11 May 2020

A Look at Unemployment Rates

The unemployment numbers on Friday weren’t surprising, but they were still shocking. The unemployment rate was 14.7 percent, and although that was better than expected, it’s still the highest reading by a long shot since the inception of this data in 1948.  In fact, the unemployment rate only breached 10 percent in two of the recessions since then. The unemployment rate is an interesting and useful statistic, but it attempts… Read More

5 May 2020

Nothing Can Stop America

About one month after Lehman Brothers collapsed during the 2008 financial crisis, Warren Buffett penned an opinion piece for the New York Times that I found immensely comforting. You can read the article by clicking here, but the thrust of it was that even if he didn’t know what stock prices would do in the short-run, that stocks would make record profits in the future and he was buying stocks. My… Read More

30 Apr 2020

Economy Contracts, Stocks Surge. Surprised?

Yesterday, the Commerce Department announced that the economy contracted by -4.8 percent in the first three months of 2020, the worst reading since the last quarter of 2008. Analysts expect that next quarter, GDP will drop by more than 30 percent, the worst in our lifetimes. Stocks surged.  Surprised? One of the phrases that you see me write all the time is ‘better than expectations,’ or ‘worse than consensus.’ Investors… Read More

28 Apr 2020

Financial Conditions Easing

A few weeks ago, I wrote that even though stock prices were still volatile, the stress in the market was settling down; I called it ‘stabilizing, but turbulent.’ Financial journalists often write about the ‘market plumbing,’ and it occurred to me that plumbing is a good analogy for the difference between stress and turbulence.  Volatility is like being in a nice hot shower and it turns ice cold. Obviously, something’s… Read More

27 Apr 2020

Stocks or Bonds in a Recession?

Even in today’s economic environment, coming up with topics daily can be a challenge.  So, when a reader asks a question, I am more than happy to answer it in this forum. Last week, I received a question in response to my article, ‘Chance of Recession: 100 percent.’  The reader wanted to know what the recession meant for bonds, especially in the coming months when markets will be volatile. That’s… Read More

22 Apr 2020

Dodging Commodities

One of the best decisions that our Investment Committee made was back in 2008 when we decided not to add commodities to the portfolio. It’s hard to believe now, but there was a lot of pressure back then to add it because stocks were down and commodities were doing well. If you look at the 12-month period ending on June 30, 2008 just before the worst part of the storm,… Read More

21 Apr 2020

Oil Gets Weird

When US Treasury bills first traded with negative yields in 2008, I took a screen shot, printed it and put it in a folder of interesting stuff that I look back at every few years.  I never dreamed that interest rates would be negative all the way out to 10-years in Europe. Well, it turns out that it’s not just interest rates that can trade completely upside down – yesterday… Read More

15 Apr 2020

Junk Bonds in Today’s Market

Yesterday, I discussed corporate bonds, and how their yield tells us something about investor risk appetite.  You can read the article here. The same thing applies to non-investment grade bonds, which are also called ‘high yield,’ or less pleasantly, ‘junk bonds.’ The first chart below is exactly like the first chart in yesterday’s article, but also includes the yield on junk bonds (in yellow) in addition to Treasury bonds (in blue)… Read More

14 Apr 2020

Corporate Bonds in Today’s Market

One of the areas of the market that we’re paying close attention to right now is corporate bonds.  To raise money, companies borrow money in the form of bonds or issue stock by selling ownership in the form of equity. Corporate bonds are safer than stocks in the aggregate because if a company fails, the bond holders get their money back before the equity holders.  While corporate bonds may be… Read More

13 Apr 2020

Coronavirus & Earnings Season

Earnings season kicks off this week, and although we’ve seen a few economic data releases, earnings announcements will offer a lot of information about how the coronavirus is impacting companies. Right now, according to FactSet, earnings are expected to be lower by 10 percent compared to the first quarter last year.  If that’s the case, it will be the largest year-over-year decline since the third quarter of 2009, when the… Read More