2017-07-12 — realinvestmentadvice.com
After a decade of complacency as the world remains awash in central bank liquidity, Dr. Minsky and his financial instability hypothesis have faded to distant memory. In 2007, Paul McCulley then Managing Director of behemoth money management firm PIMCO, coined a genius term Minsky Moment to eloquently describe the domino effect of irresponsible risk expansion followed by financial system disruption sparked by a collapse of reckless debt, in this case subprime mortgage liabilities.
Several catalysts exist today that may remind investors of Minsky. Readers should remain vigilant and keep the following concerns in mind as they invest and manage their personal wealth.
The Federal Reserve has appeared to gravitate from data dependent to data ignorant.
Economic data remains sub-par. Inflation has fallen below the Fed's target of two percent, yet they appear in their statements, determined to continue hiking short-term rates.
Based on the analysis below, the Fed has no reason to continue rate hikes this year. However, they seem hell-bent to ignore the data. Why? ... The Fed may be on an unofficial mission to curb stock market speculation. Several Fed officials including Vice-Chairman Stanley Fischer and San Francisco Fed President John Williams have voiced their concerns over lofty stock market valuations.
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