Tag Archives: bonds

The economic data over the last two weeks continued the better than expected trend. Some of the data was quite good and makes one wonder if maybe, just maybe, we are finally ready to break out of the economic doldrums. Is it possible that all that new normal, secular stagnation stuff was just a lack of animal spirits? Is it possible that the mere anticipation of tax cuts was sufficient to break us out of the 2% growth...

China’s National Bureau of Statistics reported last week that the official manufacturing PMI for that country rose from 51.6 in October to 51.8 in November. Since “analysts” were expecting 51.4 (Reuters poll of Economists) it was taken as a positive sign. The same was largely true for the official non-manufacturing PMI, rising like its counterpart here from 54.3 the month prior to 54.8 last month. China Manufacturing...

The Census Bureau reported earlier today that US imports of foreign goods jumped 9.9% year-over-year in October. That is the second largest increase since February 2012, just less than the 12% import growth recorded for January earlier this year. US Imports, Jan 2007 - 2017 - Click to enlarge In both monthly cases, however, the almost normal rates of increase which would have at least suggested moving closer to a...

There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. The extreme overbought condition of the US stock market did not correct since the last update and so I will continue to hold a modest amount of cash. Prediction is very difficult, especially about the future… Niels Bohr Every time I see that quote I think to myself, “but that...

The economic data of the last two weeks was generally better than expected, the Citigroup Economic Surprise index near the highs of the year. Still, as I’ve warned repeatedly over the last few years, better than expected should not be confused with good. We go through mini-cycles all the time, the economy ebbing and flowing through the course of a business cycle. This being a particularly long half cycle, it has had...

The good news is that the economy just printed its second consecutive quarter of 3% growth, a feat not accomplished since Q2 and Q3 2014. The bad news is that the growth spurt in 2014 was better, quantitatively and qualitatively. Those two quarters produced gains of 4.6% and 5.2% (annualized) in GDP, much better than the most recent 3.1% and 3% prints of Q2 and Q3 2017. And it took a hurricane to get the most recent...

The risk budget this month shifts slightly as we add cash to the portfolio. For the moderate risk investor the allocation to bonds is unchanged at 50%, risk assets are reduced to 45% and cash is raised to 5%. The changes this month are modest and may prove temporary but I felt a move to reduce risk was prudent given signs of exuberance – rational, irrational or otherwise. Moderate Allocation - Click to enlarge   No...

Back in June, China’s federal bond yield curve inverted. Ahead of mid-year bank checks, short-term govvies sold off as longer bonds continued to be bought. It was for some a rotation, for others a reflection of money rates threatening to spiral out of control. On June 19, for example, the 6-month federal security yielded 3.87% compared to a yield of 3.525% for the 10-year. China Treasury Bonds(see more posts on china...

Real Personal Consumption Expenditures (PCE) rose 0.6% in September 2017 above August. That was the largest monthly increase (SAAR) in almost three years. Given that Real PCE declined month-over-month in August, it is reasonable to assume hurricane effects for both. Across the two months, Real PCE rose by a far more modest 0.5% total, or an annual rate of just 3.4%, only slightly greater the prevailing average. It is...

When I wrote the update two weeks ago I said that we might be nearing the point of maximum optimism. Apparently, there is another gear for optimism in this market as stocks have just continued to slowly but surely reach for the sky. Which is fine I suppose since we own the devils (although not much in the way of the US variety) but I can’t help but wonder what happens when the spell breaks. Goldilocks may be in the...