Good News Is… Good News

If you're a bond investor, maybe you should be praying for impeachment after last Friday's November jobs report.

Granted, based on other indicators, including GDP, leading indicators, and others, the economy is not as strong as it was at the beginning of this year. But it’s still in pretty good shape, as witnessed by the 266,000 jobs that were added to the economy last month.

The immediate reaction in the bond market was a sharp drop in prices and a concomitant rise in bond yields. In other words, good economic news is bad for bonds. By the same token, a strong economy pretty much squashes the idea of the Federal Reserve lowering interest rates anytime soon, which is also negative for bond prices. If anything, if this keeps up, the Fed’s next move may be to raise interest rates again, not lower them, which is the prevailing view in the financial markets at the moment.

So that would indicate that the bond investors’ best hope is for the Democrats to be successful in impeaching Trump and as quickly as possible and push the economy in the other direction.

Of course, as some of us might remember from our junior high civics or American government class (do they still teach that in schools?), impeachment is not the same thing as removal from office. President Clinton and President Andrew Johnson were both impeached, but neither was removed from office, having prevailed in the subsequent trial in the Senate. (That’s the part most giddy news stories about the current impeachment drama leave out). But then again, the entire Democrat strategy is really about generating as many headlines as possible with the words “Trump” and “impeachment” close together, as if that’s good enough.

So impeachment isn’t such a great political or electoral strategy. Neither is it a good bond investment strategy.

Let's get back to the jobs reports, which was described variously as a “blowout” or “blockbuster” or words close to that. Continue reading "Good News Is… Good News"

Various Markets; Weekly Views

By: Gary Tanashian of NFTRH

It occurs to me that in public writing I tend to bludgeon people with macro fundamentals (like gold vs. positively correlated markets, yield relationships and even confidence in global policy makers), market indicators (VIX, Equity Put/Call, Gold-Silver ratio, Sentiment, Participation, etc.) and other views beneath the surface of things. So much so that I sometimes forget that people might like to see simple nominal charting as a frame of reference.

We update charts like these every week in NFTRH, but I have done relatively few for public review. So here it is, a simple weekly chart update of various markets, with very limited commentary interference from me.

US Stock Market

As you can see, US indexes have so far held critical support. Best projected case would be a bounce to SPX 2000 (+/-). The market continues to roll over on the intermediate trend as of now.

spx, ndx and dow

If the above is suspect to bearish, the broader US indexes are just bearish. Lower lows and lower highs abound and resistance is noted. Continue reading "Various Markets; Weekly Views"

Will Obama's Chained CPI Help Keep Inflation from Eating into Your Savings?

This week we examine ways in which inflation nibbles away at your retirement income, especially in light of the President’s proposal for Chained CPI adjustments to Social Security. The formal title is Chain-weighted Consumer Price Index and it’s a variation of how the government figures out what is what we would call "inflation." Either way, with the low rates on offer from CDs and other "safe" investments, investors who don’t take action fall behind every year.

Unfortunately, the numbers show what most people don’t want to face: the days of relying on Social Security plus a few stable bonds and CDs are long over. To earn decent and sustainable returns, investors must search beyond traditional safe havens. Continue reading "Will Obama's Chained CPI Help Keep Inflation from Eating into Your Savings?"

Minutes show Fed backs stimulus through midyear

A majority of Federal Reserve policymakers want to continue extraordinary bond purchases to help boost the economy at least through the middle of the year, according to minutes from the Fed's last meeting released Wednesday.

But many members indicated they want to slow and eventually end the program soon after that, as long as the the job market and economy show sustained improvement. The Fed's purchases of about $85 billion a month in Treasury and mortgage bonds are intended to lower long-term interest rates and support more borrowing and spending.

The minutes of the Fed's March 19-20 meeting were released at 9 a.m. EDT  five hours earlier than planned after the Fed inadvertently sent them a day earlier to congressional staffers and lobbyists. Continue reading "Minutes show Fed backs stimulus through midyear"

The Coming Crash in the Bond Market

It is my contention that the 70-year debt supercycle has come to an end.

To put the current financial situation in perspective, here's a long-term history of the debt-to-GDP ratio, which reached a record high at the beginning of the current crisis. It was a dramatic change in 2009, unlike anything since the aftermath of the Great Depression. Continue reading "The Coming Crash in the Bond Market"