Tuesday , August 20 2019
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Tag Archives: markets

Collateral Reserves: What Is Behind Record Low and Negative Yields

It was truly startling when it was announced. The second and more dangerous phase of the Global Financial Crisis had begun on July 15, 2008. Within two weeks, Merrill Lynch had etched its name on the growing list of “troubled” institutions. On July 28, 2008, Merrill Lynch agreed to sell $30.6 billion gross notional amount of U.S. super senior ABS CDOs to an affiliate of Lone Star Funds for a purchase price of $6.7 billion. At the end of the second quarter of 2008, these CDOs were carried at...

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That Can’t Be Good: China Unveils Another ‘Market Reform’

The Chinese have been reforming their monetary and credit system for decades. Liberalization has been an overriding goal, seen as necessary to accompany the processes which would keep the country’s economic “miracle” on track. Or get it back on track, as the case may be. Authorities had traditionally controlled interest rates through various limits and levers. It wasn’t until October 2004, for example, that the upper limit on lending rates was rescinded. In August 2006, the mortgage rate...

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The “Trade War” Is Over, Trump Just Doesn’t Realize It Yet.

On Tuesday, the markets bid higher following a statement from the U.S. Trade Representative’s office that tariffs will commence on September 1st, but that some products will be delayed until December 15th. To wit: “…some tariffs will take effect on Sept. 1 as planned, ‘certain products are being removed from the tariff list based on health, safety, national security and other factors and will not face additional tariffs of 10 percent. Further, as part of USTR’s public comment and hearing...

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Pay Attention To The Message The Yield Curve Is Sending 08-16-19

Quick Review Listen To The Yield Curve Message No One Ever Says Sell Sector & Market Analysis 401k Plan Manager Follow Us On: Twitter, Facebook, Linked-In, Sound Cloud, Seeking Alpha Quick Review Do you love #volatility yet?  Last week the market swung wildly back on forth on “trade talks,” “tariff relief,” inverted yield curves, and recession fears to finish the week on “hopes” banks will rescue the markets once again. The bounce on Friday, was not unexpected as the market had...

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No Shock, A Bigger Theatrical Budget

You have to understand, none of this is about money or even bonds. It is all intended for one thing and one thing only: expectations. This has been the fulfillment of Paul Krugman’s long-ago criticism. The way out is to shock the system, he said. It doesn’t even matter, by this theory, what you do. So long as it is outside of every market expectation, that’s the only goal. Japan, who was the target of Dr. Krugman’s reproach, and after having consulted with the former Economist (he’s now just...

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Denying The Curve? Show Your Work

One of the primary reasons Economists go unchallenged is because they’ve made the subject matter dense and complex. Needlessly so, in many cases. Anyone in the financial media or the public who wishes to challenge Jay Powell (well, maybe not Powell) on any economic concept is as likely to get a lecture on regressions and the three or four tests the Fed uses to seek out heteroscedasticity in its models, all of which purposefully avoids answering the question originally asked. The more...

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TIC: The Calm (June) Before the Storm (August)

As far as recent times may be concerned, June 2019 wasn’t that bad of a month. Compared to some this year, it was downright uninteresting. Starting with the UST market, there was a plunge in yields (bad sign for global dollar shortage) in the second half of April and throughout May. June saw more steady trading which continued into July that was almost reflationary – until the Fed’s panicky “one and done” kicked off this month’s mess. The latest TIC figures now updated through the month of...

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Superforecasting A Bear Market

There’s an ongoing debate about whether or not the U.S. is approaching a recession. As an investor, this question is of utmost importance. It is precisely at these times when fortunes can be made and lost. There’s no shortage of pundits with strong opinions in both the affirmative and negative camps armed with plausible narratives and supporting data sets. How to decide which side to take? Applying some proven forecasting methods to historical data can help bring clarity to this question....

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Financial Success Formula Failure

The US economy grew at a 2.1% annualized pace in the second quarter, according to data released last week. That was better than economists expected but hardly impressive. Even President Trump recognized this, tweeting the growth rate was “not bad considering we have the very heavy weight of the Federal Reserve anchor wrapped around our neck.” That’s the same Federal Reserve of which Trump himself appointed the chair and a majority of board members. But I guess he has to blame somebody. Sadly,...

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US Industrial Downturn: What If Oil and Inventory Join It?

Revised estimates from the Federal Reserve are beginning to suggest another area for concern in the US economy. There hadn’t really been all that much supply side capex activity taking place to begin with. Despite the idea of an economic boom in 2017, businesses across the whole economy just hadn’t been building like there was one nor in anticipation of one. The only place where there was a truly robust trend was the oil patch. Since the last crash a few years ago, Euro$ #3, the oil sector...

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