Two Market Indicators at Odds: Equity Risk Premium and Credit Spreads Equity Risk Premium: The equity risk premium (ERP) is widely defined as the excess return that investing in the stock market provides over a risk-free rate (think Treasury bills, bonds [...]

The Carry Trade: Why is it on our radar? Carry Trade Defined. The carry trade is a trading strategy that involves borrowing at a low interest rate and investing in an asset that provides a higher rate of return.  Typically, a [...]

Rehypothecation: What is it? Rehypothecation Defined. To understand what is happening with rehypothecation, we must first start with the concept of hypothecation. Hypothecation occurs when you pledge your financial assets to a broker, bank, or a financial institution to obtain [...]

What is the Importance of Demand Destruction? Demand destruction, in economics, is described as a permanent or sustained decline in the demand for a particular good. The decline in demand is a result of persistently high prices or limited supply [...]

Free Money: The majority of citizens who had never lost a job during the pandemic, received two tax-free stimulus checks in the first few months of 2021. This created one of the greatest booms the world had ever seen. This [...]

What is Stagflation? Stagflation is a combination of the following economic conditions:  stagnation or the economic growth rate slowing, high unemployment, and high rates of inflation (rising prices of goods and services). Causes of stagflation? Stagflation does not fit neatly [...]

What is inflation? Inflation is a “sustained increase” in the general price level in the economy. Inflation means an increase in the cost of living because prices for goods and services rise. Inflation is the decline of purchasing power in [...]

Why Is It Important? If you have not heard of the Modern Monetary Theory, or MMT, you will very soon. In response to the economic impact of the coronavirus pandemic, Congress passed a $2.2 Trillion stimulus package. Large amounts of [...]

Repo Market: What is it? We join those who believe the “panic” in the repurchase agreement (Repo) market has been the main reason many markets rose in 2019. Who would have thought the Repo market – consisting mainly of AAA-rated [...]

What Do Negative Interest Rates Mean? As we write, there is approximately $13 trillion (yes, trillion dollars) in sovereign debt (debit issued by governments) now trading with a negative yield. What exactly does that mean? Definition: Negative interest rates are [...]

Recession or Not? Historically, the onset of a recession seems to happen quickly. Why is that? Former Federal Reserve Chairmen’s Janet Yellen and Ben Bernanke spoke on January 4, 2019: “I don’t think that expansions just die of old age. [...]