{"id":17126,"date":"2018-10-05T07:07:15","date_gmt":"2018-10-05T07:07:15","guid":{"rendered":"http:\/\/thepatientinvestor.com\/?p=17126"},"modified":"2018-10-05T22:08:57","modified_gmt":"2018-10-05T22:08:57","slug":"its-a-bull-market-2","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2018\/10\/05\/its-a-bull-market-2\/","title":{"rendered":"It’s a bull market"},"content":{"rendered":"

The US economy continues to show signs of a robust expansion. Net capital formation is rising (as a percentage of GDP) as it is wont to do during a boom. In layman’s terms net capital formation is the net growth in physical assets used in the production of goods and services, after allowing for depreciation.<\/p>\n

\"Net<\/p>\n

The Wicksell spread has turned positive. When return on investment (we use nominal GDP growth as a surrogate) exceeds the cost of capital (reflected by low investment grade Baa bond yields) that encourages new investment and economic expansion as in the 1960 – 1980 period on the chart below.<\/p>\n

\"Wicksell<\/p>\n

Real bond yields, reflected below by Baa yields minus core CPI (blue line) on the chart below, are also near record lows. Low real returns on bonds support high stock earnings multiples.<\/p>\n

\"Real<\/p>\n

Fed Chairman Powell summed up the situation in a speech on Tuesday this week<\/a>:<\/p>\n

…Many of us have been looking back recently on the decade that has passed since the depths of the financial crisis. In light of that experience, I am glad to be able to stand here and say that the economy is strong, unemployment is near 50-year lows, and inflation is roughly at our 2 percent objective. The baseline outlook of forecasters inside and outside the Fed is for more of the same.<\/p>\n

This historically rare pairing of steady, low inflation and very low unemployment is testament to the fact that we remain in extraordinary times. Our ongoing policy of gradual interest rate normalization reflects our efforts to balance the inevitable risks that come with extraordinary times, so as to extend the current expansion, while maintaining maximum employment and low and stable inflation.<\/p><\/blockquote>\n

The biggest risk is that investors get carried away and drive earnings multiples sky high, but gradual rate increases from the Fed and the threat of tariff wars appear to be keeping animal spirits in check.<\/p>\n","protected":false},"excerpt":{"rendered":"

The US economy continues to show signs of a robust expansion. Net capital formation is rising (as a percentage of GDP) as it is wont to do during a boom. In layman’s terms net capital formation is the net growth in physical assets used in the production of goods and services, after allowing for depreciation. … <\/p>\n

Continue reading “It’s a bull market”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31,3761,13,15,34],"tags":[3810,3900],"class_list":["post-17126","post","type-post","status-publish","format-standard","hentry","category-the-fed-banks-interest-rates","category-gdp-and-activity","category-inflation-economy","category-investment-infrastructure","category-us-canada-countries-regions","tag-net-capital-formation","tag-wicksell-spread"],"yoast_head":"\nIt's a bull market - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"It's a bull market - the patient investor\" \/>\n<meta property=\"og:description\" content=\"The US economy continues to show signs of a robust expansion. 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I have always used the 10-year minus the 3-month Treasury\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":31607,"url":"https:\/\/thepatientinvestor.com\/index.php\/2022\/03\/22\/yield-curve-gymnastics\/","url_meta":{"origin":17126,"position":4},"title":"The yield curve recession warning","author":"Colin Twiggs","date":"March 22, 2022","format":false,"excerpt":"A great deal has been written in the past month above the flat 10-year\/2-year Treasury yield curve and the inevitability of recession if the slope turns negative. Wolf Richter sums up the problem: The weight of the Fed\u2019s gargantuan balance sheet is pushing down on long-term yields that the Fed\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"US Treasury Yield Curve","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/us-yield-curve-2022-03-21.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":30381,"url":"https:\/\/thepatientinvestor.com\/index.php\/2022\/01\/13\/gold-cpi-back-in-the-80s\/","url_meta":{"origin":17126,"position":5},"title":"Gold & CPI: Back in the ’80s","author":"Colin Twiggs","date":"January 13, 2022","format":false,"excerpt":"The consumer price index grew at 7.0% for the 2021 calendar year, a level last seen in 1982. The real fed funds rate (the overnight rate adjusted for inflation) is now the lowest in more than 60 years. CPI shelter component lags behind recent housing price increases by 6 to\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"CPI","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-01-13-cpi.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-01-13-cpi.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-01-13-cpi.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-01-13-cpi.png?resize=700%2C400&ssl=1 2x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/17126","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=17126"}],"version-history":[{"count":4,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/17126\/revisions"}],"predecessor-version":[{"id":17134,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/17126\/revisions\/17134"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=17126"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=17126"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=17126"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}