Very Different Assets, the Russell 2000 and Muni Bonds, Both Look Overvalued

Things have come to a pretty pass.  The romances are going flat…

Let’s start with munis.  It’s pretty simple.  Two Septembers ago, I wrote a post titled Gold on Hold; The New Play May Be in Munis.  This was done in the context of recession worries, and was in the context of a well-documented and [...]

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Yotai Gap Continues to Enlarge as Corporations Risk Their Balance Sheets To Shore Up Stock Prices

As one of the few American chroniclers of the still-obscure “yotai gap” phenomenon that has been present in Japan for a number of years, I read with interest a ZH post today that discusses it without using the term (LINK).  Here is a graph lifted from that post (click on chart to enlarge):

I [...]

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Germany’s Incomplete Economic Recovery Supports the Bond Bull Market

Germany’s national economic statistical repository provides an interesting set of graphs that correlate with the collapsing interest rate structure in that country.  Two-year bunds now yield a negative 0.08% per year.  The 10-year bund yields 1.27%, down from over 2.1% only one year ago.   No wonder that with the U.S. interest rate structure so [...]

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More Hints That QE Will Not Be Unwound Any Time Soon; Implications May Continue To Be Bullish For Treasury Bond Prices

The Fed is hinting that quantitative easing is here to stay:  there may be no unwinding of its expanding balance sheet in 2015.  Bloomberg.com reports (LINK):

A decision by the Federal Reserve to expand its bond buying next week is likely to prompt policy makers to rewrite their 18-month old blueprint for an exit from record [...]

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Record Low U.S. Birth Rate Parallels Japan

Fewer babies born per capita are pushing the U.S. toward zero population growth.  This began happening in Japan around the time it moved from an era of rising prices to one of price stability or very mild deflation, despite repeated “quantitative easing” by the Bank of Japan.  Bloomberg reports (LINK):

Recession Left Baby Bust as [...]

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Are Chinese Stocks Signaling Yet Lower Lows In U.S. Interest Rates?

What do Chinese equities have to do with U.S. interest rates?  Perhaps more than one would think.  This is a multi-year chart of the Shanghai Composite (stock) Index:

 

Anyone who has a passing familiarity with what’s happened to U.S. interest rates the last several years can see there is a close correlation between [...]

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Some Risk Assets Getting Frothy While the Amazing Treasury Bond Bull Market Rolls On Under Most Radar Screens

I’m not a downer all the time.  I try to go where the data leads, in a risk-averse manner.  If it keeps pointing in the same direction, so be it.

When I first began writing on this website in August 2010, I argued against the prevailing gloom.  Recovery Summer as predicted by the advocates of Keynesian stimulus had [...]

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Demographic Changes and Surprise Weakening in Corporate Profits Might Support Even Higher Prices for Treasury Bonds

In an historical rarity, the Dow Jones Industrial Average and the S&P 500 Index are both below where they were five years ago.  In contrast, the price of gold and the price of Treasury bonds have each soared.  The combination of gold rising along with silver and many other commodities while at the same time [...]

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How Japanese Bonds Might Still Be a Good Investment

Periodically the blogosphere, as well as some of the MSM and academia, raise the question of how Japan’s government is going to avoid insolvency.  Federal debt exceeds 200% of GDP and continues to rise.  Until now, the solution has been for interest rates to decline, thus allowing interest costs  to stay relatively stable.  

The bogeyman [...]

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JPM’s Whale of a Problem and Futures Market Scandals May Help Lead to Negative Rates on Bank Deposits

The Telegraph (U.K.) had a terse description of JPM’s Chief Investment Office that helped crystallize my thinking:

The bank stunned Wall Street when it disclosed that a series of bets made by the CIO on the health of major companies had triggered the . The CIO’s job is to invest deposits that the bank has yet [...]

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Enemy Action in Munis

Once is happenstance. Twice is coincidence. Three times, it’s enemy action.

—Auric Goldfinger, quote from Goldfinger (1959)

Leaving aside Vallejo’s bankruptcy of a while ago, municipal bond investors have been hit with a rat a tat tat of three California municipal bankruptcies in short order.  Stockton, Mammoth Lakes, then San Bernardino.  [...]

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