The Great Bond Bull Market is Over June 2016 will most likely be remembered as the end of the great bond bull market. 34 years earlier in 1982, when then Fed Chair Paul Volcker turned the full force of the Federal Reserve to fighting inflation, both the 10 year Treasury yield and the Consumer Price Index (CPI) stood at approximately 15%.
I can’t quite remember how I met Craig Drill, captain of Drill Capital Management, but meet him I did over a decade ago and we have become kindred spirts. Maybe it’s because we both have been in the business a long time, or maybe it is because of our connection to First Boston in a life gone by.
Despite the evidence, strong past performance is the prerequisite for manager selection by individuals as well as institutional investors. New research explains why investors are likely to get poor results from performance chasing.
David Littleton is a founding principal of the Vestmark Manager Marketplace. I spoke with him about how this solution drives value for advisors and asset managers.
Prices will rise—for producers and consumers alike—which is good for gold but a headwind for continued economic growth.
Serious gold investors know that May has historically been a weak month for the price of the yellow metal. For the 10-year and 30-year periods, the month delivered negative returns.
High-quality bonds and defensive stocks are on the ropes. And U.S. blue-chips look poised to roll over, if history is any guide. But what if it isn’t?
Readers of these missives should know our fundamental energy analysts have been bullish on oil for quite some time, as have we. In fact, we have been bullish on commodities in general, often noting they are the cheapest relative to equities as they have been since the 1960s. Yet last week crude oil’s decline spooked energy investors, raising the question, “Is the crude oil rally over?”
The first defaults will occur at the lowest end of the problematic market: high yield or “junk” bonds. They will play a role comparable to subprime mortgages in the last crisis. We’ll see mortgage problems as well, but I think overleveraged companies will be the core problem.
Public debt may be growing at the expense of private debt, the Chinese bond market is opening up, and important dates for tariffs are fast approaching.
Equities are 2-5% higher so far in May, trying to add to their small gains from April and put behind a rough winter. This week, small caps closed at a new all-time high (ATH) and NDX broke to a 7 week high near its March ATH.
We have always liked the movie “City Slickers” and particularly one scene. It’s the scene where Curly (Jack Palance) turns to Mitch Robbins (Billy Crystal) and says, “Do you know the secret of life?” The punchline is, “It’s just one thing” (one thing). For investors we agree, all you need to know is just one thing.
Passive investing has been ridiculed by Wall Street for decades. The common theme is that indexing has become such a force that the market’s price discovery function is no longer working properly. Given the number of questions I get about this issue, one would think that passive investing is now dominating markets.
The Fed chairman makes clear the bar for slowing monetary tightening is higher nowadays, and argues emerging markets are much better positioned to handle higher U.S. yields than they were before.
Today, we revisit the military preparedness question following President Trump’s nearly $700 billion military budget to attempt to make our military readiness better. We think the recent weakness in the defense sector stocks provides an interesting entry spot for investors.
I’ve been saying for some time that the next financial crisis will bring a major debt crisis. But as you’ll see today, it is a small part, maybe the opening event, of a rapidly-approaching train wreck. We’ll need several weeks to tease out all the causes and consequences, so this letter will be the first in a series.
So we headed to NYC early Thursday morning in search of the “Teenage Mutant Ninja Turtles.” After touching down at LaGuardia we climbed into a yellow taxi held together by duct tape, rode over potholed streets with our cell phone cutting in and out (gosh I love New York City), and arrived at Grand Central Terminal around 11:00 a.m.
On May 14, new MSRB regulations will require the disclosure of the often dramatic markups that retail investors are subject to when buying individual municipal bonds. Will this accelerate the shift into active municipal bond management?
The U.S. bond market is one of the largest in the world, with managers controlling more than $2 trillion in assets. Given its size, an important question is identifying active bond fund managers that add value.
Fear that the multi-decade bull market in bonds will end has centered on the benchmark 10-year Treasury yield breaching 3%. But Jeffrey Gundlach said that is the wrong focus.
Gold was up half a percent year-to-date through last Friday. This doesn’t sound very exciting, but over the same period, the S&P 500 Index was in the red—the first time in nearly a decade that stocks have been negative for the year through the beginning of May.
Bond supply is plummeting, but so is demand. And rates are rising. Where are the silver linings?
The economic calendar is normal, with an emphasis on inflation data. The week will begin with analysis of the annual Berkshire Hathaway meeting, the wisdom of Buffett and Munger, and a multi-hour CNBC program including Warren Buffett, Charlie Munger, and Bill Gates.
The traditional 60/40 model no longer can be expected to deliver the same type of results. A new model is for investors to move toward more of a risk-parity portfolio, with assets more equally divided among stocks, bonds and these new alternatives.
Stocks slide on rising rates and yield curve inversion concerns, but a recession doesn't look likely, judging by other economic data and the high-yield bond market.
“A long time ago in a galaxy far far away” I was running three separate departments at then Richmond-based Wheat, First Securities. Subsequently, Tom Dorsey and Watson Wright decided to leave Wheat, First and form the now legendary firm of Dorsey Wright. When they left, that department fell under my management.
As the Federal Reserve (Fed) tightens monetary policy further, we expect to see default rates higher next year. Loan recovery rates averaged 70 percent between 1990 and 2017 as a result of their secured status and seniority in the capital structure. Senior secured bond recovery rates averaged 58 percent over the same period, while senior unsecured bond recovery rates averaged 43 percent. We are concerned about distressed exchanges as the risk of re-default is high. About 7 percent of high-yield corporate bond issuers have defaulted in the past.
While novice investors typically stumble onto the concept of trend following in the context of stock-market timing, professionals know that trend following is not about using trends to time one or two individual markets. Modern professional trend followers often trade dozens of futures markets across equities, bonds, currencies, commodities and more obscure markets like carbon offsets.
In short, there is not enough data to have me predict a recession and the consequent bear market. But there’s enough data bubbling up all around me that it makes me very nervous, and I am paying close attention. You should be, too.
The previous article I wrote on this subject was so popular that I had to continue my tirade. Toss these six marketing buzzwords in the never-to-be-used jargon dumpster, in reverse order from the least to most offensive.
We are growing accustomed to wide daily swings in the Standard & Poor’s 500 and the Dow Jones Industrial Average. Triple-digit moves in the latter and double-digit changes in the former are no longer reasons for elation or alarm. The volatility can result from an unexpected economic report or a tweet from the White House.
Yet the earnings potential of developed and emerging markets stocks is real, since they are at earlier points in their respective business cycles.
In their second-quarter (Q2) 2018 outlook, K2 Advisors’ Research and Portfolio Construction teams share their views on why investors should not fear the return of market volatility—and why it may unlock opportunities for active managers. We believe offering these insights will help investors better understand the rationale for owning retail mutual funds that invest in hedge strategies.
The increasing costs of health insurance borne by employees and employers alike has spawned a variety of plans and strategies to help manage the expenses. Among these are health savings accounts (HSAs), which first came onto the scene in 2003.
After a decade of relying on investment and exports for growth, China’s effort to rebalance its economy toward consumer-led growth is well underway and should continue to build steam in 2018.
Facebook’s margins could ebb this year, but they remain at elevated levels and profits could still grow meaningfully.
The Tax Cuts and Jobs Act as created a media frenzy and widespread confusion. With that in mind, I will provide a brief overview of the new provisions, followed by some practical ideas on how clients can reduce taxes.
These are two of the most important paragraphs we have encountered in more than 47 years of studying markets. DO NOT read them just once. Go off to a quiet spot that invites contemplation and READ THEM SEVERAL TIMES. Then reflect on all of the mistakes you have made in trading and investing.
You’ve no doubt heard that everything’s bigger in Texas. That’s more than just a trite expression, and I’m not just saying that because Texas is home to U.S. Global Investors.
Those who own gold often argue how to best own it. I encourage anyone holding gold to assess the pros and cons of different choices of gold ownership to make an educated rather than emotional decision.
For those of you who think that social media is a useless tool for financial advisors, I’m going to tell you a story about my success back when I was an advisor.
However you define it, full engagement with a prospect is a worthy (but elusive) goal.
Great leaders are not just willing to adapt to the changing dynamics of the marketplace – they are eager to do so. How that lesson played out for Starbucks over 20 years ago is relevant for advisors today.
The definition of a China syndrome is, “A hypothetical sequence of events following the meltdown of a nuclear reactor in which the core melts through its containment structure and deep into the earth; hypothetically to China.”
Diversifying your investments limits risk, but too much diversification limits gains while not reducing risk any further. You need to embrace risk in both public and private companies to receive the returns you desire.
So-called “smart-beta” strategies hasn’t been all that smart lately – at least not for the last five years. This article will examine why, whether it was predictable and the likelihood it will work better going forward.
The evaluation of alternatives introduces an extra dimension into the equation that investors don’t need to think about with traditional equity funds. It’s the concept of capital efficiency.
Tech and financials led the recent selloff, as headline noise and regulatory risks spooked investors. But strong corporate fundamentals, including earnings growth, should ultimately drive stock returns.
When we were kids, we used to love having our parents read to us, especially from books written by Lewis Carroll. Through the Looking Glass and Alice in Wonderland were our two favorites. One of the quotes that has always stuck with us is, “Down the rabbit hole,” which is a metaphor for an entry into the unknown, the disorienting, or the mentally deranging, from its use in Alice's Adventures in Wonderland. Unfortunately, the same can be said about the stock market recently.
While U.S. equity valuations clearly are at historically high levels, is the outlook as bleak as it seems? Perhaps not. Let’s see why that is the case.
