A crystal ball enlightening a trader about the rate cut headlines would have been costly. However, a trader with the crystal ball and proper context may have been more successful.
Despite double-digit dividend yields in many cases and the cushion such high dividends provide, buying agency REITs is not a guaranteed home run in a bull steepener.
Not surprisingly, Donald Trump and Kamala Harris are floating opposite approaches to modifying the corporate tax code. If enacted, both proposals would significantly impact corporate profits and, thus, share prices. Currently, the plans are only campaign promises
I have looked at market data on inflation expectations, Fed Funds futures, and other factors that influence interest rates. Today, I add an unorthodox factor to the list: cash cows.
Part one of this series described the burgeoning bull steepening yield curve environment and what it implies about economic growth and Fed policy. It also discussed the three other predominant types of yield curve shifts and what they suggest for the economy and Fed policy.
The level of U.S. Treasury yields and the changing shape of the Treasury yield curve provide investors with critical feedback regarding the market’s expectations for economic growth, inflation, and monetary policy
Profitable bond trading opportunities arise when your expectations about Fed policy differ from those of the market. Therefore, with the Fed seemingly embarking on a series of interest rate cuts, it behooves us to appreciate how many interest rate cuts the Fed Funds futures market expects and over what period.
A recent article co-authored by Stephen Miran and Dr. Nouriel Roubini, aka Dr. Doom, accuses the U.S. Treasury Department of using its debt-issuance powers to manipulate financial conditions.
One of the most critical factors explaining the performance differences between small-cap value and large-cap growth stocks is the sector in which the companies operate, and the earnings growth associated with each industry.
In my opinion, the primary reason that yields are too high is a pronounced fear from the Fed and bond investors of another round of inflation. The Fed runs an extraordinarily tight monetary policy to ensure it doesn’t reoccur.
Fed speakers will deny any notion that its monetary policy aims in part to help the government fund her debts. Regardless of what they say, we are already in an age of fiscal dominance. Monetary policy must consider the nation’s debt situation.
Notwithstanding whether there was a formal agreement, the petrodollar is not going anywhere. Even if Saudi Arabia accepts rubles, yuan, pesos, or gold for its oil, it will need to convert those currencies into dollars in almost all instances.
Despite the Fed’s “significant progress” in lowering inflation, most citizens are outraged and confused by economists’ relatively rosy inflation observations. Most citizens believe inflation is still rampant.
A well-thought-out long-game thesis can stay intact for long periods with slight adjustments when needed. Like a long and straight drive in golf, when your macroeconomic thesis proves correct, a good portion of your investing job is done.
This third and final part of this series focuses on alternative energy sources, utility companies, and other companies related to the power grid infrastructure.
Part Two focuses on the traditional energy suppliers that will fuel the power grid. The industries and companies are not presented in any particular order.
AI and EVs can potentially increase the nation’s productivity growth, which would go a long way toward boosting economic growth. However, with the potential benefits come significant investments. Some companies have already made massive investments in those industries. Others, like those involving the power grid, are just getting started.
Since the pandemic-related fiscal stimulus, the outstanding Federal debt has risen appreciably. In nominal dollar terms, the recent debt surge is mindboggling. However, the increase is on par with the government’s negligence over the last fifty years.
On the heels of Apple’s latest earnings report, the Wall Street Journal published an article titled “Apple is Buffett’s Best Investment,” which discusses how Apple became an oversized investment of Warren Buffett’s company, Berkshire Hathaway.
In an op-ed for the Washington Post on November 5, 2010, Ben Bernanke did a victory lap, praising the Fed’s efforts in stemming the financial crisis. In the article, he discusses how QE and other Fed policies eased financial conditions, bolstering investor confidence.
In my recent piece, “Japan's Lost Decades,” I examined why Japan's GDP is smaller than it was in 1995 and why it took 35 years for its stock market to set its recent record high.
Given that many people consider gold prices to be a macro barometer, reflecting trends in the economy, inflation, currency, and geopolitics, let’s identify the driving force behind the recent surge in the price of gold.
Continuing down our path will lead to Japan circa 1989.
Easy financial conditions and tight borrowing conditions make monetary policy difficult for the Fed to balance.
Rumors are floating that a new variation of QE will help bridge the Treasury’s liquidity shortfalls.
The labor market is the most important leading indicator of consumption, and of the ability of the bougie broke to continue to be bougie instead of flat-out broke!
The Fed is talking about cutting rates and reducing QT. The only rationale for it in such an environment is a concern with liquidity problems.
Every man, woman, and child on planet Earth must spend about $45 on Apple products yearly to justify its valuation.
None of the Magnificent Seven companies existed in the heyday of the Nifty Fifty, but a unique valuation and narrative thread aligns the companies.
Could Toyota, not Tesla, be at the forefront of a significant technological advance for automobiles?
At its core, inflation is too much money chasing too few goods. That was the case in 2020 through 2022. This is not the case anymore.
We move on to the recent inflation that was kicked off by the pandemic. This summary allows us to appreciate better the similarities and differences between now and 50 years ago.
The Fed may have set the inflation fire, but the same Fed under Paul Volcker also helped extinguish it. I will examine the change in mindset at the Fed in the mid- to late 1970s.
To properly assess whether a repeat of 1970s-era inflation is likely, we must first understand why inflation was rampant during that period.
Today's popular narrative is a growing consensus for the Fed to engineer a soft landing and a “Goldilocks” economy.
Can the Magnificent Seven retain its crown? Or will some subset of the 493 other S&P 500 stocks and their neglected sectors take the throne in 2024?
If the prices of the magnificent seven outperformed their fundamentals, it will be much harder for a repeat performance in 2024.
Stock returns over the next 10 years may likely be lower than bond returns.
How might stocks and bonds perform during the pause and eventually when the Fed cuts rates?
The problem is not a deficit or a debt-issuance problem. It's an interest rate problem.
The labor market is undoubtedly deteriorating and sending signals that have been historically valuable warnings that a recession is coming.
Given the likelihood that economists are again myopic in their inflation forecasts and bond traders are betting on such projections, I see a day soon when a disinflationary or deflationary reality hits the bond market and bond yields plummet.
Whether retirement savers in TDFs know it or not, and I presume most don't, they are mindlessly investing their wealth.
The relationship and the recent divergence between real rates and stock valuations is critical. Be ready for the historical trend to reassert itself.
This article discusses one of my favorite bond fair-value models to show you the true bond-yield signal.
The odds of a unicorn spraying rainbows across the sky and the government running a surplus are the same: zero percent.
This is the 25th anniversary of the collapse of LTCM, so let’s reflect on the similarities between that debacle and what might unfold in the capital markets today.
A financial crisis, following the 5.50% hike in Fed funds and similar increases in all bond yields, is virtually inevitable.
Can the economy grow 2.0% to 2.5% faster per year over the next 10 years than the last 30 years? I don't think so.
Normalizing economic activity and the slow but steadily growing lag effect will result in a recession.
