Category Archives: Investment outlook

Tokyo Retail Investors Out Carry-Trading the Pros

A Bloomberg story tells us that Japanese retail investors are undermining the forecasts (and worse, trades) of large investment banks. The banks think the yen is seriously undervalued. Unfortunately, when it appreciates, retail investors buy more assets in countries that offer more yield, which leads them to sell yen, keeping the currency in its place. […]

The Bond Market Hath Spoken (But a Lot of People Aren’t Listening)

I know we are in the midst of a classic pattern, but it is still mystifying to watch it operate. At the end of a cycle, bonds start to decline in price before the equity market starts to fall. One would think that this sequence was sufficiently well established that the time lag between the […]

Troubled Bear Stearns Hedge Fund May Be Liquidating

When the story broke of trouble at a Bear Stearns hedge fund, the High-Grade Structured Credit Strategies Enhanced Leverage Fund, that led it to auction $4 billion of its holdings to raise cash, we speculated that this might wind up being the beginning of a liquidation. That scenario now appears likely. The Wall Street Journal […]

Is (the Perception of) Risk Returning?

Many moons ago, we lamented, “Where Has the (Perception of) Risk Gone?” Even though the markets got religion for a couple of weeks after the global downdraft of February 27, things returned surprisingly quickly to status quo ante. Over the last week and a half, we seem to have had a mini rerun of February […]

More on Troubled Bear Stearns Hedge Fund

Readers may recall that a Bear Stearns hedge fund, the High-Grade Structured Credit Strategies Enhanced Leverage Fund, scheduled an auction for $4 billion of mortgage securities to raise cash. That’s a pretty unusual move, a sign of acute distress. Although Bear Stearns officials initially denied that the big sale was to meet margin calls, we […]

Bear Stearns Hedge Fund in Distressed Sale of MBS

This story, which describes the in extremis sale of $4 billion of bonds by a Bear Stearns hedge fund, “Bear’s Fund Is Facing Mortgage Losses,” is currently the lead story on the Wall Street Journal’s website, so it is likely to get page one coverage in the print edition. The fund, the High-Grade Structured Credit […]

Bill Gross on the Divergent Impact of Interest Rates

Bill Gross, storied bond investor and head of PIMCO, a fund manager with nearly $700 billion under management, made an important observation in a Financial Times comment, namely, that interest rate policy is having a very different impact on businesses and consumers. While the two groups were (most of the time) similarly affected, now interest […]

Martin Wolf on Savings Glut Vs. Money Glut Hypotheses

Martin Wolf, in a Financial Times comment, “Villains and victims of global capital flows,” looks at the two competing theories of the causes of global imbalances. One is the savings glut story, in which parsimonious Chinese and Japanese force the US to consume to keep the world from falling into recession. This view is favored […]

Central Bankers Taking More Interest in Money Supply

We have been muttering on this blog for some time that the powers that be should take more interest in money supply, and it appears that European central bankers are coming around to our point of view. David Altig in “Putting The Money Back In Monetary Policy” at Macroblog has a very useful, detailed without […]

Cognitive Dissonance in the Markets?

Even though the US Treasury market has taken a nasty downward move through an important level that many participants see as the beginning of a bear market in bonds (which will inevitably lead to a bear market in equities), actors in other sectors of the financial markets seem remarkably sanguine, at least so far. Is […]

WSJ: Housing Gloom Increases

We have been saying for some time that a housing recovery was quite a way off, and official opinion has finally caught up with our views (or more accurately, has decided to acknowledge obvious but unpleasant reality). The Weekend Wall Street Journal reports in a page one story, “Economists See Housing Slump Enduring Longer.” The […]

Further Signs That the Bear Market Has Begun

We observed that the sharp fall in the bond markets Thursday, which was triggered not by news, but by a collective recognition that credit was too cheap, seemed to many to be an inflection point, an end of a long cycle of falling interest rates. This development is important not just for fixed income investors, […]

The Beginning of the End?

For quite some time, we have written about indifference to risk, unjustifiable asset prices in many markets, and high levels of liquidity all as different aspects of what John Authers called “overvalued credit” meaning overly bullish (more accurately speculative) conditions in debt markets which fuelled overheated conditions in asset classes that could be financed (and […]

"Could the party be drawing to an end for bond investors?"

This story by Tim Bond in Thursday’s Financial Times, provides an excellent explanation of how a change in the universe of bond investors has produced new outcomes, like a difficult-to-explain negative yield curve. It also looks prescient in light of the plummet in long-dated Treasuries that day. Bond’s article says that “long term bonds are […]

Long or Short Capital Calls a Market Top

The blog Long or Short Capital is amusing and often astute (and we all need comic relief sometimes). From “I’m Calling the Top today, my ten signs“: 1. Shares of Odyssey Marine Corporation (NYSE: OMR) recently doubled when they announced they found sunken treasure. 2. Microsoft (NASDAQ: MSFT) (supposedly smart people) paid 38x EBITDA for […]