JAPAN: KEYNES ON STEROIDS
John Maynard Keynes was a big believer that government should use tools to stabilize an economy. Over time, the Federal Reserve (“Fed”) has become more and more Keynesian in its approach to monetary policy. The Fed has used such tools at various times over the last 20 years to jump in during a crisis to […]
Volatility is back – re-pricing of risk and more importantly, opportunity!!
As the Federal Reserve (“Fed”) ends QE this month, volatility is back and risk is finally being re-priced. The Fed gave all of us a sense of complacency with the implementation of its QE program and now that complacency has evaporated. We believe volatility is higher than normal because it was suppressed by the Fed. […]
FALL OF AN INVESTMENT LEGEND – A LONG TIME COMING
Last week, the investment world was shocked by the announcement that Bill Gross, the founder of PIMCO and the man often referred to as the “Bond King”, was leaving PIMCO to join Janus Capital. We have known Bill Gross, PIMCO and many former PIMCO portfolio managers for almost three decades. It has been more than […]
Opportunity Knocks – Emerging Markets
It was just a few years back when we would ask mutual fund representatives who visited our office what investments other advisors were utilizing in their clients’ portfolios. The answer that came back time and again was “most advisors have 40%-50% of their clients’ money in international funds with half that being in emerging markets […]
ARE INVESTORS TOO COMPLACENT?
Complacency, whether in the stock market, your job, your life, etc., is never a good thing. With the geopolitical news – Ukraine, Isis, European slowdown (Italy is in recession) – making headlines, it begs the question: Are investors too complacent about risk? One way to determine if investors are complacent is to look at […]
CORPORATE BORROWING – PART 2…..
In our last market update, we discussed corporate debt and company stock buybacks. We see this topic as a bigger story than what has been reported so we thought we would again address the issue and give an example using a well- known company that has been doing this for the last few years. […]
Company Buybacks – Party like its 1999 (or 2007?)
Because of historically low interest rates, companies are selling bonds (borrowing money) and buying back shares. This is a good thing for the market, but is it just a short-term sugar high? Let’s look at some figures. For the twelve months ending March 31, 2014, companies increased the amount of company shares they purchased by […]
Unintended Consequences – No liquidity in bond markets
As a direct result of the financial crisis of 2008, the Frank/Dodd Wall Street Reform Act was passed to try and reduce the risk of banks’ failing during a financial crisis. One of the unintended consequences of the Act was that it has reduced liquidity in the bond market. How? Before Frank/Dodd, banks were active […]
European Central Bank negative interest rates – the battle to devalue the Euro
Mario Draghi, the head of the European Central Bank (“ECB”) has been vocal over the past few months about the need to devalue the Euro. His first step in pursuing this objective was to cut the bank deposit rate to -.10%, which he says will also help to fight off deflation. However, there are other […]
Risk is important, but risk with expected returns is meaningful
When a fund manager recently visited and touted their emerging market bond fund as a good investment, we couldn’t believe what we were hearing. The fund was 17% invested in Nigerian bonds, 9% in Russian bonds and 7% in Venezuelan bonds. For that much risk, the fund had a yield of only 5.5%. In our […]