Monthly Archives: November 2019

Why The Fed Funds Market Has Had a Shortage of Lenders

   The mystery of the Fed funds market experiencing a shortage of available lenders and thus trading at high rates may be because U.S. banks don’t want to risk loaning to a high risk bank whose parent is based in the EU. If the EU breaks up then the ECB central bank would be unable to continue its existence and its going out of business would be a bigger catastrophe than the Lehman bankruptcy of 2008. If a European bank defaults on a repo loan in theory the ECB could loan money to the failed bank who could then make good on their repo loan. But this rescue wouldn’t happen if the ECB is eliminated. The global banking system is

2019-11-15T18:05:59-08:00November 15th, 2019|mayflowercapital blog|Comments Off on Why The Fed Funds Market Has Had a Shortage of Lenders

Should Bearish Investors Avoid Gold and Treasuries?

    Have bearish investors gotten ahead of themselves regarding buying gold and Treasuries? One strategy some people (who are bearish about stocks) use is to buy gold and long-term Treasuries with the expectation that they will go up in value when stocks crash.  The problem is that if too many stock market bears did this then they would make the price of gold and bonds too high to make this strategy succeed. Gold should only be roughly 1,000 based on its long-term pattern of appreciating in line with CPI inflation; instead it has been around $1,500. Perhaps the $500 “excess” price is like a long-term put on stocks? If a repeat of the crash of 2008 occurs perhaps gold will

2019-11-08T17:58:25-08:00November 8th, 2019|mayflowercapital blog|Comments Off on Should Bearish Investors Avoid Gold and Treasuries?

Negative Rate Policies To End

   The possibility of endless dropping of yields until rates reach negative 8% (as suggested by one expert) is nonsense. The economic crisis that enabled negative rates somewhat like the 1962 Cuban missile crisis where stakes of failure were so high that everyone needs to pitch in and help compromise to avoid war. It was a new era, despite the cliché that people never change and thus (the old cliché) wars will continue to occur; but that is no longer applicable. So by analogy, possibly the advocates of Quantitative Easing (QE) and Zero Interest Rate Policy (ZIRP) will realize how dangerous it is and the opponents will be assertive enough to persuade government policy makers to stop it. Precedents for

2019-11-06T17:29:00-08:00November 6th, 2019|mayflowercapital blog|Comments Off on Negative Rate Policies To End

Jobs Report Not Inflationary

       The monthly nonfarm payroll report was released today showing a 128,000 increase in employment. Since employment needs to increase by roughly 100k to 125k a month to offset population and immigration increases then the “real” population-adjusted gains were a token 10k or so, which would be an annualized rate of 0.08%, which is almost a zero percent increase. Also, the pool of available workers was reduced by 41,000 last month. 80% of the job gains were in dead-end minimum wage type of work, the other 20% in secure industries like health care or civil servants where employers have a greater stability of cash flow to enable hiring even in a weak economy. Bond yield increased by only 2 basis

2019-11-01T13:51:30-07:00November 1st, 2019|mayflowercapital blog|Comments Off on Jobs Report Not Inflationary