Limits on the 500-Pound Gorilla

By Michael Ashton

With interest rates flirting with 3% on the 10-year Treasury note, and the potential (and eventuality) that they will go significantly higher, I thought it might be timely to review a blog post from February 10, 2013 called “Limits on the 500-pound Gorilla.” (It’s worth reading that original post for some of the comments attached thereto.)


Well, here’s an interesting little tidbit. (But first, a note from our sponsors: some channels didn’t pick up my article from  last Wednesday, “Fun With The CPI,” so follow that link if you’d like to read it.)

The Fed adds permanent reserves by buying securities, as we all know by now. The Open Market Desk buys securities and credits the Fed account of the selling institution. Conversely, when the Fed subtracts reserves permanently, it sells securities and debits the account of the buying institution.

Continue reading Limits on the 500-Pound Gorilla

Venezuela Devalues Bolivar More Than 80% in Currency Auction…

By Anthony B. Sanders

Venezuela must be taking the books/movies “The Hunger Games” literally.

(Bloomberg) — Venezuela’s bolivar plunged more than 80 percent as the central bank restarted currency auctions for the first time since August as part of its efforts to ease a severe shortage of dollars and clamp down on hyperinflation.

One dollar bought about 25,000 bolivars at the auction, compared with 3,345 bolivars at the last so-called Dicom sale about six months ago. The rate announced Monday is still much stronger than in the black market, where individuals and businesses without access to the official markets pay about 225,000 bolivars per dollar, according to dolartoday.com.

Continue reading Venezuela Devalues Bolivar More Than 80% in Currency Auction…

Volatility and Interest Rates

By Tom McClellan

VIX Index versus 3-month T-Bill yield
February 23, 2018

Why is the VIX spiking now?  Because now is when it is supposed to do that.

Volatility and interest rates have an interesting relationship, going back many years.  Higher interest rates pull money away from the stock market, and thus make it so that prices have to travel farther to find liquidity, after a positive or negative stimulus.

Continue reading Volatility and Interest Rates

Earnings, Stock Prices and the Voting Machine

By Charlie Bilello

“The stock market is a voting machine rather than a weighing machine. It responds to factual data not directly, but only as they affect the decisions of buyers and sellers.”- Graham and Dodd, Security Analysis

Earnings drive stock prices – so says investing lore. As earnings rise or fall, stock prices move higher or lower by a commensurate amount.

Is this actually how it works?

At first blush, it certainly seems so. In looking at a simple chart, earnings and stock prices appear to move closely together.

Continue reading Earnings, Stock Prices and the Voting Machine

How to Anticipate Stock Market Trend Changes

By Elliott Wave International

Every active stock market investor wants to know: Where are prices headed next?

Most will scour the financial headlines, tune into financial television and talk to their broker or financial advisor in hopes of finding the answer. But, alas, this quest for market insight often leaves investors just as uncertain as before.

One market veteran might say “buy the dip.” Another strongly advises: “Sell!” Yet another knowingly smiles and comments: “Volatility is normal, just ride it out.”

The truth is: no one knows for sure what the market will do next.

Continue reading How to Anticipate Stock Market Trend Changes