Federal Reserve

Shift from QE to forward guidance

In case you missed it Kevin Warsh was on CNBC this morning. Again he made some great points including highlighting one of the downfalls of QE which he suggests has led to a misallocation and “malinvestment” of capital as oppose to hyperinflation which many doomsdayers have been harping on since the beginning of Fed’s Zero Interest Rate and QE policies.

Fed bogey may change

Research work done by economists at IMF as well as work done by Goldman Sachs economist Jan Hatzius are beginning to suggest that the Federal Reserve may be planning to change the threshold for its Zero Interest Rate Policy (ZIRP) from their original 6.5% unemployment rate and 2.5% inflation rate to perhaps a lower rate of unemployment such as 6.0% to even 5.5% rate.

How The Economic Machine Works

In this video Bridgewater’s Ray Dalio explains how in his view the economy is like a machine.   Suggesting that many people don’t understand it – or they don’t agree on how it works – and this has led to a lot of needless economic suffering.

Baffled by this Market!

Even Jim Cramer of CNBC is baffled by the price action in US stock market.  In his show last night he admitted that he too hasn’t seen the following price actions in the market during his 34 years investing career.

‘Investing, When It Looks The Easiest, Is At Its Hardest’

Wise words from Baupost Group founder Seth Klarman latest newsletter courtesy of zerohedge website:

Bitcoin

So have you closed your Bank of America account and transferred your US $ accounts into Bitcoins?

23x CAPE Is Not Cheap

If we were to use Robert Shiller’s Cyclically Adjusted Price Earnings Ratio, abbreviated as CAPE which basically uses the 10-year average of “real” (inflation-adjusted) earnings for the E part of the denominator; we can then see why in his latest Viewpoint report (link) Goldman Sachs Jim O’Neill suggested S&P 500 valuation is not hardly “bargain basement”

Kevin Warsh on Federal Reserve

Informative comments by former Federal Reserve governor Kevin Warsh on what is likely to take place when the Fed unwinds its current bond-buying program, but also highlighting the role of a central banker in an economy. (Flashplayer is required to watch the video clip)

Investment Advice from Your Uncle Polonius

GMO Capital Jeremy Grantham latest newsletter once again is very insightful especially how he explained some of the basic concepts in the investing. He cleverly used Polonius a character in Shakespeare’s play Hamlet for describing and giving these investment advice.

Nash equilibrium

Whether President Obama’s recent job plan aka fiscal stimulus plan will be passed in its entirety or passed partially is still not certain, but what is certain and factually supported given the work of Reinhart and Rogoff is that solving or getting out of this malaise or hangover from our recent credit bubble will take more than just several years.

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