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equities (7)

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Don't Be Fooled The Bond Rally Continues

We’ve been bulls on 30-year Treasury bonds since 1981 when we stated, “We’re entering the bond rally of a lifetime.” It’s still under way, in our opinion. Their yields back then were 15.2%, but our forecast called for huge declines in inflation and, with it, a gigantic fall in bond yields to our then-target of 3%.

The Cause of Inflation

We’ve argued that the root of inflation is excess demand, and historically it’s caused by huge government spending on top of a fully-employed economy.  That happens…

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Where Money's Been Flowing

When first-generation ETFs launched in the 1990s—such as the SPDR S&P 500 Trust (SPY) and the PowerShares QQQ Trust Series 1 (QQQ)—lead this year's outflows, that is a sign that institutional investors are scared. These first-to-market ETFs have the ample liquidity that big institutions tend to love, with many trading more than $500 million in volume a day. While newer ETFs that may do the same thing or more for cheaper have been launched in the intervening years, early ETFs still tend to curry favor with large investors that value liquidity. These investors tend to be more tactical, and thus outflows from these ETF stalwarts are a bearish sign. 

Photographer: Balchunas, Eric

U.S. Treasuries of all maturities are raking in cash

According to…

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When The SEC Investigates Market Failures

This week, the SEC gave us a belated Christmas present.  But what does it actually portend?

The present in question is an 88-page "Research Note" from the SEC's Division of Trading and Markets titled "Equity Market Volatility on August 24, 2015." It's an innocuous-enough title, but for us market-structure wonks, it's kind of a big deal.

The conclusions of the piece are purely factual, and include dozens of pages of juicy charts and tables (be still my nerdy heart!). There's little or no conjecture, and there's absolutely no policy recommendations.

It outlines the facts of that fateful trading day, discussing what went wrong, and which classes of securities were affected. It's a gold mine for folks who want to dig in and understand what happens when things break, and, for any investor, it's worth reading at least the first…

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While main stream media does their level best to keep us hugging our equities, they seem to ignore the fact that quantitative easing ran the market up from 2009 and while the economy has come a long way since the bottom, maybe, just maybe, it's strong enough to sustain us, but not equities at elevated levels.

Federal Reserve officials have signaled they think the economy is robust enough to withstand a round of interest-rate rises starting this year. But the bond market still seems skeptical.

While yields on short-term Treasury notes have started moving higher in anticipation of an interest-rate increase as early as September, yields on longer-term debt have remained stubbornly low. That is a sign that many investors are still doubtful about the health of the economy, and the ability of the Fed to keep raising rates without jeopardizing growth.

On Tuesday, yields on short-term U.S. Treasury notes rose…

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Which Is Wrong? Bonds Or Stocks?

With so much money flowing into bonds and treasuries (TLT shown) in 2014 while the stock market rose, one must wonder..........which one is going to give?  (click chart to enlarge)

Certainly it would seem not everyone believes the economy is strong enough to support future earnings and rising profits.

Is the five-year bull run finally running out of steam?

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Japan's government is set to urge the nation's public pension funds - a pool of over $2 trillion - to increase their investment in equities and overseas assets as part of a growth strategy being readied by Prime Minister Shinzo Abe, according to people with knowledge of the policy shift.  Read more........

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