Tag Archives: interest rates

In our view, the four primary drivers of market valuations are earnings, dividends, interest rates and inflation, of which two stand out above the others as being the most important. We look at each factor and then conclude with what it means for stocks.

History strongly suggests that, rather than a return to a nice, placid world of “normal” interest rates, we are likely to see a continuation of the borrowing binge/asset bubble until real rates spike as a result of either soaring nominal rates soar or plummeting inflation. Here's why that is the case.

Most of the hundreds of financial articles posted every week are just "financial entertainment" - unfounded forecasts, fear mongering or cheer-leading. That being said, there are a number of articles that are absolutely MUST READS if you want to become an informed investor and be in position to understand what is evolving in the financial environment and be in a position act accordingly. Here they are.

I read hundreds of financial articles every week and most are nothing more than "financial entertainment" - unfounded forecasts, fear mongering or cheer-leading. That being said, there are a number of articles that are absolutely MUST READS if you are to become an informed investor and be in position to understand what is evolving in the financial environment and act accordingly. Introductory paragraphs and links to a number of them are provided in this post.

To understand how the stock market behaves it is imperative to realize that the stock market is overwhelmingly influenced by interest rates. It’s difficult to overstate this key fact. Interest rates are the bone and marrow of the stock market. More specifically, the stock market is ruled by long-term and short-term interest rates creating an overriding framework for what drives the market in which different sectors do better or worse at different points in the economic cycle. This article explains the behavior more fully.

Many gold bugs hold out hope that any day now, gold will resume its march upward to $2,000, then $5,000 and then $10,000 per ounce. In answer to the question “How can anyone reasonably calculate what the value of gold is?” I want to put forth in this post a possible model for doing just that. The purpose of the model isn’t to say where gold will go but to look at the underlying factors that drive the price of the precious metal.

So much analysis we see and hear lately is concerned with whether the stock market is in a bubble or not. The truth of the matter, however, is that bear markets do not begin due to bubble-level valuations being reached and then bursting, but in anticipation of half a dozen mitigating factors as outlined in this article.

Everyone knows that interest rates are going to rise in the future so the real question is not whether they will rise, but when and by how much. [This article analyzes when that will most likely be.]

If the U.S. economy weakens in the second half as a result of higher energy prices, that could cause interest rates and the dollar to fall — fueling a rally in metals.

A change in monetary, fiscal, and regulatory policy is necessary to beat back the forces of recession and deflation. If the messages of falling gold prices and falling interest rates are not enough to gain the attention of policy makers, I suspect that the specter of future falling stock prices throughout the world will be. That is what is in store for us if the recessionary/deflationary bias in the world economy that gold and bonds are signaling, reasserts itself.