David Kotok's Contributions

In the aftermath of the bungled Cyprus affair, we are now observing a major transition underway with regard to bank-deposit safety.

First we must correct an error. In our discussion "Euro: Requiem or Renewal?" we identified Jeroen Dijsselbloem as a central banker. That was an error; he is a political figure.

In the last several weeks, a sequence of events involving Cyprus has triggered serious questions about the sustainability of the European Monetary Union (EMU). The events surrounding the finance ministers' decision to levy taxes...

When we planned this trip to Paris and Dubai, we had no idea that the Eurogroup would launch an unprecedented attack on bank depositors, banks, central banks, and the banking system of the entire Eurozone. But they did.

World events are getting more complicated. US markets are ignoring these issues as central bank zero-interest-rate policies continue to drive asset prices higher.

For months we have stated that monetary policy around the world is a powerful engine for raising asset prices. We continue to argue that classic and typical valuation methods have to be set aside in an era in which the short-term interest rate is near zero...

The stock market may go much higher, but the wealth effects that could trigger inflationary pressure will be very limited. Housing prices will rise but will have much further to go before they trigger inflationary pressure. There is a lot of room for upside movement in asset prices, while inflationary pressures will remain muted due to suppressed consumption.

The attack on the tax-free bond continues. What remains unsaid by the White House is that dilution or removal of the tax-free status of state and local bond issues results only in higher property, sales, and local income taxes.

Washington has handed an economy now struggling to get back on its feet a barbell instead of a helping hand—a tax barbell. With much hoopla and political posturing, the United States’ political leadership raised the income taxation on the “rich,” as the White House likes to call them.

Well, guess what? The world did not end with the last entry on the Mayan calendar. How about that? I remember seeing the calendar when visiting Tikal, a monumental testament to a civilization that collapsed by over-taxing its resources.

We expect market agents to focus on the numbers. 6.5% has become the targeted unemployment rate for the headline unemployment statistic. That is now the “Evans rule,” named for Chicago Fed President Charles Evans, who pushed for this numerical standard as a threshold for the Fed to change its policy from the present expansive and stimulative one.

I would like to see us get mad enough and scared enough and clear enough about what’s really happening to us, that we realize we have to pull together to claw our way back from the cliff and get this country on stable ground.

When it comes to US fiscal policy, are we faced with a cliff, or a slippery slope? There is a difference between off-the-cliff Greece, the slippery-sloped European periphery, and the not-there-yet US.

The almost interminable season of acrimony is over. We have the results. The Obama-led wing of the Democrat party will continue leading the nation in finance, economic matters and social direction.

Taxes are a big deal in the campaign. Are we drilling deep enough in the debate? No. Do we have to resort to looking at analyses that come from private organizations whether it is the Tax Foundation, the Tax Policy Center, or somewhere else? Yes. That is the best we have.

According to the National Association of Bond Lawyers (September 2012) the Obama Administration “has proposed limiting the value of the exclusion, not only with respect to newly-issued bonds but also bonds that are currently outstanding and in the hands of investors.”

What do we do when we want to find the signs of "morphing" from idiosyncratic to systemic? The earlier an investor, professional, or analyst can see the signs, the faster they can move to protect their portfolios, strategies, and implementation options.

Needless to say, we were wrong about QE infinity. The Fed has now monumentally changed the game. The eventual (very long term) outcomes are unpredictable. We can assert, guess, estimate, calculate, infer but we cannot be certain of the final outcomes or their timing.

Mario Draghi and most European Central Bank members will not come to Jackson Hole. The exception is the Bundesbank’s president Jens Weidmann, who will come for one day.

The modern Greek odyssey continues with a dance of fireflies. This particular version is dedicated to a different Homer. We are speaking of the late Sidney Homer and his treatise on interest rates.