17 Dec 2015

The Fed Awakens

As expected the Federal Open Market Committee (FOMC) raised interest rates a quarter of one percent so that the target range for overnight lending is now 0.25-0.50 percent. Importantly, the Fed said that rates would rise gradually from here, actually using the word ‘gradual’ twice in the statement. Also, somewhat surprisingly, the vote to increase rates was unanimous.  I believed, and heard other commentators say, that there would likely be… Read More

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16 Dec 2015

Finally, Fed Day is Today

Well, today’s the day that we will in all likelihood get news that after seven years, interest rates will come off of the floor.  The Zero Interest Rate Policy (ZIRP) that the Fed has engaged in will finally be over. Although I have the feeling that what the Fed will do next will still dominate the conversation (when will they raise again, by how much, etc.), it will be nice… Read More

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15 Dec 2015

Junk Bond Selloff Continues

The junk bond market was under pressure again yesterday, but managed to finish off of their worst levels.  The high yield market was roiled again after one hedge fund, Lucidus Capital, announced that it was shutting down its $900 million credit fund, and another hedge fund, Stone Lion, said that they were suspending redemption on their $400 million fund. This comes after news from last week that Third Avenue, a… Read More

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14 Dec 2015

S&P 500 Turns Negative for Year

The rout last week reminds me of the market tremors in August and September that caused the Federal Reserve to blink. Markets thought that the Federal Reserve would raise interest rates in the September meeting and were surprised when the Fed cited market turbulence when they kept the rates unchanged. In September, markets were worried about global growth and the sharp selloff in Chinese stocks, which had fallen 40 percent in a… Read More

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11 Dec 2015

Trouble in Junk Bonds

Last September, I wrote that we avoid junk bonds because they are too sensitive to stocks, which means that a portfolio of stocks and junk bonds isn’t as diversified as a portfolio that has stocks and investment grade bonds (click here to see the original article). Over the last year, the S&P 500 has earned just 1.68 percent and suffered a 10 percent correction in the autumn.  Junk bonds, as… Read More

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8 Dec 2015

When Trends Reverse

Last Thursday, Mario Draghi, the President of the European Central Bank (ECB) disappointed markets by not increasing their current bond buying program. It was a shock to markets, although you wouldn’t really know it from looking at the stock market.  The S&P 500 lost -1.44 percent, and while that’s a fair amount, it definitely falls in the normal category and not in the shocking category. The real action was in the… Read More

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7 Dec 2015

Stocks Pop on Unemployment Data

Confirm payrolls for November rose 211,000, above the consensus estimate of 200,000, which follows the strong and upwardly revised October reading of 298,000 new jobs.  The unemployment rate held at five percent and the labor force participation rate rose slightly to 62.5 percent from 62.4 percent. After the terrible showing on Thursday, ‘Super Mario’ Draghi flew to New York and spoke at an Economic Club event.  Knowing that his communications the day before had… Read More

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4 Dec 2015

Mario Draghi Taketh Away

Back in 2012, Draghi famously said that the ECB was ready to do ‘whatever it takes’ to preserve the euro. Although he was talking about keeping peripheral countries within the euro during their sovereign debt crisis, the ECB has developed a reputation over the past few years for exceeding investor expectations with their economic stimulus programs. That ended yesterday when the ECB failed to deliver the stimulus that markets were… Read More

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3 Dec 2015

Stocks Reverse Solid Gains (Exactly)

One of the interesting stories yesterday was that Yahoo might sell its core business, which got me wondering: what is Yahoo’s core business? Interestingly, the market is puts a negative value on Yahoo’s core business, whatever it is.  Let’s take a look at some of their assets: a 15 percent stake in Alibaba worth $32 billion, a 35 percent stake in the separate publicly traded Yahoo Japan that is worth… Read More

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1 Dec 2015

A Good Way to Give Back

It looks like Black Friday was a dud, I hope that Small Business Saturday was successful and I trust that Cyber Monday was largely ignored here in the office. Last year, Marie Tustin apprised me to Giving Tuesday, which always follows the aforementioned ‘holidays’ but is dedicated to giving back instead of getting good deals. Even if you don’t have specific plans for Giving Tuesday, this is the time of… Read More

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