Rom’s Rambling Remarks on Bondsquawk
By Rom Badilla, CFA
August 18, 2012
- Yields keep increasing with the 10-Year passing support levels (Grateful for Stop-Loss Orders). It seems 1.88/1.90% is in the cards.
- The surge in Retail Sales is a good sign but energy prices have declined by over five percent in the past year. So this may have freed up spending money to spend on other discretionary items
- Recently, energy prices have rebounded since June. Can we see a reversal of this effect on consumer spending which for the most part drives the U.S. economy?
- Longer-term, the bull trend in Treasuries remains intact…for now.
- If I had to avoid sitting on the fence (it is uncomfortable!), the Bernank’s next move is easing over tightening. When? Not in September.
- Don’t fight the Fed.
- Capacity Utilization is higher but still below post-recessionary averages of the low 80’s. If factories are idle, how can there be inflation?
- If people are idle, how can there be inflation? I like the 4-week moving average of Initial Jobless Claims to hover near 300,000 people to see real improvement in the Unemployment Rate.
- Everyone expects the ECB to come in big in September with major bond purchases. Is this the bazooka that the market needs to end the crisis? More importantly, is this the bazooka that the European economies need to avoid a depression?
- If Europe follows the U.S. blueprint, then monetary policy action and concurrent fiscal actions toward burden sharing are signs of a true union. Perhaps THAT is the bazooka.
- As many investors are grabbing for yield out the curve, I prefer corporate bonds with short maturities. You can own riskier bonds like Financials and Banks since the price risk in case you need the liquidity, is much lower
- Home runs get you the highlights on ESPN but as the book, Money Ball, illustrated playing small ball with good defense can win baseball games.
- There will be a time to own riskier bonds out the yield curve…not now.
- Investment people continually say that ‘there is no such thing as a free lunch.’ Good fortune on any level can fall in our lap sometimes. Yet, many will attribute this to skill. While true in most cases, in other cases it may be because of just plain luck. If people practice what they preach, shouldn’t people pass on that luck to someone less fortunate?
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