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Tag Archives: bonds

The Stock-Like Returns of Sovereign Bonds

Sales of junk bonds from the emerging markets have been on a tear this year, thanks to a surge of investor money chasing higher-yielding assets around the world. Global investors have so far been rewarded for their risk taking. A Bank of America Merrill Lynch index that tracks sovereign bonds rated BB and lower has returned 10.2% so far this year. That ...

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Policy divergence revisited

Three years ago, the Fed had begun tightening and all other central banks were still on easy street. Now, we are at an inflection point where the Fed is now the outlier. Other central banks are likely to tighten more than the Fed. That’s negative for the US dollar and positive for longer duration US Treasuries. Policy divergence was the watchword in late 2014. As Europe struggled to extract itself from the ravages of the sovereign debt crisis, ...

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The Permanent Portfolio

==========================================I will admit, when I first read about the Permanent Portfolio in the late-80s, I was somewhat skeptical, but not totally dismissive.  Here is the classic Permanent Portfolio, equal proportions of:S&P 500 stocksThe longest Treasury BondsSpot GoldMoney market fundsThink about Inflation, how do these assets do?S&P 500 stocks – mediocre to pretty goodThe longest Treasury Bonds – cratersSpot Gold – soarsMoney market funds – keeps value, earns incomeThink about Deflation, how do these assets do?S&...

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Redacted Version of the March 2017 FOMC Statement

Photo Credit: Norman Maddeaux====================================February 2017March 2017CommentsInformation received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace.Information received since the Federal Open Market Committee met in February indicates that the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace.No ...

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Enter the Bear Market in Bonds?

Morning MoneyBeat is the Journal’s pre-market primer. To receive this morning newsletter via email, click here: http://on.wsj.com/MoneyBeatUSSignup OVERNIGHT DEVELOPMENTS Stocks and bonds struggled while the dollar climbed Tuesday. The Stoxx Europe 600 edged down 0.2% in recent trading as a fall in U.K. bank shares weighed on the pan-European index. Markets in Asia were largely muted, while futures pointed to...

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The divergence in equity and credit markets

This chart speaks volumes about the Trump rally.  Up until February, the Russell 2000 and the 10-year Treasury yield were moving up in lock step. That’s a sign that markets expected an economic rebound which would eventually drive up the Fed Funds rate, but that the growth would enhance profits even so. Now, however, equities and bonds are diverging, with bond yields falling back down even as equities continue to...

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Distrust Forecasts, Part 2

Photo Credit: D.C.Atty || Scrawled in 2008, AFTER the crash started=============================Comments are always appreciated from readers, if they are polite.  Here’s a recent one from the piece Distrust Forecasts.You made one statement that I don’t really understand. “Most forecasters only think about income statements. Most of the limits stem from balance sheets proving insufficient, or cash flows inverting, and staying that way...

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Estimating Future Stock Returns, September 2016 Update Redux

Idea Credit: Philosophical Economics Blog || I get implementation credit, which is less…=================================================================My last post on this generated some good questions.  I’m going to answer them here, because this model deserves a better explanation.  Before I start, I should say that in order to understand the model, you need to read the first two articles in the series, which are here:Estimating Future Stock ReturnsEstimating Future Stock Returns, Follow-upIf you...

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