Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Ecce Homo

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You have a next-door neighbor. His name is Sam. He seems like a decent guy and seems to do all right for himself. And, for the purposes of this allegory, you happen to know a lot about Sam’s financial situation.

First off, he makes a good living. He pulls down $200,000 a year. Impressive! So he is able to sell whatever goods and services he has available and is willing to provide for that sum each year. Well done, Sam. It’s a good income.

Oh, he’s also $250,000 in debt. But big deal, right? After all, plenty of people have debt. Mortgages, for one thing. Debt is part of life. he’s on time with his payments. So lay off. His “debt to annual production” is 125%.

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The Influence of Fed Balance Sheet Growth

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First off, thanks to The Lone Ranger for inspiring this post in the first place.

Lone Ranger Fed Question

And now let’s begin…

Starting with the bird’s eye view, the chart below shows all available data on the FOMC’s operations going back to 2007 (for a more detailed explanation with chart of all the FOMC operations current to Apr 2020, check out this excellent post I found here).

Except for the period between 2015 and the end of 2019, virtually all of the market gains were concurrent with FOMC operations. I will focus in this post on the periods of high complacency as identified by extremely high levels of the 100SMA (20wk SMA) of the Equity Put/Call ratio. If you want to read those posts, the first is here and the second is here.

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That Ship Sailed

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About a week ago, someone here pointed my attention to a new book called A Fiscal Cliff. I am absolutely loving it – – can hardly put it down – – and I’m sure to write a long review/summary of it once I’m finished with its 400+ pages. As a side note, even though the book is pretty much hot off the presses, its data is made out-of-date thanks to Covid. For one thing, it mentions how in ten years we might pass the record Debt-to-GDP level of 107% set back in 1946. Well, folks, put down your pencils. We have roared right past that level massively………….we’re up to where the CBO projected we’d be in the year 2060 already.

slopechart FR GFDEGDQ S

Flatten the Funhouse Mirrors

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Let’s suppose you were about to head outdoors, and you asked me the temperature so you could dress appropriately. “It’s thirty-two”, I tell you. So you slip on a thick coat, a scarf, and a hat, then you head outside.

After you shut the door behind you, the hot air hits you, and you immediately come back inside, furious with me, and change into something more comfortable. I was telling you the truth – – the temperature was, in fact, 32. Celsius. In other words, you should be wearing a short-sleeved Tommy Bahama top and not a thick coat.

Similarly, you might ask me what my father’s salary was when I was a kid. “Thirty-five thousand dollars.” Wow, pathetic, right? How did he support a family of six, and we lived in a nice house? Well, the salary I am telling you about was from decades ago, and it was pretty good money back then.

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