The PBOC wasted no time this week showing that it was serious about its desperation last week. The central bank fixed the CNY reference contrarily upward to 6.583 this morning from Friday’s 6.600. As we have been documenting during this unabated “dollar” problem, whenever the PBOC attempts a contrary maneuver with the fix it typically sets off enormous fireworks. Sure [...]
The most important outbreak or story of 2015 had to have been the junk bond reversal. It combined all the major elements of what investors and economic agents are both fearing and, at one point in the past anyway, hoping. It is the confluence of finance, “dollars”, liquidity and economics with or without recovery and the best scenario. The FOMC [...]
The risk budget this month is unchanged. For the moderate risk investor, the allocation between risk assets and bonds remains at a defensive 40/60 versus the benchmark of 60/40. Credit spreads narrowed on the month but the widening trend is intact and has recently resumed. Valuations are still excessive and 3rd quarter earnings have been generally downbeat. A divergence is [...]
The deletion of “dollar” capacity in money dealing globally is not just a theoretical impugning upon asset prices alone. Corporate debt issuance has been obviously provoked to an increasingly smaller state. The numbers are starting to become serious, which may account for at least part of the economic misfortune that the Fed desperately wants the world to ignore. Where swap [...]
Economic Reports Scorecard – 10/12/15 to 10/24/15 The bifurcated nature of the economy is on display for all to see in the economic data from the last two weeks. Manufacturing continues to struggle as shown by the Fed surveys, the CFNAI, IP and inventories. Meanwhile, housing continues to improve in both the existing home and new home side of the [...]
Economic Reports Scorecard – 8/17/15 to 8/28/15 The economic data since my last update hasn't changed much. I know that is getting boring to hear but it does have the advantage of being the truth. Manufacturing continues to struggle, housing is doing relatively better, inflation is dead and the consumer is struggling - although apparently confidently so. The jobs market [...]
Adding to the repo observations from this morning regarding illiquidity and more importantly gathering risk aversion, the behavior of corporate bonds and spreads matches that overall sketch very closely. The key point is how different the corporate bond space, like the UST curve, has behaved in 2014 in relation to 2013. In past periods just prior to recessions, you see [...]
And so another year has passed into the history books - the older I get, the faster they seem to go - and investors must again try to position their portfolios for a profitable year. It hasn't been easy to do the last few years and this year promises to be just as challenging. The usual suspects that made last [...]
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