Earlier in the year, we discussed the dangers of buying into the hype around TAM (Total Addressable Market) in valuing speculative businesses. We did this in the context of a red hot IPO of a company called Beyond Meat. Since reaching its high of roughly $225/share in mid to late July, the stock is down […]
Repos: No, the Fed isn’t coming for your car—but it still could signal a problem
A bit of humor to lead into a complex, but important topic. This week the Fed has had to intervene several times in the cash markets to provide liquidity (i.e. buy treasuries) where buying demand dried up, Treasuries were oversupplied and consequently rates spiked. The so-called “Repo” operation, allows Primary Dealers to exchange collateral for cash, up to $75 billion worth each day. In this way, the Fed can keep short-term rates within its target range (roughly 2.00%, but lowered to 1.75% today)—an important part of implementing its monetary policy. Depending on the reporting source, overnight rates were said to have spiked to 8-10% at one point prior to Fed intervention.
A Lack of Consensus – Should We Be Worried?
We’ve discussed previously the dissent of two Fed voting members of the most recent Fed rate cut in July. This was somewhat unprecedented. Since then we’ve had a suggestion from a former Fed governor that the Fed should shape policy based upon a political agenda. Add to that further disagreements in public by current Fed […]
Another “Great Rotation”?
We’ve seen a brutal rotation over the last week in many asset classes. Brutal in the sense of its speed and magnitude. Starting with bonds. After a downward trajectory in yields all year, this trend accelerated dramatically in July and August – most notably, the yield on 30-year Treasuries fell almost 60 bps in 60 […]
The Concerning Disconnect for Oil & Gas Companies
Over the last few months, we become increasingly concerned about companies in the Energy sector, specifically Oil & Gas E&P (Exploration & Production) companies which, in our opinion, have become disconnected from the oil price, which has largely traded in a range even as many of these stocks have been punished. Through August 30, 2019: […]
A Former Fed Governor Gets Political and Reduces Confidence
After many months of criticism and complaints about President Trump jaw-boning the Fed, an influential former Fed governor, Bill Dudley, retaliated in an op-ed on Bloomberg. However, instead of taking the high road and defending Fed independence such as a group of former Fed Chairs did recently, he took the low road, all but suggesting a weaponization of the Fed to influence a political outcomes
Five Things to Consider- Week of August 19th 2019
Airbus Harnessing AI in Bid to Save Millions on Finance Tasks Artificial Intelligence (AI) is most often thought of in applications such as self-driving cars and virtual receptionist platforms. However, one application is much more feasible: financial AI. Finance tasks, such as reviewing accounts payable, are tedious and often are especially susceptible to human error. […]
Why are the markets more volatile? One reason — the data is hard to interpret.
Whether it’s inverting yield curves, or the strong US consumer, conflicting economic data both hard and soft, has been causing fits for economists, central bankers and investors. Add in macro uncertainty primarily related to trade wars of all types (US/China, S.Korea/Japan, UK/Europe) and central bank activism and you have a potential wicked stew of contradictory […]
Finally, a Worrisome Yield Curve Inversion?
This week, we actually had a yield curve inversion that potentially matters – the 2-year treasury actually briefly yielded more than the 10-year treasury. But why would anyone demand less return for lending for 10 years than for 2 years? Pretty perverse. More perverse than $16 trillion of negatively yielding bonds around the world? Suffice […]
Fed Watch: A Notable and Vocal Dissent
We noted a few days ago that the Fed’s decision to lower interest rates wasn’t unanimous. Two Fed voting members dissented, including Eric Rosengren of the Boston Fed. Most interestingly, Mr. Rosengren released a memo two days later revealing his logic and justifying his decision in a series of charts. https://www.bostonfed.org/news-and-events/press-releases/2019/statement-of-eric-s-rosengren It’s a quick and […]
