The amount of cash available for banks to borrow over-night dried up this week for some reason. Interest rates on these short-term funds shot up to almost 10% as a result, which was four times the average of normal costs. This has not happened since the worst of the 2008 financial crisis. Should investors be concerned? Yes and no. What bothered most bond market traders was that no one knows exactly why this occurred. It happened on Monday. Market participants seem to agree that a confluence of events caused this week’s cash crunch. The first event had to do with…
Insights & Advice
Bill Schmick
The era of U.S. oil independence
Last weekend’s surprise drone attack on Saudi Arabia’s major oil fields was a disaster, but it could have been worse. Fifty years ago, an attack like that would have sent the world’s financial markets into a tailspin and rocked global economies. None of that happened–thanks to the U. S. energy production. Granted, there was an initial decline in the markets until the damage was assessed and experts concluded that the 5.7 million barrels per day (bpd) of crude production could be put back online within three weeks. The short-fall represented about half of the Saudi’s daily production. Yet, the markets…
Investors discover value stocks
Value stocks, those equities that have fallen out of favor, have made a comeback this week. These underpriced orphans have become the new darlings of Wall Street, while high-flyers (think software and some tech) have sold off. What does this say about the markets? The short answer is that we have more room to run. It means, in my opinion, that we will reach and break historical highs in the U.S. averages and that we should have fairly smooth sailing into October. If, at that point, there are breakthroughs in the trade issue and the Federal Reserve Bank cuts interest…
Europe throws in the towel
The European Central Bank (ECB) announced a major new stimulus package on Thursday. A key interest rate was reduced, and a new bond-buying program was announced, amounting to $22 billion per month. In the past, those efforts would have been enough to boost the European Economy, but will it be enough this time around? It is not as if we haven’t seen this before. Through the years, ever since the Financial Crisis of 2009, the ECB, as well as other central banks around the world, have stimulated their economies to avoid recession, or something worse. The problem is that monetary…