflation is like that too. It can ease in the near term while going up in the long term before it reaches its final level. So be careful extrapolating recent trends.
Blog: Will the real inflation rate stand up? One characteristic of our times is a surplus of data. When I started out, data was hard to come by, particularly timely data. This was true for money managers, economists, and central bankers. Now we may have too much data. So much it’s hard to see what's