Fed a Small Step Closer to Raising rates

Fed a Small Step Closer to Raising rates Today’s FOMC statement published after the meeting is more upbeat than the last one in discussing the labor markets and the inflation outlook.  The FOMC noted “solid gains and a lower unemployment rate” and that the “likelihood of inflation running persistently below 2 percent has diminished somewhat” despite lower oil prices.  In announcing the end of QE, the statement noted “substantial improvements in the outlook for the labor market since” Read more [...]

Though Not In the Lead, After the FOMC Will Leveraged Loans Be The Turtle That Wins the Race?

The senior bank loan or leverage loan market as measured by the S&P/LSTA U.S. Leveraged Loan 100 Index ticked up last week as the index has returned +0.10% month-to-date and 1.56% year-to-date.  Last week’s price action of the secondary loan market assisted the index in clawing back against a month-to-date loss from the beginning of the week of -0.51%.  Much of last week’s leveraged loan positive return accompanied a 3.2% rally in equities (S&P 500) and a 0.8% high-yield bond rally Read more [...]

Muni Minutes – A Changing of the Seasons

Following in suit with the colors of the trees, investor sentiment appears to be cycling. While the market may not be trading high-yield junk for investment-grade positions as quickly as New Yorkers are trading in their flip-flops and shorts for scarves and umbrellas last week, market demand has shifted in October. The S&P/BGCantor U.S. Treasury Bond Index, which tracks over USD 7 trillion of outstanding treasury debt, responded to October’s equity volatility with investors moving toward quality. Read more [...]

Ouch. That’s gonna leave a mark.

By my reading, the recent tone in the investment press and blogosphere has been decidedly, shall we say, anti-active.  Index-based investing has won, active has lost, time for stock pickers and portfolios managers to find new careers.  It’s over. One of the sharper summations of the zeitgeist comes by way of a recent post from The Banker's Umbrella.  The author takes a sardonic jab at the life of an equity fund manager:  track the index, naively over/under weight a few names, sit back and Read more [...]

Next Week’s FOMC Decision A Watershed Event? High Yield Doesn’t Seem To Think So.

Unlike Treasuries and investment grade corporates, the high yield market as measured by the S&P U.S. Issued High Yield Corporate Bond Index touch a low point for yield earlier in the month at a 5.87% on October 6th.  This market was in the process of selling off and had a yield of 6.51% on October 15th, up 65 basis points from the 6th and 38-basis point higher than the 6.13% start to the month.   High yield’s reaction posts October 15th was “risk on” as yields since then moved 60 basis Read more [...]

The VIX Takes a Hairpin Turn

I have a neighbor who is cooler than me. He is braver than me. He also has more expansive and expensive medical and auto insurance than I do. How do I know all this? Well, he races street motorcycles. The other day I asked him what was the fastest he had ever gone. His answer: "Very fast, but that's not where the thrill is. The adrenaline rush comes from handling and powering through the curves." The movements in the CBOE Volatility Index (VIX) the past few weeks have made me reflect on this Read more [...]

The Great Barrier To Commodities Down Under

This week I am in Australia meeting with investors about commodities.  Usually when I visit a heavy natural resource producing country, the conversations flow easily since the locals understand commodities.  We have been discussing farms, coal, iron ore and tin - subjects that engulf the culture of the locals.  The Australians seem to know all about the public companies and private deals and are comfortable about the commodity exposure in their portfolio via their stock market, the S&P ASX Read more [...]

Dim Sum – What is on the Menu?

As tracked by the S&P/DB ORBIT Index, the size of the offshore renminbi bond market rose 66% year-to-date (YTD) and reached CNY 280 billion*, which reflected the robust supply in 2014. And if we look at the index exposure by issue year, the new issues in 2014 represent 53% of the index. Exhibit 1: Index Exposure by Issue Year: The S&P/DB ORBIT Index While it is not surprising to see the index is dominated by Chinese issuers at 89%, there is a continuous trend of country diversification Read more [...]

Active vs. Passive: How to keep score of the ongoing debate

At the heart of the active versus passive management debate lays the theoretical underpinning that the average return of both actively and passively managed assets must equal the aggregate market, thereby making it a zero-sum game. Since the costs of active management typically exceed those of passive management, the average actively managed dollar will underperform the average passively managed dollar after accounting for costs (Sharpe 1991). Over the past few decades, this debate has inspired many Read more [...]

Gold: Its History and Recent Trends

During festivals such as Diwali, the demand for gold in India increases because it is considered auspicious.  Traditionally, people invested in physical gold bars, coins and jewelry.  However, after the introduction of the gold ETF, the option to invest in gold also became popular.  There was a huge growth in the assets under management for gold ETFs compared with ETFs in other asset classes. Investors purchased gold as a way to preserve value and hedge against inflation and recession.  Gold Read more [...]