Bulls Take a “Time Out” from Stock Market

Bulls Take a “Time Out” from Stock Market

So, the stock market has had some major trouble this year as we break out of the gate of 2016.

In fact, the bulls have chosen to completely ignore the gate, take a nap, and let the wimpy bears charge through the gate instead.

Key Questions For Stock Market Future

  • What if emerging markets go into recession?
  • Why has economic data gone soft?
  • How low will oil go?
  • Is this stock market crash a sentiment reaction?
  • What will the Feds do now with respect to interest rates?
  • Do President Obama’s State of the Union team of speechwriters have a clue about anything?

This Bull Needs a Break

This bull has been working hard at making money and just needs to take a break….


Let’s all hope the bulls head back into action again. Stay tuned!
What is Shadow Banking?

What is Shadow Banking?

The term ‘shadow banking’ sounds a bit suspicious and maybe even sinister, especially after what happened in 2008 when the shadow banking system ran amok with a domino effect on global  financial markets.

Shadow Banking Definition

Paul McCulley,  expert economist, coined the term ‘shadow banking’ in 2007.  The term has taken on many different definitions since then.  Paul’s definition of shadow banking is the following:  Entities engaged in old-fashioned banking activity (maturity, liquidity and credit transformation), but without a backstop against a run.

A run on a bank is when a large number of depositors withdraw their money in a panic because they are afraid the bank will become insolvent.  Did you see “It’s a Wonderful Life”?  Boom.  Our standard banking system has regulations or backstops in place such as deposit insurance (FDIC) and the lender of last resorts (Federal Reserve in the US)) to deal with the challenge of bank runs.

Shadow Banking Regulation

The shadow banking system is gaining momentum again with optimism that new regulations will prevent another disaster similar to 2008.

The Financial Stability Board (FSB), an organisation of international policy makers for global financial stability is leading the way to establish and monitor regulations for the shadow banking system.

The FSB has reported that there has been important progress on establishing regulations, but agreed principles have not been implemented nationally.  The  regulations seek to find the perfect balance between preserving the benefits of shadow banks and containing the vulnerabilities inherent with the risks.

The FSB process for addressing challenges is to use a 3-stage process of vulnerability assessment, policy development and coordination, and implementation monitoring.

Paul McCulley explained the challenge of regulation as being to find the balance between the invisible hand of free market creativity doing it’s magic, and the visible fist of the government to protect against vulnerabilities.

Shadow Banking Education

There are some excellent books and videos to help explain shadow banking and the international impact of this system.

This video from “The Economist” explains in layman terms the pros and cons of shadow banking, regulations, impact on money market funds and how institutions have evolved since the 2008 crisis.

Paul McCulley explains the term he coined, ‘shadow banking,’ and shares his optimism regarding the future challenges and solutions.

The Dogz took an online class called ‘Economics of Money & Banking’ taught by Perry G. Mehrling, Professor of Economics at Barnard College.  He explained shadow banking in detail.  That class was offered last fall on Coursera.  If you want to understand the fundamentals of shadow banking from a pro, get your coffee, strap yourself in and watch the below video.


Will You Get Audited This Year?

Will You Get Audited This Year?

The answer is … probably not.

The IRS has a decreased budget overall, plus they have lessened the amount of dollars allocated within their budget for tax auditors. Does that mean you can cheat?  Nope.  If you do happen to  win the Uncle Sam lotto and get audited next year or up to 6 years from now, you could still get caught if you fudge this year’s taxes.   Remember, an audit would go back three to six years and scrutinize your records for each year looking for any suspicious activity, so it’s best to take the high road.  (more…)

How Long Can the Bear Market Hibernate?

How Long Can the Bear Market Hibernate?

The stock market has kept us on the edge of our seats for most of 2014.  We’re talking eight record highs in a few months,  with a few scary moments mixed in.  If you’re already in, then it’s likely that you are reaping the rewards of this aging bull market.  If not, you may be feeling like Charlie Brown in loser mode and quietly (or loudly) hoping that the market crashes so you too can afford to hop on the moolah chariot and whoop it up with everyone else when the markets surge again.   (more…)

What Happens if Debt Ceiling is Not Raised?

What Happens if Debt Ceiling is Not Raised?

Default In one word, default.  This means the government will not be able to pay all of it’s bills that are due.   The US government collects approximately .65 in tax revenue for every one dollar it spends.   Once approximately 65% of the total due bills are paid, the money would run out and the remaining 35% of those who are expecting payments would not get paid unless the debt ceiling is raised and we borrow the additional money.  The underlying main issue here is overspending.  (more…)