The risk budget is unchanged again this month. For the moderate risk investor, the allocation between bonds and risk assets is evenly split. The only change to the portfolio is the one I wrote about last week, an exchange of TIP for SHY. Interest rates are on the rise again, the 10-year Treasury yield punching through 3% again this morning. [...]
There are two components to economic demand: willingness and ability. The two factors work only in tandem. We all want to buy our own private islands stocked with the most obscene amenities yet invented, but none of us are able to put together the down payment for such an insane venture. The demand for ultra-wealthy living is high in fantasy, [...]
There is a huge difference between believing in gold and believing in the gold business. The former is about wanting a stable, dependable global monetary system, one very much like what survived thousands of years of history without a whole lot of changes to it. The latter is about convincing you who are likely to believe the same thing to [...]
Why so much wholesale emphasis on collateral? Easy. The monetary history of recent times hasn’t been very kind in that regard. On the one hand, the repo market has become so much more important than it was, as scared interbank participants fled unsecured eurodollar markets eleven years ago next month for the presumed shelter of security(ies). But in turning toward [...]
After the Soviet invasion of Afghanistan in 1979, the Russians became hyperaware of US and NATO countermovements. There was an increase in bellicose rhetoric on both sides, and the Andropov years had left the Soviet leadership weakened by economic stagnation increasingly worried that the US just might launch a first-strike attack. The Communists developed a systematic intelligence approach in response. [...]
The term "decoupling" was invented in early 2008 really because of oil prices. It was widely believed that though the US economy might stumble that year (because of nothing other than subprime mortgages, naturally) the rest of the world would be insulated from any fallout. EM economies like China's were immune from such folly, they said. Like every other economic [...]
It’s funny how these things work. He didn’t actually say the word “taper”, at least not when the frenzy first started. The very idea of the “taper tantrum” was the media’s work, the easy slogan that could be used as shorthand for the conventional explanation. The economy was improving, everyone was told and easily believed, therefore what was supposed to [...]
Welcome to the slowdown. It isn't much - yet - and it may just be a passing phase, but there is little doubt that the US economy has slowed somewhat. The rise in short term interest rates has stalled and the long end of the curve has rallied. The result is a flatter yield curve but it isn't the flatness [...]
There are several factors missing from the latest eurodollar rout. Well, not really missing so much as sitting this one out to this point in time. We knew things were really getting serious in 2015 when the Japanese yen joined the currency parade. Only it didn’t fall as others had, JPY rather rose very much against the Bank of Japan. [...]
In all honesty, I do mean to beat this one particular dead horse. In fact, I intend to pulverize it until there is nothing left but the smallest particulate matter. This is everything that is wrong with how things are right now. Either they are willing to put out what could only be legitimately classified as outright propaganda (lies), or [...]
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