During this thin holiday market as markets, it’s important to remind ourselves of the tools that are necessary to have in order to profit in the global financial markets. I had the pleasure to sit down with Eddie to reprise many stories that bring laughter but also knowledge of the markets. Please enjoy the podcast.
As far as Tuesday goes, the equity rally powers on and the yield curves continue to flatten, causing angst among many asset managers. But as the U.S. curves flatten the European curves are actually steepening, which is in contravention to conventional wisdom. The ECB is still building its balance sheet while the FED has actually begun shrinking its $4.5 trillion accumulated asset base. The U.S. curve OUGHT to be steepening while the European should be flattening. My opinion is that the emphasis is on buying the short end of Europe but forcing global investors to seek duration risk in the U.S. with its higher sovereign yields. Just last week, the European junk bond market was actually yielding less than U.S. 10-year Treasuries. I can’t stress it enough: The international market for pricing risk has been terribly distorted by the central banks. This is the environment we exist in for the business we have chosen. I will be on with Rick Santelli on Wednesday at 9:40am CST. Enjoy your Thanksgiving for anyone reading this BLOG has much to be thankful for. All the best, Yra
November 21, 2017 at 7:36 pm |
Have the CB around the globe created a World Wide ” Orange County”?
November 22, 2017 at 9:53 am |
For those who have the 45 minutes, Yra’s Podcast is very worthwhile.
November 22, 2017 at 10:01 am |
Richard–thanks
November 22, 2017 at 3:33 pm |
Yra–can you please explain why you think the yc should steepen? My model has the ten year falling to ~1.8% over the next few years while fed hikes/continued strength in housing and wages should bring the two year near 2%. Which is to say I see an inverted curve by the end of 2019, possibly earlier.
November 27, 2017 at 1:22 pm |
Wbuelow—when i see the FED starting to reduce balance sheet coupled with a fiscal stimulus and increased U.S. debt my traditional signals are for a pasting of the long end—-but in this environment my long held analysis is WRONG as the battlefield has been changed due to massive central bank bombing of significant indicators—sorry for the military metaphors but this is a battle that the markets are trying to come to terms with—I don’t have a problem with your model but if your analysis is correct then equity markets should be weak as rising wages and short term rates eat into corporate profits
November 27, 2017 at 4:01 pm
Call me William; I’m a big fan of yours. My macro model for equities does have them more overvalued than at any point going back to 1910 (as far as my data take me). Wage growth is still accelerating (I watch the Atlanta Fed’s Wage Growth Tracker as it granger causes AHE) but from a low point. Eventually profits will take a hit but as long as earnings growth is positive and growing (second derivative) it’s hard for markets to fall too far and not catch a bid, even if the level is ridiculous. I still take shots here and there, though. I tried selling the rally in RTY on the 16th but got stopped out in short order. Still have my flattener on…
November 27, 2017 at 5:38 pm
William–thanks for the kind words and great discourse.We operate here with discourse and not validation—and you have personified this–thanks
November 22, 2017 at 7:00 pm |
Happy Thanksgiving, everyone! 🙂