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Discussion: (16 comments)

  1. so much for the Lucas Critique……..

    1. morganovich


      it also seems like a questionable premise as correlation and causality are not the same.

      since 2009, the S+P correlates well with lots of things including americans on disability and foodstamps.

      yet claiming a rise in foodstamps is good for the market would seem absurd.

      the correlation with fed asset purchases is quite strong. no surprise there…

      there are some issues with the jobs market as well.

      Despite the headline decline in the unemployment rate from 7.6% to 7.4%, July’s unemployment numbers were bad news for the economy.

      The economy created 162,000 jobs, but hours worked in the economy decreased by a tenth of a percent. The average workweek shrank, and average earnings declined by two cents. Job gains for May and June were revised down by a total of 26,000.

      Although the number of Americans employed in 2013 has increased by about 1 million, 82% of these jobs have been part-time, according to data from the Labor Department’s Current Population Survey. There have been 4.5 part-time jobs created for every full-time job.

      much of this “jobs gain” may really be job splitting as people get pushed back to fewer hours and 3 workers are replaced by 4 to dodge obamacare.

      1. Methinks

        Are we still well correlated with skirt lengths too?

        I notice the S&P is going higher the closer we get to a full-scale Oblundercare. and higher taxes.

        It’s the animal spirits!

        1. morganovich


          lions and tigers and bears! oh my.

          what are you seeing/guessing on flow of funds?

          i would not be at all surprised to see a move from bonds to equities continue as tapering approaches.

          nothing takes all the fun out of a 1.35 yield like a nice capital gains loss.

          1. Methinks


            My opinion would not be superior to yours. I don’t know. I just hope whatever happens, it’ll spike vol! Or volume. I’ll take a bump in either right now.

          2. mesa econoguy

            And here you go – Flow of Funds, 10 Years of Capital Flows


            All kinds of good stuff today…

      2. yet claiming a rise in foodstamps is good for the market would seem absurd.

        So, you still aren’t convinced that aggregate demand drives growth?


        1. morganovich


          et tu brute?

      3. mesa econoguy

        Exactly my thoughts.

        Yet this type of thinking seems to underpin current Fed action.

      4. mesa econoguy
  2. Methinks

    What happens when you scrub out Fed POMO?

    1. mesa econoguy
      1. All hail our central planners.

  3. It’ll be interesting to see what will happen when “FED tapering” goes into effect. If the Federal Reserve hadn’t blown the previous bubble to such outrageous proportions, we wouldn’t be in this mess right now, which we are just starting to dig ourselves out of. The leadership at the Federal Reserve claimed to have learned from The Great Depression, but their actions over the ensuing years tells us otherwise.

  4. I guess that ends all the silly claims that equities have advanced due to the various Fed actions.

  5. This is the type of nonsense that gives economists a bad name. What we have is grasping for anything that supports a predetermined narrative as the bigger picture is being ignored. It seems to me that Mark should notice that what we have is yet another of a series of bubbles that he has a hard time seeing until after they pop. Not only do we see the biggest bubble in human history when we look at the bond market but most other areas show that asset classes are in bubble territory as central banks have decided that the path to prosperity requires the destruction of the purchasing power of currencies and the impoverishment of those pesky savers.

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