The Price of Risk: Market Readies for $3billion Puerto Rico Junk Bond Sale

Puerto Rico general obligation bonds tracked in the S&P Municipal Bond Puerto Rico General Obligation Index have rallied 13.67% this year ahead of the planned $3 billion bond sale by Puerto Rico this coming Tuesday.  Yields of bonds in the index have dropped 122bps to end March 7th 2014 at 7.12%.  The success of the pending bond Read more […]

Deflation, Debt and Disaster

Central Banks persist in fighting inflation. The Fed is tapering and talking about tighter money. The European Central Bank won’t cut interest rates. Only in Japan, where the Prime Minister is pushing the Bank of Japan is there a hint of a different approach. Inflation rates in most developed markets are below central bank targets Read more […]

Buybacks and the S&P 500® EPS

Buybacks do not increase S&P 500 Index earnings-per-share (EPS), the Dow is a different story. On an issue level, share count reduction (SCR) increases EPS, therefore reducing the P/E and making stocks appear more ‘attractive’. SCR is typically accomplished via buybacks, with the vital statistic being not just how many shares you buy, but how Read more […]

Examining Emerging Market FX Contagion: It was all about Relative Risk-adjusted Performance

A large number of emerging markets currencies declined en masse during the period from 30 April 2013 through 31 January 2014, with many observers applying the moniker of contagion.  Over the whole period many emerging market currencies were clustered in the range of losing between 9% and 22% of their value against the US dollar, Read more […]

How do you know if an ETF is truly passive? A formulaic approach to ETF identification

The acronym “ETF” was once a reliable term to identify exchange traded funds using passive investment strategies, specifically those tracking transparent, rules based independently calculated indices.  “Today, the ETF acronym is being used broadly by the fund industry and media outlets to include non-fund product structures and active management strategies”[1].   Furthermore “active ETFs stand out Read more […]

War Risk

Russia and the Ukraine are dominating trading around the world since last Friday. The charts show the losses and rebound in the stock markets and currencies in the Ukraine and Russia.  The bounce back reflects both a seemingly more moderate comment from Russian President Putin on Tuesday morning as well as the markets pausing after Read more […]

COMMODITY COMEBACK

It is no surprise that now might be the perfect environment for brewing commodities.   The S&P GSCI was up 4.5% in February and was in backwardation for the first time in February since 2004. In 2004, the S&P GSCI returned 17.3%. 22 of 24 commodities in the S&P GSCI were positive in February. All 5 sectors were positive, led by agriculture, Read more […]

International events take the front seat

Due to the political issues surrounding Russia and the Ukraine, the yield of the 10-Treasury as measured by the S&P/BGCantor Current 10 Year U.S. Treasury Bond Index tightened by 8 basis points over the course of the last week of February.  The index returned 0.39% for the month as the year-to-date is now a 3.94%. Investors Read more […]

Targets and Tantrums at the Fed

Goal oriented monetary policy and hidden sources of volatility, discussed at the US Monetary Policy Forum last Friday, sparked articles in the New York Times, the Financial Times and the Wall Street Journal over the weekend. With investors seeking income in bond and money markets while nervously watching for when Fed policy will shift to Read more […]

Why Size Matters

This morning’s Financial Times revisits the argument that smaller funds generally have a performance advantage over larger funds.  One contention advanced in favor of this view is that as funds grow, they “have” to hold more large-cap stocks, and that this large-cap weighting hurts overall performance: “Outperformance in large-cap companies is harder to achieve because Read more […]