Category Archive

by David Moon In an attempt to boost investor confidence and economic activity, the Bank of Japan (BOJ) has been purchasing between 3 and 7 trillion yen worth of Japanese stocks during each of the past several years. These purchases, funded with newly-created money, make the BOJ one of the 10 largest shareholders in 200 of the 225 stocks in the Nikkei Stock Average. The Japanese central bank now owns more Japanese blue-chip stocks than Blackrock, the largest money management firm in the world. Why would the BOJ do this? Because it has run out of other stimulus tools. Driving … Read More

by David Moon Beginning in the early 1970’s, brothers Nelson and Herbert Hunt set out to corner the world’s silver market, eventually owning or controlling 200 million ounces of silver, or more than half of the world supply at the time. Silver prices rose from $1.95 an ounce in 1973 to a peak of $54 in 1980, creating billions in paper profit for the brothers—until the U.S. government set out to dismantle the brothers’ market manipulation. The silver market collapsed, exposing the brothers, lenders and other creditors to billions in potential losses. As the massive scale of the Hunt acquisitions … Read More

by David Moon During Barack Obama’s first seven years as president, annual GDP growth has averaged 1.7 percent, peaking at 2.5 percent in 2010, his second year in office. Since the U.S. has recorded such data, President Obama is the first president during whose term of office the economy never grew more than three percent in a year. It would be easy to blame Barack Obama; he has been the most philosophically anti-business president since Woodrow Wilson. Yet the Federal Reserve, under both Ben Bernanke and, to a lesser extent, Janet Yellen, has been the most accommodative and business-friendly central … Read More

by David Moon   When Judge Leon Jordan sentenced Knoxville financial thug and thief Jacqueline Stanfill to nine years in prison it marked the latest chapter of a long book of Knoxville financial fraud. The collapse of the Butcher banking empire in 1983 wasn’t the first East Tennessee Ponzi scheme, but it certainly launched more than three decades of repeated and costly swindles.  The suckers of these scams have mostly included intelligent, accomplished individuals—not exactly a stereotypical vision of vulnerable victims. While the demographics of professional investment fraud victims differ significantly from that of the low-income, repeated lottery loser, the … Read More

by David Moon The Citigroup board of directors increased the pay of its CEO, Michael Corbat, 27 percent in 2016, to $16.5 million. The board justified the increase because Corbat’s 2014 pay compared unfavorably his peers. It took Citigroup three times and four years to pass the Federal Reserve’s stress test. Wells Fargo surpassed it to become the country’s third largest bank. This, while the stock returned zero since 2014 and has fallen 10 percent this year. Corbat deserved to be paid less than his peers. Horrible corporate governance like this explains some of the income inequality in the U.S. … Read More

by David Moon Last week’s column about the correlation between a president’s political party and stock returns during his term of office generated quite a bit of reader response. Most offered their explanation as to why the S&P 500 has historically performed much better when a Democrat was president. One reader suggested that stocks perform better when a Democrat is president because Wall Street prefers Republicans. I hope this guy gets some help. The most commonly suggested explanation is that the US economy is stronger under Democrat presidents.  That assumption is correct, but the conclusion doesn’t follow from it. Since … Read More

by David Moon Don’t tell your republican friends, but the US stock market has performed better when a Democrat was president than during Republican administrations.  And it’s not even close.  The difference is too large to ignore, regardless of the time frame. Since 1929, the S&P 500 has produced a total return of 204,398 percent, or 9.2 percent compounded annually. (Yes, that’s correct: 204 thousand percent.) The average annual return when a Democrat occupied the White House was 13.2 percent, compared to 4.6 percent during the 40 years of Republican administrations. When separately compounded over the 40 Republican years and … Read More

by David Moon The perverse irony was inescapable.  A March 24 federal court ruling allowed a former law school student to discharge a student loan in bankruptcy—on the same day the US Department of Education disclosing that barely half of all outstanding student loans are being repaid according to their terms. Student loans are generally non-cancellable, even in the event of bankruptcy. Excluding loans to currently enrolled students and those within the six-month post-graduate grace period, barely half of the $855 billion of outstanding direct student loans are being repaid. (Federally guaranteed private sector loans bring the total to more … Read More

by David Moon In the hours following the Brussels terrorist attack this past Tuesday, US stock futures immediately declined in pre-market trading. Most media outlets attributed the drop to reaction to the attacks. Asian and European currencies also declined as investors around the world moved money into a perceived safe haven, the US dollar. By the end of the day, however, stock prices had slipped less than 0.25 percent. Discussing the financial reaction to a tragic human event, especially as the details are still developing, is cold and insensitive. It is also a common reaction on Wall Street and Main … Read More

By David Moon When the Federal Reserve began a three-stage quantitative easing program that would eventually create $3 trillion out of thin air, there was much disagreement about the advisability and risks of the plan. There was one topic, however, in which there was little disagreement: that “printing” that much money would lead to increased inflation. The consensus expectation was reasoned, conservative, based in history—and massively wrong. An explanation requires some background. Quantitative easing grew out of the October 2008 $475 billion Troubled Asset Relief Program (TARP.) TARP was an emergency plan to provide badly needed liquidity in a money … Read More