In a surprise move, the Federal Reserve raised the discount rate by a quarter point to 0.75% after the market close today.

Expect many market pundits to pooh-pooh the rate increase.  That is a mistake.

From 1945 to 1998, at the bottom of a typical bear market bottom, rising interest rates were positive for stocks as rising rates indicated an improving economy and increasing demand for credit.

On China's stimulus-induced economy, in this morning's Wall Street Journal.

Andy Xie is predicting that the Chinese property bubble is set to burst.

As bank lending slows, “it’s very difficult to see this demand continuing,” Xie, formerly Morgan Stanley’s chief Asian economist, told Bloomberg Television in Hong Kong today.

From the WSJ.

California's inventory of unsold, previously owned homes shrank to a five-year low in December, in another sign that the state may be coming out of its worst housing slump in decades.

I am not a fan of the investment bank model as a shareholder.  The collapse of Bear Stearns and Lehman, and the takeover of Merrill Lynch was not a surprise to me, though the timing and velocity of the collapse was unexpected.  This is not because I am particularly foresightful or intelligent.  Rather, I think that eventually, any business model that dramatically leverages marked-to-market securities and relies on funding through public markets is a disaster waiting to happen.  I have little doubt that had the government not stepped in to directly intervene in the capital markets, both

Last week, Brett Arends at the Wall Street Journal made the argument that homes were now cheap.

It's important to note that real-estate prices in many areas are far from a historic bargain. And where there is a glut, prices -- obviously -- are likely to stay lower for longer. It is still a buyer's market. If you are buying, drive a hard bargain.

We here at Running of the Bulls believe that the odds of consumer price inflation in the future are elevated.  But is hyperinflation coming?  And I mean hyperinflation, as articulated by John Williams.

From The WSJ

[T]wo new studies ... suggest that when chief executive officers get paid more, shareholders end up earning less.

The first study, led by corporate-governance expert Lucian Bebchuk of Harvard Law School, looked at more than 2,000 companies to see what share of the total compensation earned by the top five executives went to the CEO. The researchers call this number—which averages about 35%—the "CEO pay slice."

From Tom Toles.