11 Mar 2019

Calling Dr. Draghi, Dr. Mario Draghi

Investors have been hyper-focused on every word that comes out of every Federal Reserve official since October, but when the European Central Bank (ECB) made a major policy reversal last week, the markets yawned. Ten years ago, Warren Buffett described the 2008 financial crisis as akin to a heart attack.  The Fed, acting as a physician, prescribed zero interest rates and when that wasn’t enough, they tried an experimental strategy known as quantitative… Read More

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17 Sep 2018

Remembering Lehman Brothers: What Have We Learned?

Five years ago, at the five-year anniversary weekend remembering the collapse of Lehman Brothers, I wasn’t ready to deal with the bad memories of that terrible time. Granted, what happened 10-years ago in financial markets was not like being in a war, a natural disaster, sick with a terrible disease or the victim of a terrible crime, but it was still upsetting to me (no doubt because I live in… Read More

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30 Apr 2018

Cheap Rates

It finally happened. For the first time since 2014, the yield on the 10yr Treasury just traded over 3.0%. For months, many have proclaimed that 3.0% is the Maginot Line that, if crossed, spells impending doom for the markets. While it is easy to get excited about round numbers, the reality is that the economic impact of 3.0% is no different than 2.99%. The Treasury rate that I really find… Read More

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12 Mar 2018

Busting Another Wall Street Myth

Over the last few months, I’ve read multiple articles making the claim that the correlation between stocks and bonds is shifting and that the new relationship will negatively impact portfolios. One recent Bloomberg article, titled ‘Easy Allocation Models ‘Doomed’ as Diversification Breaks Down’ really set me off and caused me to take a closer look at some of these claims. The thrust of the claim is that the recent negative… Read More

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5 Feb 2018

What the Heck Just Happened?

What the heck happened?  Stocks were rolling along, picking up steam even, when all of a sudden, out of the blue, ‘POW!’, the index hit a wall. In reality though, while the move lower was a surprise, it wasn’t really all that surprising.  It’s true that I couldn’t have told you the week before that stocks would have fallen sharply last week, but a move like this really isn’t out… Read More

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31 Jan 2018

Tax Reform’s Impact on the Value of Muni’s

The new 2018 tax laws are already having a major impact on investment portfolios. Lower tax rates, especially the decline in corporate rates, has boosted optimism for economic growth and higher wages which has manifested itself in higher stock multiples and higher prices. The opposite has happened with interest rates. Higher growth and wages would be expected to bring higher inflation too. Increased inflation expectations along with an expectation for… Read More

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22 Nov 2017

The Curve is Falling… The Curve is Falling!

The yield curve has been a very hot topic lately in the financial news media.  Multiple times a day, there are commentators pointing to the yield curve as a sign that markets are on the verge of imploding.  Is it time to panic? The Federal Reserve has continued to push short term rates higher throughout 2017.  Long term rates have responded by falling 10 bps.  This has led to a… Read More

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13 Nov 2017

The Canary in the Bond Market?

The recent poor performance of junk bonds received a lot of attention last week, culminating in an article in the Wall Street Journal that asked, ‘Are High Yield Bonds the Canary in the Coal Mine?’ The two largest junk bond ETFs, HYG and JNK, saw their largest weekly pullbacks since August, falling just short of a percent each on unusually large volume. There are several reasons for the selloff: Barron’s… Read More

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29 Aug 2017

Forecasting Expected Returns

“Price is what you pay.  Value is what you get.”  -Warren Buffet How can investors know the value of an investment?  Bond yields remain very low and stocks continue to climb higher across the globe.  Using typical valuation measures, markets everywhere look very expensive.  However, investors continue to pour money into them, so they must see value.  The value of an investment is subject to an uncertain future, so how… Read More

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30 May 2017

Bond Market Views on Growth and Inflation Today

Almost a year ago, the yield on the 10-year US Treasury hit an all-time low, falling to 1.36 percent, just below the previous all-time low of 1.39 percent, set in 2012. After the yield on the 10-year bottomed last summer, the yield drifted slowly higher until the election when, boom, it shot dramatically higher overnight.  Investors were optimistic that the Trump administration might bring faster economic growth through a combination of… Read More

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