Risk/Reward Vol. 359
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
Good earnings reports and a "steady as she goes" Federal Reserve meeting combined to send stocks to new record highs. All three major indices are up double digits year to date. This week the stellar performer was the Dow Jones Industrial Average. How come? The DJIA is comprised of 30 big, international industrials like Exxon, Verizon, GE, Apple, Merck, etc. Their domestic profits have been ok, but there foreign incomes have been superior. This is for two reasons. One, the European economy has been steadily improving. And two, a weak dollar. Year to date, the Euro is 12% higher versus the dollar. The dollar has sunk in similar percentages against the peso, the Canadian dollar and the yen. Since US companies report earnings in dollars, the exchange rate alone has provided a significant boost in profits even if foreign sales had remained stagnant---which they did not.
Why is the dollar tanking? One, the dollar spiked in value with The Donald's election as the world believed that a business friendly President and a Republican Congress would do much to boost the economy including tax reform and infrastructure spending. Such activity would strengthen the dollar. Have you read the headlines recently? The Donald can't steer his own ship let alone a Congress. Second, the world is preparing for the European Central Bank to wean the Eurozone from quantitative easing (massive government bond buying. Without the ECB backstopping Euro bonds, interest rates in Europe are sure to rise (many are negative now). This is occurring at the same time the Federal Reserve has expressed a cautious approach to normalizing rates. Thus with one central bank becoming more interest rate hawkish (ECB) while the other more dovish, a currency shift is occurring. Dollars are being sold and Euros purchased. This is just the opposite of what occurred last winter.
We know that passive index investors have done well. So how have I done? The total portfolio that I manage is up 5% year to date (much of it tax advantaged) even though I have maintained a 50% cash position at all times. I am quite pleased given my aversion to risk. Recently, the positions I have taken in municipal bond funds have experienced capital appreciation. As the likelihood of tax reform continues to lessen, the value of these holdings increases. Moreover, they continue to pay on average above 5.5% tax free, amortized monthly.
Sunday, July 30, 2017
Sunday, July 23, 2017
July 23, 2017 Signs, Signs Everywhere Signs
Risk/Reward Vol. 359
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
Each week the three major indices reach for new records. The NASDAQ was on a ten day winning streak until profit taking ended that run on Friday. As noted previously, the Shiller CAPE ratio ( an historical measure of price/earning ratios) is above 30 for only the third time in history; the others being just before the crashes of 1929 and 2000. Short selling interest is as low as it has been since May, 2007. Everyone is a holder or a buyer, and there is plenty of cash on the sidelines. Mr. Market is positively euphoric. In normal times, these are sell signals. But these are not normal times. Never before have the world's central banks been so laser focused on one metric to the seeming exclusion of others: achieving 2% inflation. Japan is so desperate to reach that goal it has maintained zero bound interest rates for several years. Originally believing its easy money monetary policy would achieve that number in 2011, Japan's lead central banker was quoted this week as predicting 2% inflation in 2020. (Hey, Mr. Kuroda, have you ever heard of Albert Einstein's definition of insanity? See Vol 358 http://www.riskrewardblog.blogspot.com/ ). On Thursday, European Central Bank President Draghi stated that due to low inflation the ECB would continue quantitative easing (purchasing 60billion Euro worth of government bonds each month) for the foreseeable future. And as we know from last week's Congressional testimony, due to her concerns about lagging inflation, Janet Yellen is rethinking the timetable of the balance sheet reduction and interest rate normalization that Federal Reserve intimated just a month ago.
Why the fascination with inflation? As highlighted last week, central bankers are almost all economists. One tenet of modern economics is the Phillip's Curve which, simply put, posits that there is an inverse relationship between the rate of unemployment and the rate of inflation. The theory is that the lower the unemployment rate, the higher the wages as employers compete for labor; the higher the wages the more disposable income; the more disposable income, the more demand for goods and services; the more demand for goods and services the more their prices inflate; the more prices inflate,the more manufacturers produce; the more that manufacturers produce the more the economy grows. So, following the above logic (synthesized from the Fed's FAQ page) , inflation resulting from higher wages should precede economic growth. Thus, if a central banker believes that his/her job is to grow the economy (and that is a questionable proposition) then he/she would want to see inflation before cutting back on accommodative policies. Seem simplistic? Scarily so, especially since it isn't working. Unemployment is at 4.4% which is below what was thought to be full employment (5%) just a few years ago, and yet the rate of inflation is falling; most recently measured at 1.4%. Central bankers everywhere are perplexed. Hey, Janet, wake up. Maybe the world's social programs are so "rich", people would rather retire or drop out of the work force than work. Take a look at our record low job participation rate---only 62.7% of eligible persons are in the potential work force. Oh, and maybe more disposable income does not equate to more demand. That is certainly true for those over age 65 which constitute an ever increasing percentage of the developed world's population. Look at Japan! Whatever the reason, the Phillip's Curve ain't working in real life. Meanwhile, accommodative monetary policies are inflating the value of financial assets worldwide.
Do you doubt this? Since 2008, central bank policy has mattered more than anything else when it comes to the value of financial assets; be they bonds, securities directly correlated to bonds (my favorites) or equities. With historic low interest rates (in the history of the world there have NEVER been negative interest rates until now) and a reckless bond buying programs (quantitative easing) central bankers everywhere have driven virtually every investor, be they pension plans or Ma and Pa, out of government bonds, money markets, etc. and into much riskier bonds and stocks. Put another way, does any reader of this edition believe that we are NOT in a stock market bubble? And look at commercial real estate. Thanks to the surplus of cheap credit provided by our central banks, some buyers of apartment complexes are now receiving 10 year interest only loans. This has caused a bidding war with buyers paying so much that they are left with a sub 5% yield. This is at least 50% lower than in "normal" times. (Remember lower yields result from higher prices.) With prices so high no wonder speculative developers are constructing apartments at an alarming rate; apartments that likely will remain empty. Think I'm nuts? Look around. All of this is a direct result of a surplus of money and historically low rates--- thanks to central banks. The above notwithstanding, so long as central banks continue to provide the punch there is no reason to stop drinking from the bowl.
So the obvious question is when will central banks forsake the Phillip's Curve and get serious about normalizing rates? Not the half hearted measures announced a few months ago by the Fed which take years to achieve and which can be derailed by any stock market reaction, but serious efforts to raise rates no matter how the financial markets respond. So long as the current lineup is in charge the answer is never (note Japan's sorry story alluded to above). But come February, 2018 a change can be expected. Chair Yellen's term comes to an end and the smart money is that she will be replaced by Kevin Warsh, Glen Hubbard or John Taylor--all of whom have been highly critical of our monetary policy. All three are more concerned by asset bubbles (like the stock market) and normalizing rates than with achieving an arbitrary inflation number. Some of these guys are more aggressive than others. Once the nomination process begins, let's see how the smart money reacts. That may provide a truer sell signal.
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
Each week the three major indices reach for new records. The NASDAQ was on a ten day winning streak until profit taking ended that run on Friday. As noted previously, the Shiller CAPE ratio ( an historical measure of price/earning ratios) is above 30 for only the third time in history; the others being just before the crashes of 1929 and 2000. Short selling interest is as low as it has been since May, 2007. Everyone is a holder or a buyer, and there is plenty of cash on the sidelines. Mr. Market is positively euphoric. In normal times, these are sell signals. But these are not normal times. Never before have the world's central banks been so laser focused on one metric to the seeming exclusion of others: achieving 2% inflation. Japan is so desperate to reach that goal it has maintained zero bound interest rates for several years. Originally believing its easy money monetary policy would achieve that number in 2011, Japan's lead central banker was quoted this week as predicting 2% inflation in 2020. (Hey, Mr. Kuroda, have you ever heard of Albert Einstein's definition of insanity? See Vol 358 http://www.riskrewardblog.blogspot.com/ ). On Thursday, European Central Bank President Draghi stated that due to low inflation the ECB would continue quantitative easing (purchasing 60billion Euro worth of government bonds each month) for the foreseeable future. And as we know from last week's Congressional testimony, due to her concerns about lagging inflation, Janet Yellen is rethinking the timetable of the balance sheet reduction and interest rate normalization that Federal Reserve intimated just a month ago.
Why the fascination with inflation? As highlighted last week, central bankers are almost all economists. One tenet of modern economics is the Phillip's Curve which, simply put, posits that there is an inverse relationship between the rate of unemployment and the rate of inflation. The theory is that the lower the unemployment rate, the higher the wages as employers compete for labor; the higher the wages the more disposable income; the more disposable income, the more demand for goods and services; the more demand for goods and services the more their prices inflate; the more prices inflate,the more manufacturers produce; the more that manufacturers produce the more the economy grows. So, following the above logic (synthesized from the Fed's FAQ page) , inflation resulting from higher wages should precede economic growth. Thus, if a central banker believes that his/her job is to grow the economy (and that is a questionable proposition) then he/she would want to see inflation before cutting back on accommodative policies. Seem simplistic? Scarily so, especially since it isn't working. Unemployment is at 4.4% which is below what was thought to be full employment (5%) just a few years ago, and yet the rate of inflation is falling; most recently measured at 1.4%. Central bankers everywhere are perplexed. Hey, Janet, wake up. Maybe the world's social programs are so "rich", people would rather retire or drop out of the work force than work. Take a look at our record low job participation rate---only 62.7% of eligible persons are in the potential work force. Oh, and maybe more disposable income does not equate to more demand. That is certainly true for those over age 65 which constitute an ever increasing percentage of the developed world's population. Look at Japan! Whatever the reason, the Phillip's Curve ain't working in real life. Meanwhile, accommodative monetary policies are inflating the value of financial assets worldwide.
Do you doubt this? Since 2008, central bank policy has mattered more than anything else when it comes to the value of financial assets; be they bonds, securities directly correlated to bonds (my favorites) or equities. With historic low interest rates (in the history of the world there have NEVER been negative interest rates until now) and a reckless bond buying programs (quantitative easing) central bankers everywhere have driven virtually every investor, be they pension plans or Ma and Pa, out of government bonds, money markets, etc. and into much riskier bonds and stocks. Put another way, does any reader of this edition believe that we are NOT in a stock market bubble? And look at commercial real estate. Thanks to the surplus of cheap credit provided by our central banks, some buyers of apartment complexes are now receiving 10 year interest only loans. This has caused a bidding war with buyers paying so much that they are left with a sub 5% yield. This is at least 50% lower than in "normal" times. (Remember lower yields result from higher prices.) With prices so high no wonder speculative developers are constructing apartments at an alarming rate; apartments that likely will remain empty. Think I'm nuts? Look around. All of this is a direct result of a surplus of money and historically low rates--- thanks to central banks. The above notwithstanding, so long as central banks continue to provide the punch there is no reason to stop drinking from the bowl.
So the obvious question is when will central banks forsake the Phillip's Curve and get serious about normalizing rates? Not the half hearted measures announced a few months ago by the Fed which take years to achieve and which can be derailed by any stock market reaction, but serious efforts to raise rates no matter how the financial markets respond. So long as the current lineup is in charge the answer is never (note Japan's sorry story alluded to above). But come February, 2018 a change can be expected. Chair Yellen's term comes to an end and the smart money is that she will be replaced by Kevin Warsh, Glen Hubbard or John Taylor--all of whom have been highly critical of our monetary policy. All three are more concerned by asset bubbles (like the stock market) and normalizing rates than with achieving an arbitrary inflation number. Some of these guys are more aggressive than others. Once the nomination process begins, let's see how the smart money reacts. That may provide a truer sell signal.
Sunday, July 16, 2017
July 16, 2017 Insanity
Risk/Reward Vol 358
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
The headline in Thursday's Investor Business Daily read " Yellen Triggers Stock Rally." What? Did I not praise her in the last edition for her newly adopted low profile and her desire to make Fed watching as exciting as paint drying? It seems that central bankers worldwide just can't resist meddling. Talk about the hubris of the elite. So what did she say and why the reaction? In testimony before Congress, Yellen admitted that the current, paltry 1.4% rate of inflation (2% inflation now being the Fed's Holy Grail) may be the result of something other than transitory low prices in commodities and that as a consequence future rate hikes may be more gradual. Mr. Market and Mrs. Bond interpreted this to mean that the Fed's balance sheet reduction anticipated to begin in September and/or its anticipated December rate hike may not occur. In other words, the easy money punch bowl may continue. This sent bond yields lower and stock prices higher.
The problem with the Fed, as I see it, is that it is populated by academic economists who, despite giving lip service to "following the data, slavishly follow models they developed decades ago. If one truly "follows the data", how can one not conclude that a decade of easy money has not spurred the economy? And who says inflation necessarily equates to economic growth? Look at the period 1850 to 1900, the sweet spot of the industrial revolution and one of, if not the greatest, period of economic growth in US history. The annual rate of inflation was 0.17%. In other words $1 in 1850 was worth $1.09 in 1900. Inflation had little to do with economic growth. What did? The population of the US more than TRIPLED. As I have written again and again, no matter how much money or credit one has, one does not buy houses, cribs, diapers or mini vans if one does not have children. And old people and recent immigrants are not big buyers of anything. Simply put, we are a consumer driven economy, and we do not have enough consumers. We need policies that incent those in the upper and middle classes of child bearing age to propagate. The Fed's stated belief that easy money will spur growth is insane given Einstein's definition. ("Insanity is doing the same thing over and over again expecting different results.") The only result that I see is pushing investors out of interest bearing instruments (bond, cd's and savings accounts) and into equities. No wonder the stock market is trading (read: bubbling) at record price/earnings ratios with no end in sight.
And speaking of insane, I re-entered the oil patch this week. Here's the backstory. As loyal readers know, no petro stock has taken a beating like Kinder Morgan. Once the darling of the pipeline companies, its ill fated reorganization and 75% dividend cut in 2015 put KMI at the back of the pack. That said it remains the largest player in the field, and slowly but surely it has been regaining credibility. That is until last month when its much touted TransMountain, Alberta to British Columbia, construction project ran into a series of environmental roadblocks. This news caused its stock to plummet. That said, I was attracted to its preferred, KMIpA, which trades well below par and is currently yielding over 11%. A quick look at KMI's financials led me to conclude that the preferred is not at risk no matter what happens in Canada. Thus I bought. I also continue to pick up municipal bond closed end funds on dips.
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
The headline in Thursday's Investor Business Daily read " Yellen Triggers Stock Rally." What? Did I not praise her in the last edition for her newly adopted low profile and her desire to make Fed watching as exciting as paint drying? It seems that central bankers worldwide just can't resist meddling. Talk about the hubris of the elite. So what did she say and why the reaction? In testimony before Congress, Yellen admitted that the current, paltry 1.4% rate of inflation (2% inflation now being the Fed's Holy Grail) may be the result of something other than transitory low prices in commodities and that as a consequence future rate hikes may be more gradual. Mr. Market and Mrs. Bond interpreted this to mean that the Fed's balance sheet reduction anticipated to begin in September and/or its anticipated December rate hike may not occur. In other words, the easy money punch bowl may continue. This sent bond yields lower and stock prices higher.
The problem with the Fed, as I see it, is that it is populated by academic economists who, despite giving lip service to "following the data, slavishly follow models they developed decades ago. If one truly "follows the data", how can one not conclude that a decade of easy money has not spurred the economy? And who says inflation necessarily equates to economic growth? Look at the period 1850 to 1900, the sweet spot of the industrial revolution and one of, if not the greatest, period of economic growth in US history. The annual rate of inflation was 0.17%. In other words $1 in 1850 was worth $1.09 in 1900. Inflation had little to do with economic growth. What did? The population of the US more than TRIPLED. As I have written again and again, no matter how much money or credit one has, one does not buy houses, cribs, diapers or mini vans if one does not have children. And old people and recent immigrants are not big buyers of anything. Simply put, we are a consumer driven economy, and we do not have enough consumers. We need policies that incent those in the upper and middle classes of child bearing age to propagate. The Fed's stated belief that easy money will spur growth is insane given Einstein's definition. ("Insanity is doing the same thing over and over again expecting different results.") The only result that I see is pushing investors out of interest bearing instruments (bond, cd's and savings accounts) and into equities. No wonder the stock market is trading (read: bubbling) at record price/earnings ratios with no end in sight.
And speaking of insane, I re-entered the oil patch this week. Here's the backstory. As loyal readers know, no petro stock has taken a beating like Kinder Morgan. Once the darling of the pipeline companies, its ill fated reorganization and 75% dividend cut in 2015 put KMI at the back of the pack. That said it remains the largest player in the field, and slowly but surely it has been regaining credibility. That is until last month when its much touted TransMountain, Alberta to British Columbia, construction project ran into a series of environmental roadblocks. This news caused its stock to plummet. That said, I was attracted to its preferred, KMIpA, which trades well below par and is currently yielding over 11%. A quick look at KMI's financials led me to conclude that the preferred is not at risk no matter what happens in Canada. Thus I bought. I also continue to pick up municipal bond closed end funds on dips.
Sunday, July 2, 2017
July 2, 2017 Draghi
Risk/Reward Vol. 357
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
Words have consequences when one is a central banker. Ask Ben Bernanke. Remember the "taper tantrum" of 2013 when he surprised the market by announcing a tapering of bond purchases without sufficient forewarning? Well, Janet Yellen remembers it and that is why she takes such pain to condition the market for any move of significance. For example, Mr. Market has been warned and fully expects the Fed to allow its balance sheet to run off at the rate of $10 to 50 billion per month starting this fall, to raise rates one more time this calendar year and to raise rates three times in 2018. Springing surprises is anathema to Chair Yellen. As she has stated on numerous occasions, she wants Fed actions to be as exciting as watching paint dry. This is a lesson that European Central Bank President Mario Draghi needs to learn. On Tuesday, out of the blue, he stated the following: "All the signs now point to a strengthening and broadening recovery in the euro area. Deflationary forces have been replaced by reflationary ones." What! Reflation has appeared nowhere in his previous comments. The reaction in the bond market was swift and significant as fixed income investors interpreted the statement to mean that the ECB would soon end its very accommodative 60billion Euro/month bond buying program. Since bond markets are more globalized than equity markets, the sell off hit everywhere including the United States. Yields (which move opposite to prices) shot through the roof. The yield on the all important US Ten Year Treasury Bond ("10Year") jumped from 2.14 to 2.3%, a huge move given the stability in rates below 2.2% that we have experienced recently. Predictably, the prices of those securities that are correlated to the 10Year fell.
So what did I, a man whose portfolio is closely pegged to the 10Year, do? First, I determined that despite the hit, my portfolio remained green. But even if it had dipped into the red, I would not have sold so long as the losses were less than 5%. Why not sell? Because over several years of tracking interest rates, I have learned that Mrs. Bond, like Mr. Market, often overreacts when surprises are sprung. And a quick review of the context in which Draghi's comment was made (reaffirming the monthly bond purchase program) confirmed the overreaction. So I bought more of the same, preferred stock and municipal bond closed end funds. If I am right, I should see nice capital gains and healthy monthly dividends from my new acquisitions.
The stock market, too, took a time out in the wake of Draghi's comments but came back strong by week's end. Seemingly each of the major indices flirts with a new record high on a daily basis despite periodic warnings that stock prices are bloated. This week's warning was a report that the CAPE (Nobel Prize winner Robert Shiller's comparative price/earnings chart) was near 30 for only the third time in its history. The other two were just before the stock market crashes of 1929 and 1999. Again, I say "So what". In a world dominated by central bank policies that depress interest rates, There Is No Alternative ("TINA") to stocks. In this regard, the House Financial Services Committee held hearings this week on "The Federal Reserve's Impact on Main Street, Retirees and Savings." The consensus of those that spoke was that the decade long easy money policies of the Federal Reserve have enriched the investor class at the expense of savers. Duh! One need not look beyond my 92 year old mother. At her age, traditional advice would have her in short term bonds and cd's. And that is where she is. As each matures she reinvests, often for below 2% returns. If her level of care increases she will erode principal. Should she be in stocks? Some would say yes, but what would a 10% or even a 2% correction do to her? No thank you. And she is not alone. One economist who testified at the hearing estimated that the past decade of centrally planned low interest rates has cost savers nearly $2.5 trillion in interest that in more normal times they could have expected. And to what end? As I have written ad nauseum in this blog, low interest rates have proven ineffective at spurring our economy which is growing at a pitiful 1.4% annually. No matter how low the rate, no one is going to buy what one does not need. People without children do not buy diapers, cribs, houses or minivans. And old people don't buy much at all. Look around. We are a childless, aging country. In other words, an economy with an ever shrinking number of buyers simply cannot grow no matter how accommodative its monetary policy. Finding ways to prosper in such an environment is the challenge we all face.
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
Words have consequences when one is a central banker. Ask Ben Bernanke. Remember the "taper tantrum" of 2013 when he surprised the market by announcing a tapering of bond purchases without sufficient forewarning? Well, Janet Yellen remembers it and that is why she takes such pain to condition the market for any move of significance. For example, Mr. Market has been warned and fully expects the Fed to allow its balance sheet to run off at the rate of $10 to 50 billion per month starting this fall, to raise rates one more time this calendar year and to raise rates three times in 2018. Springing surprises is anathema to Chair Yellen. As she has stated on numerous occasions, she wants Fed actions to be as exciting as watching paint dry. This is a lesson that European Central Bank President Mario Draghi needs to learn. On Tuesday, out of the blue, he stated the following: "All the signs now point to a strengthening and broadening recovery in the euro area. Deflationary forces have been replaced by reflationary ones." What! Reflation has appeared nowhere in his previous comments. The reaction in the bond market was swift and significant as fixed income investors interpreted the statement to mean that the ECB would soon end its very accommodative 60billion Euro/month bond buying program. Since bond markets are more globalized than equity markets, the sell off hit everywhere including the United States. Yields (which move opposite to prices) shot through the roof. The yield on the all important US Ten Year Treasury Bond ("10Year") jumped from 2.14 to 2.3%, a huge move given the stability in rates below 2.2% that we have experienced recently. Predictably, the prices of those securities that are correlated to the 10Year fell.
So what did I, a man whose portfolio is closely pegged to the 10Year, do? First, I determined that despite the hit, my portfolio remained green. But even if it had dipped into the red, I would not have sold so long as the losses were less than 5%. Why not sell? Because over several years of tracking interest rates, I have learned that Mrs. Bond, like Mr. Market, often overreacts when surprises are sprung. And a quick review of the context in which Draghi's comment was made (reaffirming the monthly bond purchase program) confirmed the overreaction. So I bought more of the same, preferred stock and municipal bond closed end funds. If I am right, I should see nice capital gains and healthy monthly dividends from my new acquisitions.
The stock market, too, took a time out in the wake of Draghi's comments but came back strong by week's end. Seemingly each of the major indices flirts with a new record high on a daily basis despite periodic warnings that stock prices are bloated. This week's warning was a report that the CAPE (Nobel Prize winner Robert Shiller's comparative price/earnings chart) was near 30 for only the third time in its history. The other two were just before the stock market crashes of 1929 and 1999. Again, I say "So what". In a world dominated by central bank policies that depress interest rates, There Is No Alternative ("TINA") to stocks. In this regard, the House Financial Services Committee held hearings this week on "The Federal Reserve's Impact on Main Street, Retirees and Savings." The consensus of those that spoke was that the decade long easy money policies of the Federal Reserve have enriched the investor class at the expense of savers. Duh! One need not look beyond my 92 year old mother. At her age, traditional advice would have her in short term bonds and cd's. And that is where she is. As each matures she reinvests, often for below 2% returns. If her level of care increases she will erode principal. Should she be in stocks? Some would say yes, but what would a 10% or even a 2% correction do to her? No thank you. And she is not alone. One economist who testified at the hearing estimated that the past decade of centrally planned low interest rates has cost savers nearly $2.5 trillion in interest that in more normal times they could have expected. And to what end? As I have written ad nauseum in this blog, low interest rates have proven ineffective at spurring our economy which is growing at a pitiful 1.4% annually. No matter how low the rate, no one is going to buy what one does not need. People without children do not buy diapers, cribs, houses or minivans. And old people don't buy much at all. Look around. We are a childless, aging country. In other words, an economy with an ever shrinking number of buyers simply cannot grow no matter how accommodative its monetary policy. Finding ways to prosper in such an environment is the challenge we all face.
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