AWTM Newsletter

It's Not The Fed's Job to Boost Asset Prices

Posted by John E. Kaprich on Jun 25, 2020 2:10:17 PM

  • The Federal Reserve has succeeded in stopping the liquidity crisis that gripped markets.
  • Flooding the markets with liquidity has led to an asset bubble that benefits the rich and widens the wealth gap.
  • It's not the Fed's job to prevent investor losses and prop up zombie companies, this creates a new set of problems that could lead to economic catastrophe.
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The Fed Put Is Necessary For Markets To Function

Posted by Ian C. Carroll on May 28, 2020 11:38:18 AM

  • The Fed Put is the belief that the Fed will rescue the market
  • The Fed has two main tools in its toolbox: cut interest rates and buy securities
  • The Fed's recent moves were necessary to help stabilize markets and the economy
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Corporates Look More Attractive Than They Have in 11 Years

Posted by John E. Kaprich on Apr 15, 2020 7:03:08 PM

A lot of the material being written about the fixed-income market's correction examines which companies will see their bonds downgraded and the possible effect this will have. But, we think the big story is that the corporate credit market looks more attractive than it has in 11 years.

As we sit home amid the Covid-19 Pandemic, the outlook is scary because we have no idea how long the economy will be affected. The closest comparison we have is the Spanish Flu of 1918, a disease that spread rapidly and killed millions. Since the markets back then were not as developed as today, the past offers little guidance on what to expect. And this uncertainty is spooking markets.

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It's The Liquidity, Stupid.

Posted by Ian C. Carroll on Mar 24, 2020 4:59:21 PM

Over the past few weeks the bond market has been on a rollercoaster of such velocity that it's leaving investors with whiplash.

The Federal Reserve's two interest-rate cuts, totaling 150 basis points, was a useless and desperate attempt to boost the economy and the market. That it barely registered shows the Fed's impotence. Making money cheaper doesn't help if there's no demand. The problem is people aren't leaving their homes. But it doesn’t hurt either, and could speed the recovery when it comes.

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Are You in Excel Hell?

Posted by Pritam Dalal on Mar 3, 2020 11:12:18 AM

The ability to process and analyze data has never been more important. Spreadsheets - in particular Microsoft's Excel - are a primary data-analysis tool for finance professionals. However, as the size and complexity of financial data analysis increase, we quickly find ourselves working on problems beyond Excel's capabilities. Still many people persist in using the tool with which they are familiar. This leads to a syndrome known as Excel Hell.

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The Bond Market is Addicted to Low Rates

Posted by John E. Kaprich on Feb 3, 2020 7:31:44 PM

I don’t know if the market is just damned drunk on low interest rates or hung over. But, it still hasn't come to grips with: “Why keep interest rates so low when it doesn’t seem to affect growth or inflation?"

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Topics: Investment Strategy

No Recession in 2020; Support Your Risky Assets

Posted by John E. Kaprich on Dec 30, 2019 8:00:00 AM

Predicting the future is a hazardous occupation. No one correctly predicted that the 10-year U.S. Treasury's yield would spike to 3.25% in late 2018, before falling to 1.45% in less than a year. But that's what fixed-income money managers do. We seek to invest for the future by navigating through rugged environments.

Unlike December 2018, when the Federal Reserve was still raising interest rates, Fed tightening is no longer a concern. After three cuts in the Federal Funds Rate over the last six months, concern over what we believe is faulty monetary policy has disappeared.

So as another year ends, and people look to rebalance their portfolios, we offer our outlook for 2020.

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Topics: Investment Strategy

After all the Sturm and Drang, Brexit Will End Up a Non-Event

Posted by Ian C. Carroll on Dec 2, 2019 6:50:08 PM

As portfolio managers trying to make money in a world of economic uncertainty, we are constantly scanning the horizon for the biggest issues that can sway or shock global markets. When the Brexit referendum passed in 2016, it certainly shocked the market, sending haven assets such as US Treasurys into rally mode.

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Topics: Investment Strategy, Brexit

Treasurys Are Not Risk Free

Posted by John E. Kaprich on Nov 8, 2019 10:44:06 AM

The foundation of the U.S. bond market, and the global market in general, is that bonds are less risky than stocks and that U.S. Treasury securities (bills, notes, and bonds) are "risk free."

But the times they are a changing and Treasurys may not be as, "risk free" as people think.

U.S. Treasurys are considered "risk free," because these fixed income instruments don't have any material credit risk; they’re backed by the full faith and credit of the U.S. government. Unlike a corporation, which can go bankrupt and default on its bonds, there's virtually no risk of the U.S. government not paying the principal and interest on its debt.

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Topics: Investment Strategy

ESG Is Not Just a Buzzword at Aware

Posted by Ian C. Carroll on Sep 26, 2019 1:44:59 PM

One of Wall Street's newest strategies is to invest according to Environmental, Social and Governance issues, better known as ESG. It's a way to invest according to a certain ethical philosophy.

"Environmental, social and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights," according to Investopedia.

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Topics: Investment Strategy

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