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Tag Archives: TIPS

Inflation Undershoots, Inflation Expectations Sketch Out Growing Downside

For the third time in the last five months, inflation expectations have matched record lows. To hear officials and Economists talk, you’d think they were at or nearing record highs. The unemployment rate, after all, is at a 50-year low point which by mainstream reckoning should mean the cusp of an epic wage-driven breakout. According to the University of Michigan’s Surveys of Consumers, it’s just not there. In fact, it’s never been there. Like bond yields, there has only been conspicuous lack...

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Janus Powell

Again, who’s following who? As US Treasury yields drop and eurodollar futures prices rise, signaling expectations for lower money rates in the near future, Federal Reserve officials are catching up to them. It was these markets which first took further rate hikes off the table before there ever was a Fed “pause.” Now that the Fed is paused, it’s been these same markets increasingly projecting not just a rate cut or two but an entire series of them. Playing from behind once more, Chairman...

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Major Asset Classes | Correlations Profile | 30 April 2019

Do lower and negative correlations between markets enhance diversification for building diversified portfolios and (potentially) earning higher risk-adjusted returns? If the answer is “yes,” Mr. Market has become moderately more generous in spots in recent months by expanding the opportunity set of relatively low and negative correlations across asset classes. Skeptics will note, correctly, that quantifying the degree of diversification (or the lack thereof) in assets is a task that...

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Is The Stock Market As Confused As You Are About A Recession?

Last week, Barron’s ran an article entitled “The Stock Market Is Just As Confused About A Potential Recession As You Are?” To wit: “Investors have long used where we are in the economic cycle to decide which stocks to buy and sell. New research from Nomura’s Joseph Mezrich flips that on its head by showing how investors can use stock performance to help determine where we are in the cycle. Too bad the market is sending mixed messages right now.” But let’s be clear here; no one wants the party...

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Monthly Macro Monitor: Well Worried

Don’t waste your time worrying about things that are well worried. Well worried. One of the best turns of phrase I’ve ever heard in this business that has more than its fair share of adages and idioms. It is also one of the first – and best – lessons I learned from my original mentor in this business. The things you see in the headlines, the things everyone is already worried about, aren’t usually worth fretting over. The market may not be perfectly efficient...

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The Real End of the Bond Market

These things are actually quite related, though I understand how it might not appear to be that way at first. As noted earlier today, the Fed (yet again) proves it has no idea how global money markets work. They can’t even get federal funds right after two technical adjustments to IOER (the joke). But as esoteric as all that may be, recent corporate statements leave much less doubt at least as to the primary effect. Before the FOMC gave up on the boom, company bellwethers like FedEx beat them...

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Powell’s Final Straw Wasn’t The S&P 500

I have to agree with my colleague Joe Calhoun. Everyone thinks the Fed is (over)reacting to the stock market drop in December. There’s a little bit of truth in it, reading so many FOMC transcripts as I have you get the unmistakable sense the S&P 500 is unofficially included on the policy dashboard. In the early part of 2007, policymakers certainly cared more about the NYSE than they paid attention to eurodollar futures. I doubt, I know they’ve learned nothing from the debacle. Still, what...

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Monthly Macro Monitor – January 2019

A Return To Normalcy In the first two years after a newly elected President takes office he enacts a major tax cut that primarily benefits the wealthy and significantly raises tariffs on imports. His foreign policy is erratic but generally pulls the country back from foreign commitments. He also works to reduce immigration and roll back regulations enacted by his predecessor. This President is widely rumored to have had numerous adulterous affairs and his administration is wracked by repeated...

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Living In The Present

The secret of health for both mind and body is not to mourn for the past, nor to worry about the future, but to live in the present moment wisely and earnestly. Buddha Review It’s that time of year again, time to cast the runes, consult the iChing, shake the Magic Eight Ball and read the tea leaves. What will happen in 2019? Will it be as bad as 2018 when positive returns were hard to come by, as rare as affordable health care or Miami Dolphin playoff games? Will China’s economy...

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More Extraordinary Still

There were rumors and whispers of a trade truce between China and the US. Wages domestically grew by the most since 2009, better than 3% last month. OPEC is going to be cutting oil production again. And most of all, for the mainstream narrative anyway, the Fed is about to go on a break. Why didn’t markets react positively to all the good news? The last couple of days have been money crazy. Start with eurodollar futures. The so-called Fed pause is pretty obvious: Prices have been bid over the...

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