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Tag Archives: Interest rates

When They Introduced An Even Longer Gov’t Bond

If you tally up the amount of local government debt and add it to the total owed by Japan’s central government, at the close of fiscal year 1991 it wasn’t too bad. The Japanese had always been fiscally responsible especially when compared to any of that nation’s big economy peers. In those early days of the “lost decade”, the balance was about ¥275 trillion and in terms of total gov’t debt to GDP it ended up being a bit less than 60%.The Japanese government then spent the next few years...

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Conventional Wisdom Is Nothing of The Sort

If you had known in October all that would transpire over the next 2 ½ months, how would you have positioned your portfolio? The conventional wisdom before the election was that a Biden win would be negative for stocks because he has promised to raise taxes and specifically corporate taxes. In 2016, conventional wisdom was that a Trump victory would be bad for stocks because of his protectionism. In both cases, conventional wisdom turned out to be nothing of the sort. After the November...

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Inflation Cometh And So Is A Big Market Correction

It was hilarious, no, sad actually, to see a piece last week by some market strategist mocking the “inflation truthers.”   Kind of like “election truthers?” Of course, he surely knows the one thing that can knock the markets on their ass and keep them down is accelerating inflation. Guess what, folks?  It’s here. I just finished reading through at least 50 country PMIs (purchasing manager index) and almost all report accelerating inflation due to supply shocks and higher demand.  It’s...

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Can the Dollar Find Traction Even if the Employment Data Disappoint?

Overview: The global equity rally picked up this week as it closed in 2019.  The MSCI Asia Pacific Index gained today and is up in nine of the past 10 sessions.  It has fallen only in one week since the end of October.  South Korea's Kospi led today's advance with a nearly 4% rally on the back of talks that were later played down between Hyundai and Apple.  Europe's Dow Jones Stoxx 600 is at its best level today since last March and is posting gains for the fourth consecutive week.  US...

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They’ve Gone Too Far (or have they?)

Between November 1998 and February 1999, Japan’s government bond (JGB) market was utterly decimated. You want to find an historical example of a real bond rout (no caps nor exclamations necessary), take a look at what happened during those three exhilarating (if you were a government official) months. The JGB 10-year yield had dropped to a low of just 77.2 bps during the depths of 1998’s Asian Financial Crisis (or “flu”, so noted for its regional contagious dollar shortages). Having backed...

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Covering (In) COT Blue

It was late on a Tuesday night, in the middle of last week, Christmas week of all weeks, with most people already checked out. Having finally obtained Congressional support and approval, the $900 billion plus “stimulus” (read: stipend) was on its way to becoming reality after months of politically-motivated uncertainty. Not one to sit idly by while everyone else had their say, President Trump on that particular evening tweeted a shocking video where he declared the key (for the public)...

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Messing Gold

They really got carried away, though in the context of that time there seemed any number of legitimate reasons for this. Gold investors were bidding up the precious metal like there was some kind of shortage, the price in dollars making a new record high (LBMA morning fix) on August 7. The way it was reported in the mainstream, this was more confirmation of Jay Powell’s flood of money printing making its way into every last corner of the financial world driving gold bugs nuts in the process...

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Winning The Beauty Contest

One of the hardest things to understand as an investor is that markets sometimes – often – don’t line up with economic reality. Markets rarely reflect current economic conditions and at times they seem to discount a future that seems highly unlikely at best, and delusional at worst. That seems to be the case today, as stocks sit near all-time highs and the economic recovery falters in the face of the renewed virus outbreak (or whatever cause you want to assign). But it...

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Bursting A Few Bubbles; No, Not That One

The Presidential election was supposed to have been a big one. Yields were low, or high, based on how whichever expert or financial media article was interpreting the manner of trading in bond markets. You could take your pick; a “blue wave” was bad, as in BOND ROUT!!! due to inflation and potential for even more (how?) spendthrift ways in government. A tossup election was both good and bad, opinions split on the ramifications.Either way, nearly everyone said November 3rd was pretty much...

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Gross (in)Opportunity, European Yields Not Fixed By Pfizer

It’s easy to pick on Bill Gross because he made it so easy for everyone to do so. Time and again, he called for an end to the bond market “bull”, seeking to make huge profits on the fixed income massacre he said would soon follow whichever one of those decrees. There were several and they weren’t limited to just US Treasuries. The real reason why we highlight Mr. Gross as opposed to some other so-called Bond Kings is that, in one very important sense, he got it exactly right. Low yields are...

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