The Bond King’s Alpha [PREMIUM]


This post is by Steve LeCompte from CXO Advisory


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Did Bill Gross, the Bond King, generate significantly positive alpha during his May 1987 through September 2014 tenure as manager of PIMCO Total Return Fund (Fund)? In their March 2019 paper entitled “Bill Gross’ Alpha: The King Versus the Oracle”, Richard Dewey and Aaron Brown investigate whether Bill Gross generates excess average return after adjusting Keep Reading

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Real Time Economics: China Retaliates, U.S. Prepares to Escalate


This post is by Jeffrey Sparshott from Real Time Economics


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This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

The U.S.-China trade fight is heating up and Amazon is giving employees money to quit. Good morning. Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.

U.S.-China: It’s Getting Hot In Here

The U.S.-China trade dispute is escalating.

  • Beijing retaliated against higher U.S. tariffs with plans to increase levies on $60 billion in U.S. imports.
  • Washington laid out nearly $300 billion of new Chinese imports that would face 25% levies as early as this summer.
  • President Trump said he plans to meet with Chinese President Xi Jinping next month when he is in Japan for a Group of 20 summit. That might be the best chance for Continue reading “Real Time Economics: China Retaliates, U.S. Prepares to Escalate”

Real Time Economics: Mortgage Rates Drop, Prospects for U.S.-China Deal Rise


This post is by Jeffrey Sparshott from Real Time Economics


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This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

Good morning. Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.

THE 4% MORTGAGE IS BACK

Mortgage rates are dropping. Economists and lenders believe they’re getting low enough to help jump-start the housing market. The average rate on a 30-year fixed mortgage this week fell to its lowest since January 2018. Some lenders are advertising sub-4%. Just a few months ago, average rates were on the verge of hitting 5%, drying up refinancings and putting a damper on home price growth, Ben Eisen reports.

Thanks, Fed: Rates have been declining along with the yield on the benchmark 10-year Treasury note. The bond-market moves have been spurred by the Federal Reserve’s decision to pause its Continue reading “Real Time Economics: Mortgage Rates Drop, Prospects for U.S.-China Deal Rise”

Real Time Economics: The Economy May Look Worse Before It Looks Better


This post is by Jeffrey Sparshott from Real Time Economics


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This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

Good morning. Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.

SLOW RIDE

The Commerce Department today releases revised fourth-quarter gross domestic product figures. Economists polled by the WSJ are expecting a significant downgrade—a 2.2% pace of growth instead of the initially reported 2.6%. Yes, that’s all so 2018. But it points to a slowing trend that appears set to continue into the first quarter of 2019. The trend, however, has been looking better lately as more hard data comes in. The Atlanta Fed’s GDPNow model initially was tracking a scant 0.3% pace of growth for the first quarter. That’s now up to 1.5%. Some economists expect a rebound in the Continue reading “Real Time Economics: The Economy May Look Worse Before It Looks Better”

Real Time Economics: The Accurate Economist, Diving Bond Yields and a More Politicized Fed


This post is by Jeffrey Sparshott from Real Time Economics


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This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

Good morning. Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.

MEET THE WSJ SURVEY’S MOST ACCURATE ECONOMIC FORECASTER

Bernard Baumohl, chief global economist at The Economic Outlook Group, was the most accurate forecaster for 2018 in The Wall Street Journal’s monthly survey. How did he get top billing? Conventional models, such as those deployed by the Federal Reserve, don’t properly capture the way technological change has affected how Americans live and spend, he says. The Princeton, N.J.-based firm he founded in 2008 strives to insert “more of a human analysis.”

Forecast: Mr. Baumohl expects growth to slow in 2019, although he says there should be enough momentum in the economy Continue reading “Real Time Economics: The Accurate Economist, Diving Bond Yields and a More Politicized Fed”

Real Time Economics: Yes, the Economy Is Slowing


This post is by Jeffrey Sparshott from Real Time Economics


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This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

Brexit, GDP, yield curves, Fed speeches, trade talks… Buckle up, this week could get interesting. Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.

DANGER ZONE

Let’s hope this week is better than last. Friday closed out with reports showing factory output in the eurozone fell in March at the fastest pace in six years and U.S. manufacturing activity slid to its lowest level in almost two years. The drumbeat of unsettling news drove the yield on 10-year Treasury notes below that of three-month bills for the first time since 2007. That situation, known as an “inverted” yield curve, has preceded every U.S. recession since 1975 and is viewed by many investors as Continue reading “Real Time Economics: Yes, the Economy Is Slowing”

ISM PMI and Future Junk Bond Returns? [PREMIUM]


This post is by Steve LeCompte from CXO Advisory


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A subscriber asked about the validity of the assertion in “The Daily Shot” of February 26, 2019 (The Wall Street Journal) that “recent weakness in the ISM [Institute for Supply Management] Manufacturing PMI [Purchasing Managers’ Index] index points to downside risks for high-yield debt.” Such a relationship might support a strategy of switching between high-yield More

The post ISM PMI and Future Junk Bond Returns? appeared first on CXO Advisory.

Coverage Ratio and Asymmetric Utility for Retirement Portfolio Evaluation [PREMIUM]


This post is by Steve LeCompte from CXO Advisory


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Failure rate, the conventional metric for evaluating retirement portfolios, does not distinguish between: (1) failures early versus late in retirement; or, (2) small and large surpluses (bequests). Is there a better way to evaluate retirement portfolios? In their December 2018 paper entitled “Toward Determining the Optimal Investment Strategy for Retirement”, Javier Estrada and Mark Kritzman propose coverage ratio, More

Net Speculators Position as Futures Return Predictor [PREMIUM]


This post is by Steve LeCompte from CXO Advisory


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Should investors rely on aggregate positions of speculators (large non-commercial traders) as indicators of expected futures market returns? In their November 2018 paper entitled “Speculative Pressure”, John Hua Fan, Adrian Fernandez-Perez, Ana-Maria Fuertes and Joëlle Miffre investigate speculative pressure (net positions of speculators) as a predictor of futures contract prices across four asset classes (commodity, currency, equity index and More

Retirement Withdrawal Modeling with Actuarial Longevity and Stock Market Mean Reversion [PREMIUM]


This post is by Steve LeCompte from CXO Advisory


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How does use of actuarial estimates of retiree longevity and empirical mean reversion of stock market returns affect estimated retirement portfolio success rates? In the October 2018 revision of his paper entitled “Joint Effect of Random Years of Longevity and Mean Reversion in Equity Returns on the Safe Withdrawal Rate in Retirement”, Donald Rosenthal presents a More

Real Time Economics: Global Stocks Rebound | Trump Says Fed is ‘Out of Control’ | Social Security Boost for Seniors


This post is by Jeffrey Sparshott from Real Time Economics


Click here to view on the original site: Original Post




This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

Good morning. Today we look at global markets, President Trump’s unhappiness with the Fed, bond yields, Social Security payments, and the latest developments in U.S.-China relations.

IS IT OVER?

U.S. stocks tumbled for a second straight day Thursday. But global shares rebounded Friday, calming jittery investors who had been weighing whether this week’s deep selloff was the beginning of a broader downturn or simply a two-day blip, Avantika Chilkoti reports.

Catalysts: China posted better-than-expected growth in exports, the U.S. Treasury Department next week is expected to find that China isn’t manipulating the yuan, and President Trump plans to meet with Chinese leader Xi Jinping next month, raising hopes that a further escalation in trade tensions may be averted.

Next up: Investors are watching major Continue reading “Real Time Economics: Global Stocks Rebound | Trump Says Fed is ‘Out of Control’ | Social Security Boost for Seniors”

Real Time Economics: How Long Can the U.S. Economic Expansion Last? ‘Effectively Indefinitely.’


This post is by Jeffrey Sparshott from Real Time Economics


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This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

Good morning. Today we look at extraordinary U.S. economic growth, rising bond yields, collateral damage in emerging markets, why U.S. worker wages might take a step back in September, and the continuing demise of the shopping mall.

HOW ABOUT THAT ECONOMY!

The 10-year U.S. Treasury yield rose to its highest level in more than seven years as investors bet on strong economic growth and rising inflation. The immediate cause: robust economic data and easing trade tensions after the U.S., Mexico and Canada hashed out a new pact.

The 10-year Treasury is a closely watched barometer of sentiment toward growth and inflation. Investors appear to expect more of both. It’s also used as a reference for everything from auto loans to mortgages. Higher yields likely mean higher Continue reading “Real Time Economics: How Long Can the U.S. Economic Expansion Last? ‘Effectively Indefinitely.’”

The Balance: On Private Activity Bonds


This post is by David Merkel from The Aleph Blog


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=================

For about two months, I wondered when I would write this.  Now I know… I’m writing it now.  To all my readers, I am letting you know that Aleph Blog is not ending, but it is changing.  I accepted a writing assignment with The Balance.  I am going to write 4-5 articles for them per month, and correct some old articles as well.  I will publish links to them here.  Like Aleph Blog, The Balance is free, so you don’t have to do anything more than click on the article link here to read it.

Why did I do this?  I felt I was getting stale in my writing.  I was a little bored; that’s why I wasn’t writing so much.  I had completed all of my main goals for the blog in 2014, and slowly Continue reading “The Balance: On Private Activity Bonds”

SACEVS with Quarterly Allocation Updates [PREMIUM]


This post is by Steve LeCompte from CXO Advisory


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Do quarterly allocation updates for the Best Value and Weighted versions of the “Simple Asset Class ETF Value Strategy” (SACEVS) work as well as monthly updates? These strategies allocate funds to the following asset class exchange-traded funds (ETF) according to valuations of term, credit and equity risk premiums, or to cash if no premiums are undervalued: 3-month Treasury bills (Cash) More

Benefits of Volatility Targeting Across Asset Classes [PREMIUM]


This post is by Steve LeCompte from CXO Advisory


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Does volatility targeting improve Sharpe ratios and provide crash protection across asset classes? In their May 2018 paper entitled “Working Your Tail Off: The Impact of Volatility Targeting”, Campbell Harvey, Edward Hoyle, Russell Korgaonkar, Sandy Rattray, Matthew Sargaison, and Otto Van Hemert examine return and risk effects of long-only volatility targeting, which scales asset and/or portfolio exposure higher (lower) when More

Ziemba Party Holding Presidency Strategy Update [PREMIUM]


This post is by Steve LeCompte from CXO Advisory


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“Exploiting the Presidential Cycle and Party in Power” summarizes strategies that hold small stocks (large stock or bonds) when Democrats (Republicans) hold the U.S. presidency. How has this strategy performed in recent years? To investigate, we consider three strategy alternatives using exchange-traded funds (ETF): D-IWM:R-SPY: hold iShares Russell 2000 (IWM) when Democrats hold the presidency More

The Pips are Squeaking


This post is by David Merkel from The Aleph Blog


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Photo Credit: sid=================

This should be a short post.  I just want to note the degree of stress that many emerging market countries are under.  The Fed raises rates, and something blows up.  That is often the class of debt that has grown the most in the bull phase of the cycle, or, the one that has financed with short-term debt.  This is the “volatility machine” that Michael Pettis wrote so well about.

The Brazilian stocks I own have been falling.  A little lower, and I will make them double-weight positions.  Five times earnings for utilities that cannot be done without?  Wave the shares in.

Look at Argentina, Indonesia, and Turkey.  Fundamentally misfinanced.  Maybe own assets there that have enduring demand.  I own IRSA [IRS].

Russia is fundamentally sound.  I own shares in RSXJ, which is Continue reading “The Pips are Squeaking”

Thoughts on Bank Debt


This post is by David Merkel from The Aleph Blog


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I have long said that until an asset class goes through a “failure cycle,” risk-based pricing will be weak toward the assets in question.  One asset class that has become popular of late is bank debt.  Bank debt is a loan to a corporation that typically has first priority to make claims on the company in bankruptcy, ahead of the bondholders, much less the preferred stockholders and the common equity.

Though it is called bank debt, often the loans are arranged by banks and allow others to lend alongside them.  This has become popular among closed-end funds and ETFs like BKLN.  What are the advantages?

  • In the past credit losses have been low, partially because of strong covenants and low availability.
  • The loans have floating rates, so if interest rates rise, you get paid more, assuming the company does not choke on Continue reading “Thoughts on Bank Debt”

Worldwide Long-run Returns on Housing, Equities, Bonds and Bills [PREMIUM]


This post is by Steve LeCompte from CXO Advisory


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How do housing, equities and government bonds/bills perform worldwide over the long run? In their February 2018 paper entitled “The Rate of Return on Everything, 1870-2015”, Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick and Alan Taylor address the following questions: What is the aggregate real return on investments? Is it higher than economic growth rate and, if so, More