Monthly Archives: March 2018

Free and Fair Trade: Does it Result in Loss of Jobs?

   The argument in favor of free trade is that as people in EM countries get jobs that used to be in the Developed world these people will use their new paychecks to buy things made in America, including luxuries that they could now afford thanks to their new job. Thus, in theory there would be no global loss of jobs. This would be true if a U.S. factory moved to Canada, but it is less likely to be true if a U.S. factory moved to very insulated and poor country that didn’t cooperate with the principles of free trade. If EM based employers keep too much profit instead of paying a living wage to employees then their employees can’t

2018-03-22T13:19:33-07:00March 22nd, 2018|mayflowercapital blog|Comments Off on Free and Fair Trade: Does it Result in Loss of Jobs?

Fed Raises The Rate: Nothing Happened To Bonds

   The Fed raised the Fed funds rate by 0.25% to a mid-level target of 1.625% today as expected. The 10 year Treasury Note ended the day unchanged at 2.88%. 3 month Libor floated up to 2.25%, implying that the marketplace, without Fed controls, wants rates to be at that level. I expect that the yield curve will stay roughly the same for rates between 2 years to 30 years maturity and the changes to take place will be that the short end of the yield curve between 1 day to 2 years maturities rises to about where the two year Treasury yield is now at 2.32%.   If you own a 90 day Treasury and short term rates rise

2018-03-21T15:20:52-07:00March 21st, 2018|mayflowercapital blog|Comments Off on Fed Raises The Rate: Nothing Happened To Bonds

Interest Rates Forecast

Most economists expect rising inflation. Blackrock said core CPI might go to 2.4% and then drop to 2.2%. David Rosenberg warned that in a previous cycle core CPI had gone from 1% to 3%. If core CPI goes to 2.3% and the “natural” real rate is zero then the overnight Fed funds should be 2.3%. Currently 90 day Libor is 2.18% and the two year Treasury is 2.28% (2.5% state income tax-adjusted). Thus some short term rates set by the market have already discounted rising inflation that will make rates go up. When the Fed raises rates that will make long term bonds’ yield go down slightly when investors see the Fed is trying to fight inflation. It won’t take

2018-03-16T15:25:16-07:00March 16th, 2018|mayflowercapital blog|Comments Off on Interest Rates Forecast

Employment Report’s Huge Gain Very Misunderstood

Today the monthly BLS employment report was released showing 313,000 new jobs, a much higher increase than the typical 170,000. Nominal hourly wages up 3.2% annualized (using 3 mo. average); YoY up 2.6%. David Rosenberg says wage gains are real; and says the report is a “perfect report”; importantly that manufacturers added 100,000 jobs instead of the low wage service jobs.     Economist Mike Bazdarich has an excellent commentary, using his methods, showing only modest, gradual increase in employment and wages occurred when excluding two volatile occupations.     ECRI says unemployment rate actually increasing in recent months if one looks down to the third decimal place. Remarkable: “All of the growth in jobs since 2000 has been among those 55

2018-03-09T14:40:40-08:00March 9th, 2018|mayflowercapital blog|Comments Off on Employment Report’s Huge Gain Very Misunderstood

The Dollar Is Too Low

     Economics firm BCA said short German government Euro denominated bunds, and go long, unhedged for foreign currency changes, the 30 year US Treasury bond because of the interest rate differential. I think investors hold a prejudiced view that Europeans like to pay higher taxes and thus have a more sound currency due to smaller deficits. I disagree with that claim, I think the EU has plenty of loopholes and is not a haven for those who like to collect high taxes and use the tax revenue to pay down debt; instead they have many aspects of deficit spending. The EU financial system is inherently unstable, using a new type of system never tried before where they have national central

2018-03-05T12:57:02-08:00March 5th, 2018|mayflowercapital blog|Comments Off on The Dollar Is Too Low

Inflation: Chances of It Increasing or Decreasing?

Reasons inflation may increase: Full employment economy of 4.1% unemployment Economy is strongest since the bottom in 2009 Tax cuts will stimulate the economy leading to excessive growth and inflation   Reasons inflation won’t increase: The dominant economic paradigm is that giant companies export good jobs in Developed countries to EM countries to cut costs and cut taxes. Corporations will seek to lower their taxes by moving more activities offshore where they can pay 12.5% instead of 21%. Continued hallowing out of mid-skill good jobs results in workers taking a demotion, pay cut, and shifting to unreliable gig economy work instead of a real job. This demotion results in workers qualifying for smaller loans and thus cuts their ability to

2018-03-02T17:55:49-08:00March 2nd, 2018|mayflowercapital blog|Comments Off on Inflation: Chances of It Increasing or Decreasing?