Earnings Multiple Expansion, QE and the Fed

Source: Bloomberg Over the years, I have described secular bull and bear markets as long periods of earnings multiple expansion and compression (respectively). What is the impact of the Fed’s QE on the P/E compression that began when the market peaked in March 2000 or October 2007? Dave Wilson of Bloomberg points us to Gina Martin […]

Hard to be Easing

The United States Federal Reserve’s decision to undertake a third round of quantitative easing, or QE3, has raised three important questions. Will QE3 jump-start America’s anemic economic growth? Will it lead to a persistent increase in risky assets, especially in US and other global equity markets? Finally, will its effects on GDP growth and equity […]

Why Is a Price-Fixing/Collusion Lawsuit Against the Biggest Names in Private Equity Getting Only Cursory Notice?

It’s troubling that some stinging charges against the very biggest names in private equity are getting only passing attention in the financial media. The New York Times last week managed to get some court filings unsealed last week in a class action lawsuit, Dahl v. Bain Capital Partners. This revelation came after the parties tried to satisfy […]

Ten Observations as the Week Winds Down

The US dollar is going into month and quarter end on a soft note.  The greenback had been generally firm against most of the major foreign currencies, but the Japanese yen, since around mid-month, but the news stream appears to have turned against it.  Yesterday the euro traded in both sides of Wednesday’s range and […]

How Long Can These Markets Run on QE ?

Today marks the end of the month and quarter. Hence, it is a good time to look over the key economic and market data, and try to assess where we are in the overall cycle. The data itself suggests several contradictory factors are driving markets. Durable goods orders — those big ticket items like autos, washers, and […]

Time to Rethink a Broken Market

Yves here. Readers are likely to assume that the “broken market” of the headline is US housing related, say the private mortgage securitization market, but the subject is what once was the gold standard of trading markets, equities. Index Universe has cited a study by the Tabb Group that finds that investor confidence in stock markets is even […]

Have Sharpe Ratios Peaked?

There’s a strong case for expecting that Sharpe ratios will be lower, perhaps a lot lower, for the stock and bond markets for the foreseeable future. What’s the source of this outlook? Gravity. Reviewing the past two decades reminds that equity and fixed-income returns, after adjusting for volatility and the risk-free rate (3-month T-bills), have been soaring. […]

The New Abnormal: Inflation Expectations & the Stock Market

There’s a rumor going around that the crowd’s worried about inflation. Tim Bond of Odey Asset Management speaks for many of this persuasion when he writes in the Financial Times that “the rise in inflation has been the main factor responsible for the sharp slowdown in global growth since the start of the year.” Normally, […]

Profiting From the Confusion Over Europe

Mrs. OldProf “delicately” suggests that my work might be improved via brevity.  OK. Here is the Executive Summary of what you need to know. When it comes to Europe, there is a pundit and media checklist for any proposed solution: Does it account for the certain Greek default? How many dominoes (other defaulting countries) are […]

Welcome to Q4: Credit Crisis Hangover Continues

Wake up! Time to make the donuts! Good Monday morning. We begin the week, month and quarter with a world still suffering from the hangover from its prior credit crisis. Wherever we look, we see complications from that binge still causing problems. Indeed, as we look across each of the major asset classes and geographic […]