In February 2013, Federal Reserve Board Governor Jeremy Stein gave a speech at a research symposium produced by the St. Louis branch of the Federal Reserve that shocked quite a lot of people. QE3 and QE4 were still quite new, but here was a Board member talking just months after their start of “reach for yield.” His assessment of risks [...]
The risk budget is unchanged this month although the composition of the portfolio does change. For the moderate risk investor, the allocation between bonds, risk assets and cash remains at 50/45/5. There are changes to the allocation but the overall risk budget stays the same. Credit spreads did continue to narrow this month but other indicators did not confirm the [...]
Earlier in April, analysts were projecting $26.69 in as-reported second quarter earnings for the S&P 500. By the week of June 22, just prior to the start of Q2 earnings season, that estimate had only declined slightly to $26.38. For the week of July 21, just a month later, with about one-third of companies reporting the earnings figure sank to [...]
The Chinese yuan fell again in Monday Asian trading, breaking below 6.70 for the first time. Not surprisingly, the tone to broad early trading in Europe and the US was slightly negative on what would be negative “dollar” factors. I have surmised for some time that Japanese banks have been the primary “dollar” supply for Chinese “dollar” needs, so it [...]
I am raising the budget for risk assets this month. For the moderate risk portfolio, I am raising the risk allocation to 45%, reducing the bond allocation to 50% and adding a 5% cash position. The narrowing of credit spreads necessitated a move in the allocation as investors are clearly willing to take on additional risk right now. This is [...]
All it takes are the words “record high” and all economic or financial sins are forgiven and forgotten. The financial media cannot contain themselves whenever they get the chance to use the term, adding qualifications like “soar” and “sharply” to make sure everyone gets the message. Context need not apply because stocks are supposed to be forward-looking discounting mechanisms. However, [...]
So much of the basis for monetary policy was put in place in the 1960’s study of the 1930’s. It has become commonplace simply to assume 21st century tactics as being directly lifted from the start of the Great Depression. One of the causes of that calamity was certainly restrictive money supply, but any dereliction on the part of the [...]
Economic Reports Scorecard The response to the much better than expected employment report today is quite interesting although not in a good way. Stocks will surely get most of the attention, assuming they continue to trade higher by the end of the day (they did), but other markets - bonds and gold - are not confirming the strength of the [...]
If there seems to be more safe haven demand of late, the increasing odds of British exit from the EU is being blamed. According to Yahoo!Finance, Goldman Sachs sees “kinks” in the option structure, an agglomeration of hedging demand that points to maturities around the UK referendum. The absence of any heavy hedging this week suggests that markets have no [...]
The risk budgets are unchanged again this month. For the moderate risk investor, the allocation between risk assets and bonds remains at 40/60. I struggled more with this decision than any in recent memory but in the end there just isn't sufficient evidence to make a change. Raising or lowering the allocation to risk assets right now would require making [...]
Stay In Touch