Economic Reports Scorecard Relative to expectations, the incoming reports over the last two weeks have run about even, just about as many better than expected as worse. That’s a significant improvement over the trend from last year and early this year. I would emphasize however this is a result of reduced expectations not an improvement in the actual data. From [...]
The risk budgets this month are unchanged. For the moderate risk investor, the allocation between risk assets and bonds remains at 40/60 versus the benchmark of 60/40. While the BofA ML High Yield Master II OAS did widen significantly since the last update I’ve decided not to reduce the risk allocation more at this time. The stock market selloff and [...]
“To him who is in fear, everything rustles.” - Sophocles Smart philosopher, Sophocles and although he wasn’t referring to investors, a better description for today’s market participants is hard to find. Nervousness and plain old fear seem to have relegated the financial markets to short-term, news driven schizophrenic behavior. It is visible in the bond markets, commodity markets and, of [...]
Oil is at the lowest level relative to gold of the last 30 years, when the Fed data series begin. Deutsche Bank has calculated the series back to the Civil War. Based on their work, an ounce of gold buys you more barrels of oil than anytime since 1892. An ounce of gold currently buys you just over 42 barrels [...]
If we have at least a good idea about the gross exposure to US junk if not who ultimately holds and funds it, the emerging markets infiltration is much more difficult to parse. There are only a handful of estimates that appear reliable enough to obtain a decent range estimate. The first comes from the BIS and was written in [...]
With the release of retail sales, the estimates for inventory across the whole supply chain are completed for December. The inventory-to-sales ratio for total business rose yet again to 1.39; the last time the series was that out of balance was May 2009, a ratio higher than what was registered in October 2008. The ratio for the manufacturing level surged [...]
The January retail sales report demonstrates perfectly the nature of this whole recovery, but especially the last year or so when everything holding to the primary narrative boils down to the unemployment rate – a statistic that is more and more determined by peculiar assumptions and calculations. The advance release from the Census Bureau had enough positive vigor to provide [...]
Mainstream commentary will continue to harp on the unemployment rate as if it were some kind of lucky charm for protection against an increasingly unrecognizable and frightening (to the orthodoxy) world around it. That appeal dominates even where it has so little if any bearing, as in negative swap spreads that were in truth an easy and simple warning about [...]
I use the June 2018 eurodollar futures contract as a significant benchmark in my analysis of money markets because I feel it represents a solid cross section of sometimes conflicting influences. It’s close enough to the front end as to be significant both in terms of monetary policy as a factor but far enough to be as heavily if not [...]
The entire point of leveraged positions is the margin of safety. That is true on both sides of that equation, as for the provider and the borrower/user. In the most famous examples of collapse, from AIG to LTCM losses were never really the issue. None of them could withstand instead collateral calls to their liquidity reserves. As noted last week, [...]
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