Caution: The VIX spiked 32% Yesterday.

Do not dismiss yesterday’s spike in the VIX. A 32% move on the Malaysian plane crash is the most significant development in the last 3 months. Volatility is back, closing above April’s highs: And here’s a 1-year picture of the … Continue reading

How Financial Crises Start, Part 2

Yesterday, I highlighted the financial panics of the 19th Century (aka bank runs), how they start, and the government’s response to prevent future runs (the Fed and FDIC).  As noted, regulators and economists are only able to locate the problems … Continue reading

How Financial Crises Start, Part 1

Today is the start of a multi-part series on the financial crisis: what was the cause and what have we learned.   When I lived overseas, I was the proud owner of a 1982 Toyota FJ40.  Designed as an offroad … Continue reading

Recalls are Automakers Best Sales Strategy Yet

Auto sales surged in June to 16.9mm cars, a level not seen since 2006. Here’s the picture of the recovery: The sales spurt may come as a surprise if you’re familiar with the endless number of recalls issued by automakers … Continue reading

The ECB Will Bail Out Portugal Like Ronaldo’s Last-Second Goal

Now what? The market is set to open 1% lower on concerns that Portugese banks are mimicking the recent dismal performance of their national soccer team. A company linked to the nation’s second largest banks missed a debt payment, driving … Continue reading

Why CNBC Wants You To Be Concerned About Your Money

In the days before financial news media broadcasted market information around-the-clock with scrolling pre-market quotes and endless “Breaking News” segments; In the days before online brokerages marked your net worth up or down with every tick in the S&P 500 … Continue reading

Game Theory and NBA Free Agency

A little off-topic, but this story is dominating the headlines and has larger economic implications. Game theory is the study of strategic decision making. It was developed to understand the economic interactions of producers and consumers, and has since been … Continue reading

The Jobs Data Will Provoke Conspiracy Theories

The pace of job creation accelerated in June, as the US added 288k new jobs. This blew away expectations of 215k jobs. The unemployment rate also dropped to 6.1% vs expectations of 6.3%. (This is the lowest unemployment rate since … Continue reading

Economic Theory is About to Shift

Similar to psychology and sociology, economics is considered a “soft science” as they are all understood through theories about how we think people will behave. On the other hand, “hard sciences” (like physics) are governed by universally accepted laws which … Continue reading

GDP Drops 2.9%: Blame It On the Rain.

Shocking news on the economy was delivered yesterday as Q1 Gross Domestic Product (GDP) dropped a whopping 2.9%. Here’s how this number compares to recent readings: Wall Street economists immediately began diminishing the importance of the this number with poor … Continue reading

Inflation in the 21st Century

Here’s a very interesting table from David Stockman (http://davidstockmanscontracorner.com/): SMH (that’s millennial parlance for “Shaking My Head”), I thought increasing trade with China was intended to bring us cheaper goods! Let’s discuss the various expenses on the list and determine … Continue reading

The Instability of the Fed, Part 2

Yesterday, we wrote about the systemic instability caused by the Federal Reserve’s attempt at stability. If you missed that article, you can read it here. Today, let’s discuss this instability in the context of how events have transpired since 2008. … Continue reading