Edward J. Strafaci ~ Academic Blog

The Bank of Japan joined a group of Euro countries last week and imposed a below zero interest policy. For many of these countries this is an effective strategy that should continually weaken their currency, thus making their export position more competitive. Foreign cars and handbags become more desirable if a strengthening U.S. Dollar makes these goods more affordable. To harken back to Economics 101, it is basic ”Law of Demand” theory…lower prices equals more demand!  Since global GDP figures are weak, the prospect of a low rate program spurring inflationary fears becomes less concerning for these Central Banks. Negative rates mean that institutions and individuals are essentially paying to keep their money in the bank. The costs of protecting, storing and transferring non-bank deposits provide a rational for paying these fees.  However, on a Macro Economic level, some of this vast currency can use a permanent home. Not every Euro or Yen needs to be accessible. Commod...

The campaigning is already getting old however the next President would be wise to consider the following economic policies next January: Allow the revaluation of assets.  – Let’s face it a newly minted President does not want to see a market sell off during a honeymoon period.  Despite this, if the markets continue to revalue, it would be better for it to happen at the beginning of a term. In 1994, at the start of Clinton 1, Greenspan raised rates six times and the bond and equity markets were rattled.  Painful as it was, it set the stage for a longer term recovery. With interest rates artificially low due to QE 2, the true, adjusted required rate of return should be much higher. A revaluation is required if home buyers and investors will begin buying anew; thus spurring some meaningful capital spending. 2.     Supply Side Theory is appropriate now.- Despite abnormally low interest rates financial intermediaries are too chafed t...

25   “Therefore I tell you, do not worry about your life, what you will eat or drink; or about your body, what you will wear. Is not life more than food, and the body more than clothes? 26   Look at the birds of the air; they do not sow or reap or store away in barns, and yet your heavenly Father feeds them. Are you not much more valuable than they?   27   Can any one of you by worrying add a single hour to your life ? Matthew 6:25-34 While it’s all too easy to sink into despair, a pattern of worrying is harmful for you and anyone around you. To avoid worrying excessively and obsessively, check out these tips for how to stop holding yourself back and begin to actually live your life. 1. Instead of imagining worries, imagine possibilities Remember that life is short, and time spent worrying is time wasted. Think of all the things you’ll get to do once you finally  stop  worrying. Realize how  free  you’re going to be. You want t...

Alice Goffman’s “On the Run” is must reading for anyone interested in making America a better place. This is not an indictment on the police; they are merely attending to the tasks we created, many times at their own peril. Rather the blame lies squarely on the shoulders of the average American who gives no thought to the legislation that creates a Criminal Justice system poised to cripple the young Black man. In Goffman’s thesis we meet a number of young Black human beings who are caught in a web of incarceration, bleak opportunity and despair. We come to understand how, inculcated from birth, the Black man learns to hustle, avoid detection and defend himself as if there was no rule of law. As a Catholic it appalls me that we are not addressing this plague on our fellow citizens.  We must demand that our leaders bring real solutions to this epidemic. We must stop viewing our society as bifurcated between the privileged and the poor …it must end; we must show merc...

3 reasons why this feels like a Market Crash There is a serious liquidity concern.  The episode at Third Avenue  http://www.wsj.com/articles/sec-examining-high-yield-fund-holdings-after-third-avenue-tumult-1452725970   is literally unprecedented as investors could not liquidate their mutual fund holdings. Liquidity issues have always been at the forefront of market meltdowns. A commodity meltdown has occurred.  Developing Economies now have to struggle with a severely diminished asset base as well as a strengthening dollar. This will kill their ability to export. They will also have to pay dollar based loans with more expensive local currencies…ouch!!! Interest Rate Easing is over.  The Central Banks are out of room and the average retiree has been overreaching for yield. Once the selloff started panic set in, a fixed income with a declining portfolio value coupled with longer life spans can be a scary thought for most people. Stay ...