George Morgan's Blog, page 4

I Knew It Wouldn't Take Long

Michael Lewis’ new book “Flash Boys” was published yesterday and today the Wall Street Journal published a book review. I think this is indicative of the level of discussion the book is capable of generating. There are couple of takeaways from the review; first is that it is very one sided and its portrayal of Wall Street is not totally objective. This should not come as a major surprise because all of Lewis’ previous books have depicted Wall Street as greedy, not overly perceptive and at tim...

Big Flash

Last night, Michael Lewis appeared on 60 Minutes to promote his new book, “Flash Boys,” which is an expose on flash trading.  Kramer talked about it for a few minutes this morning, but there was nothing in the Wall Street Journal concerning it. It might be a good topic for Jason Zweig this weekend. What I saw was nothing new, but, the significance is that flash trading was being talked about on Primetime TV. Lewis claims that flash trading is merely trading ahead, which is of course ille...

Green Sprouts

In the month of February, the inflation rate came in at under 2% for the 22nd straight month. The last time inflation ran below 2% for 22 months was from 1997 to 1999. Inflation also ran low for long stretches between 2001 and 2004. What does this mean for the market? With inflation at this relatively benign rate it would be very difficult for the Fed to justify any significant increase in interest rates. We know that some of the recent tumbles in the market have followed announcements by the...

More Good News

Another piece of economic data following on the heels of yesterday’s GDP report provides additional insight into the state of the economy and the market. In the fourth quarter of 3013, after tax corporate profits rose to one $1.9 trillion setting an all-time record. In light of the less than stellar growth of the GDP, to what factors can we attribute this outstanding result? First of all, companies are guarding their cash rather than putting it back into the economy in the form of new hiring....

Not To Cold, Not To Hot

Just released figures indicate that in the fourth quarter of 2013 our gross domestic product grew at an annualized rate of 2.6%. While this is down from the 4.1% experienced in the third quarter, it still keeps our long-term growth trend line in a reasonable trajectory. One of the brightest spots of the report was that consumer spending was up 3.3 % which was a significant gain over the 2.7% percent experienced in the third quarter. All of this seems to vindicate the Yellen Fed and their late...

Fed Not Alone

The European Central Bank is the European equivalent of our Federal Reserve Bank, except that they establish monetary policy for a host of economies, not just one. The ECB is signaling that they are willing to increase monetary stimulus to jumpstart the Europeans economy. The tools available to them are similar to those currently being used our Fed. These include historically low interest rates along with the purchase of government and private debt to hold down long-term rates and boost lendi...

High Hopes

A further pursing of the Federal Reserve’s policy statement that was released last week reveals some very interesting and perhaps bold assumptions used by the Fed to reach it’s policy decision. The Fed projects then in the year 2016 the unemployment rate will be 5.4%, the GDP will grow at near 3% and the inflation rate will be just below 2%. I would say these projections are aggressive, but not unattainable. If their projections are correct they could result in a number of positive outcomes....

Good News

An article on the front page of today’s Wall Street Journal states that the market may have misinterpreted last Friday’s press release by the Federal Reserve Open Market Committee. What Wall Street heard was Janet Yellen suggesting that the Federal Reserve might start raising short term interest rates a little sooner than investors had expected. However, in its official statement, the Fed said that it planned to keep short-term rates below what it sees as appropriate for normal economy even a...

Not What I Said

Many on Wall Street understood that the Fed’s latest statement on monetary policy signaled a shift to the hawkish side of the spectrum. For those of you unfamiliar with Fed jargon, hawkish means that your focus is on fighting inflation and you favor a tighter monetary stance. But, according to Narayana Kocherlakota President of the Federal Reserve Bank of Minneapolis, that is not the case. Mr. Kocherlakota, who cast the only dissenting vote to the policy statement, told the Wall Street Journa...

Growth vs. Value

By law, every mutual fund must provide investors with a legal document, called a prospectus, which details the investment approach that the portfolio manager will take. The funds investment approach is called its style. This style can be conservative, aggressive, a mix of stocks and bonds or all international, to name a few. Two of the biggest style categories are growth investing and value investing. Value investors seek to buy stocks whose market price they feel is less that the value of th...