For Your TGIF Procrastinations, March 27, 2015

  1. SwitzerlandEurope is suddenly booming — this is why – The eurozone has had an infamously weak recovery, and two recessions, since 2008, all amid the chaos of whether Greece would exit (and take other countries in southern Europe with it). But there are a few main factors that help explain why there’s a recovery underway now.
  2. Bernanke Was Right: Interest Rates Aren’t Going Anywhere – Yet every time the Fed tries to wean off the cheap money junkies — I’m not talking outright tightening but merely slowing the flow of stimulus by ending its QE1, QE2 and QE3 bond-purchase programs — the economy slows, inflation falls, the stock market rattles and the Fed is forced to dole out more. It happened in 2010. It happened in 2011. And it’s happening again now.
  3. A History of Failure Hasn’t Stopped Speculators From Trading This Note – Past surges in the VIX note’s popularity have been less than prescient in predicting more turbulence. Shares outstanding in VXX climbed to multiple records throughout 2013, a year when the S&P 500 gained 30 percent and U.S. shares posted one of the broadest advances in history. A high on July 24, 2014, came just before a 3.8 percent August rally in the equities gauge.
  4. Bank of Japan Inflation Gauge Grinds to a Halt as Spending Falls – Declines in household spending and retail sales, even as the labor market tightens and prospects for wage gains improve, indicate the lingering effect of an increase in the sales tax last year. While BOJ Governor Haruhiko Kuroda has said that any drop in prices will be temporary and won’t stop the bank reaching its 2 percent target, economists surveyed by Bloomberg expect an extra dose of monetary stimulus by October.
  5. Weak Demand? Strong Dollar? U.S. Businesses Aren’t Investing Much – Weak business spending—along with other factors like a downbeat export picture—prompted some economists to downgrade their assessments of how much the economy expanded in the current quarter. Morgan Stanley said it now thinks gross domestic product grew at a 0.9% annual rate in January through March instead of its prior estimate of 1.2%. Macroeconomic Advisers lowered its estimate a tenth of a percentage point to 1.4%.
  6. How China used more cement in 3 years than the U.S. did in the entire 20th Century – The statistic seems incredible, but according to government and industry sources, it appears accurate. What’s more, once you dive into the figures, they have a surprisingly logical explanation that reveals some fascinating differences between the two countries, and some ominous realities about China.
  7. The biggest mistake investors are making right now – It’s been so long since the last major market event that investors have returned to one of their time-honored traditions—denying the link between higher risk and higher reward. The worst part is that they are doing this in the fixed income side of portfolios, taking equity-like risk with their bond funds, guaranteeing that the protection from volatility that bonds offer does not show up when it is most needed.
  8. How Much Cash Is Too Much Cash for Your Portfolio? – “There’s no right or wrong answer to how much cash an investor should hold as an investment, it is a strategic decision,” Charles Schwab responded. “It’s easy to question cash in the sixth year of a bull market and when the Federal Reserve is artificially suppressing interest rates, but we don’t invest based on the last six years. We invest based on what we expect the future may hold. Bull markets end and interest rates rise. When they do, a little cash will feel pretty good.”
  9. Liquidity
  10. Bank of England Warns of Risks From Greece and Market Liquidity – The Bank of England said Thursday that Britain’s stability continued to be threatened by international risks, including Greece’s financing needs, China’s slowdown and potentially inadequate market liquidity.
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