Tag Archives: Featured

For at least a couple of years before the Great Financial Crisis, policymakers often cautioned that investors were mispricing risk.  Through the crisis, investors became painfully aware of many risks, including counterparty risk and reputation risk.  Now many observers are highlighting a new risk, what they call the credibility of central banks.   The issue is that many central banks are nowhere close to reaching their inflation targets.  ECB President Draghi seems to agree.  The ECB has...

The US dollar is broadly mixed as attention turns to the FOMC statement later today.   The most important development has been the unexpectedly large oil inventory build reported by the API ahead of today's government estimate.   The 11.4 mln barrel build is the largest in nearly two decades.  To put the rise in perspective, consider that the US output is around 9.2 mln barrels a day.    The news keeps the price of crude volatile, and yesterday's $1.10 increase in the March light sweet...

The S&P 500 now stands at 1880.33 points, only 31.97 points from its 2015 opening price of 1848.36; for the broad market, a year’s meager gains almost wiped clean. The index’s P/E ratio now stands at 19.81, and is still well above its historic average of 15.57. S&P 500 Year To Date Performance The market confirmed my fears  of last week that it was in free-fall. In fact, it posted its worst ever 10-day losses  for a year-begin! The week saw only Utilities post a modest gain of...

Week January 17-22 This was the first winning week of 2016 and of some relief to ordinary investors. The question is whether it is sustainable, or just a short-covering bounce, as is frequently the case when the market is undergoing a correction. Currently the S&P 500 has sunk 10.5%, the DJ-30 12.1%, and the NASDAQ 12.0%, since mid-2015. Calling a bottom, or a top, is a challenge even for professional investors. I would cite three short-term factors bearing on the question ‘Where do we...

Equities and oil continue to be moving in the same direction. During the first few weeks, they were moving down together and now up together.   It is frustrating for asset managers.   Large cap and small cap stocks moving together as if everything is being tarred with the same brush.  We continue to try to tease out the relationship between equities and oil prices, but there is some underbrush needed to be gotten rid of before we can have a clear space to share our tentative...

Reports indicating that Italy is close to establishing a bad bank prompted one wag to ask if  Italy does not already have enough.  The country may be better served by setting up a good bank.  The sharp sell-of in shares of Italian banks this year is an important driver of G7-leading 12.4% slide in the local bourse this year.   The Renzi government has been trying to establish a "bad bank" to warehouse the non-performing loans (NPLs) that are hardening the arteries of Italy's financial...

With equities sliding and oil pushing back below $30, it may feel like the resumption of moves in the first two and half weeks of the year, but it is different.  It is considerably more orderly.  The contagion from the equity and oil slide is more limited than previously, and even oil is recovering in the European morning to trade back above $30.  European equities opened lower but spent the morning recovering, even if not fully.   The change is also evident in the foreign exchange...

Let me share a little story, that I think will help illustrate a point. Before Copernicus, people believed that the other planets orbited the Earth. They looked up at the night sky and saw that the outer planets like Jupiter normally moved slowly eastwards in the night sky. But sometimes, they seemed to stop moving and then moved west for a while. With their assumption of the Earth being at the center, this funny path was hard to describe and impossible to explain. What could possibly cause...

We have consistently been making the contrarian call for a falling silver price and a rising gold to silver ratio for years. This ratio has risen a lot during this time. So are we ready to change our call yet? This being the start of a new year, we wanted to take the opportunity to… [caption id="" align="alignnone" width="1064"] Gold and Silver Price[/caption]   This content is for The Last Contango – Free Membership members only. Please login to view this content. (Register here.) Full...

The Bank of Japan meets later this week.  We do not think that it will expand its already aggressive monetary policy stance.   Given the largely operational adjustments announced last month, it seems premature to expect substantive adjustment now.    It is true that the recent string of data has been mostly disappointing, and the yen has strengthened on a trade-weighted basis over the past month.  Our takeaway from talking to Japanese officials is that they are not exceptionally concerned. ...