31 Oct 2014

GDP Treats Investors

The consensus growth forecast for third quarter GDP was 3.00 percent, so markets responded happily to the 3.55 percent reading from the Bureau of Economic Analysis. The largest contribution to growth came from net exports, which grew at a rate of 1.32 percent and consumer spending added 1.22 percent while inventories were a negative contributor at -0.57 percent. I am always a little confused by how the government reports GDP… Read More

By David Ott Tags:
30 Oct 2014

Federal Reserve Ends Quantitative Easing

During the 2008 financial crisis, Warren Buffet compared the US economy to a heart attack victim lying flat on the floor. Buffet’s analogy has continued to be a useful analogy as the Federal Reserve pumped medicine into the economy in the form of buying bonds on the open market in a program known as quantitative easing, or simply QE. That program came to an end yesterday, so you could carry… Read More

24 Oct 2014

Anatomy of a Short Squeeze

Although it’s come and gone, I am still thinking about the price spike in the 10-year US Treasury note that occurred last Wednesday. Someone from Blackrock told me yesterday that it was the most volatile day for the 10-year since 1980, which implies that it was more volatile than 99.91 percent of all of those trading sessions. You can see from the chart that all of wilding was in the… Read More

9 Oct 2014

When The Fed Speaks, The Market Listens

Unlike most central banks, the Federal Reserve has what is known as a dual mandate: to foster full employment and stable prices. Generally speaking, doves are thought to focus more on full employment at the expense of inflation and, theoretically, hawks are more willing to accept higher unemployment for the sake of stable prices. Of course, in reality, everyone is in the middle somewhere, since no one wants high unemployment… Read More

22 Sep 2014

What if You Called The Bond Market Perfectly?

It’s an interesting question. The ability to call the tops and bottoms with perfect accuracy is considered the “holy grail” of bond market investing. We spend a great deal of effort talking to clients about the risk of trying to make speculative calls – the risk of being wrong of course. Just as an exercise I thought it would be neat to imagine what it would be like if we… Read More

20 Sep 2014

Why Aren’t Interest Rates Higher?

With a lot of focus being put on the coming end to the Federal Reserve’s quantitative easing campaign, this article will delve into some of the other factors impacting interest rates in the US. The Federal Open Market Committee (FOMC) has maintained a steady course ever since Chairman Bernanke first hinted at the end of quantitative easing in the spring of 2013. The “Taper” which is scheduled to complete this… Read More

17 Sep 2014

ALM Insights – September 2014

ALM Insights is focused on banks and other institutions that use their portfolio to manage risk on both sides of their balance sheet. It takes an in-depth look at securities investment strategies, balance sheet and asset/liability strategies, regulatory topics and general economic information. To view this issue, click the image below. In This Issue: What if You Called The Market Perfectly? The Impact of Fed Tightening Why Aren’t Interest Rates Higher?

16 Sep 2014

The Naked Truth About Actively Managed Mutual Funds

Twice per year, Standard & Poor’s issues a report that compares the performance of actively managed mutual funds to corresponding S&P indexes. The most recent report, the S&P Indexes Versus Active, or SPIVA, can be found here. It’s a great report because it provided high quality, continuous evidence in the ongoing debate about active versus passive management. The debate, which has being going on for 30+ years, centers on who… Read More

8 Sep 2014

Markets React to Disappointing Jobs Data

The employment situation in the US was worse-than-expected in August, according to new data from the Bureau of Labor Statistics. The headline unemployment rate fell from 6.2 to 6.1 percent, but as it is often the case, the headline rate doesn’t tell the whole story.  For starters, one of the largest contributors to the decline can be explained by a lower unemployment rate among teenagers and other less-educated workers. The… Read More

By David Ott Tags:
5 Sep 2014

Why We Avoid Junk Bonds

The Wall Street Journal had a headline yesterday that I couldn’t resist: Junk Bonds Deserve a Place in Investors’ Portfolio. I like to read articles where I agree with the fundamental proposition, but I REALLY like to read articles where the premise completely contradicts my view, or the view of Acropolis. This article falls in the second category since we believe that junk bonds don’t deserve a place in your… Read More