Talking about bubbles

With The Fed buying $85B a month of [...]

Following Japan

In the 1980s Japan followed a well documented path – fast economic growth, large trade surplus rapidly increasing values for both property and financial assets i.e., the Japanese stock market. And of course we all know how that ended; in 1991 we saw enormous crashes in the Japanese property [ .pdf ] and stock [...]

Who really controls America?

Everyone knows the US now has a little more than $16 trillion dollars of debt, but who is funding this? I previously refuted the notion that China, of all nations, holds the most US Treasuries (I think the Chinese are far too smart for that), pointing out that America itself held the most US [...]

Sell in May isn’t working

I’ve previously written about the old Wall Street adage “sell in May and go away but don’t buy back before St. Legers Day”, the second Saturday of September when a horse race is run in England. For the last two summers this advice proved sound, as the S&P 500 declined -5.56% (2010) and -14.77% [...]

The fiscal cliff, visualised

There has been many stories about the “fiscal cliff” America faces in the fourth quarter, 2012. While I’m very familiar with all the details I didn’t think any story presented the challenge faced by the American bond markets too well so I created the chart above. It shows US Treasury debt by maturity, from [...]

About the US stock market …

S&P 500, US Long Bond, daily, April 1st to May 3rd 2012

Investors typically will diversify their wealth between two different assets: stocks and bonds. In America professionals generally track the S&P 500 (a basket of the stocks of 500 different companies) compared to the “long bond”; a US treasury security with a maturity [...]

Ready for the surge in interest rates?

The yield on the US Ten Year Treasury, 1962 to 2012

The chart above shows the yield on the Ten Year, US benchmark treasury security. This issue is tremendously important as it used as a reference for all consumer loans – mortgages, credit cards, whatever type of debt an American wishes to take on. [...]

Risk on and US interest rates

US Long Bond, price declines since January 1st 2012; lower chart shows price of long bond from 1990 to 2012

Seems like lots of money is embracing risk, with the S&P 500 very close to a record high and The VIX all but collapsing.

What does this mean for US interest rates? The [...]

Don’t trust bond spreads

Spread between 10Y US AAA Corporates and 10Y US Treasuries, 1962 to 2012

The chart above shows the difference in yields between AAA 10Y US Corporate bonds and 10Y US Treasuries. This difference, known as the spread, reflect the relative riskiness of the two assets. As risk increases yield must also increase to compensate [...]

So far in 2011, bonds have soundly beaten stocks

The US 30Y Treasury opened at 121.95 on January 3rd 2011 and closed at 141.29 on December 9th 2011, for a YTD gain of 15.85%.

The S&P 500 opened on January 3rd 2011 at 1271.87 and closed on December 9th at 1255.19, for a return of -1.31%.

With roughly three weeks to go, short [...]