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rffrydr
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 Posted: Tue Sep 27, 2011 6:05 am Post subject: |
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Citi looks for rebalance:
• The international equities are down 12.6%, the domestic equities are down 7.33%, and the SBBIG index is up 1.68%.
• This implies a 2.6% rotation out of bonds and into equities. Historically speaking this is quite a strong number, though down from this time last month.
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rffrydr
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| Posted: Mon Aug 08, 2011 7:46 am Post subject: |
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Over 6.50 spread earnings yield to treas. with '09 levels on A/D.
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rffrydr
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rffrydr
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| Posted: Wed Dec 15, 2010 9:49 pm Post subject: |
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Sideline cash; what the Bulls are looking at:
All in good time.
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rffrydr
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| Posted: Wed Aug 25, 2010 8:57 am Post subject: |
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It's starting to get silly....and that's just what it takes. Intel, the monopoly holder of our internet gateways, 3.5% vs. 2.4% UST. Yield will pull 'em in...even--especially with depression talk.
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rffrydr
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| Posted: Fri Jul 09, 2010 3:15 pm Post subject: |
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Where will we find the money for next leg up in SP? From trapped bond investors who'll have to make up for lost time (politics).
Some simple math from Mr. Graff:
| Quote: | ...Right now, the yield on the 10-year bond is 3.00%. We know that if you hold for 10 years, you will make exactly 3.00% per year. The yield on a two-year bond is 0.60%. If you buy that bond today and hold it to maturity, you will be re-investing at whatever the rate is two years hence. Presumably, if you choose the two-year bond over the 10-year, you believe that your re-investment opportunities will be much better in two years than they are now.
But a strategy of just rolling two-year notes would require tremendously higher rates in the future to just equal the 10-year yield of 3%. After 10 years, an investment of $100,000 in the 10-year Treasury would have earned $30,000 in interest (3% per year times 10 years). In order to produce the same results, a strategy of rolling two-year notes would require a one-time rate spike of 300bp sometime before your first investment matures. It's 400bp if the spike occurs sometime after your first re-investment period, in other words, if your timing isn't just right. If, rather than a one-time rate spike you expect rates to steadily rise over time, it would require a 60bp increase every year for all 10 years for the two-year rolling strategy to produce the same return as a buy-and-hold 10-year note position. |
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rffrydr
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| Posted: Thu Apr 29, 2010 9:09 am Post subject: |
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The bullishness of this chart comes with some very big caveats. I'd say corporate debt has more to fall than stocks to gain--but before that happens we will see rotation. But that also will be less than expected. There's a generation worth of "never agains" out there who will stay planted in what they understand: debt 
Note how the bulls can push this staring that '07 print right in the face  But, as we've learned, a print is never a print alone.
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rffrydr
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| Posted: Mon Apr 26, 2010 10:15 pm Post subject: |
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Here's your long-term correction in cyclical bull picture (within secular bear), HTO:
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rffrydr
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| Posted: Wed Feb 10, 2010 12:57 pm Post subject: |
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This chart was last useless like this in that other great recession:
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rffrydr
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| Posted: Thu Mar 26, 2009 7:36 pm Post subject: |
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--Or, could be the record supply this first quarter. see "Fight Debt with Debt."
Short View: Credit market gloom
| Quote: | By John Authers, Investment editor
Published: March 26 2009 18:51 | Last updated: March 26 2009 18:51
Equity markets are cheering up. Why will credit not come along?
Perhaps the greatest cause for concern amid the equity rally is that credit markets, the target of all the rescue operations, are still working on the assumption of absolute disaster.
Deutsche Bank has published a study of how gloomy a reality the credit market is predicting. It takes the current spread between the yields on corporate bonds and similar government bonds and derives the default rate needed over the next five years for the corporate and government debt to end up paying out the same amount.
This varies depending on the recovery rate – the proportion of the principal on defaulted bonds that is recovered.
If recovery rates are at the historical average, the iBoxx investment grade corporate bond indices are priced for default rates of 38 per cent in Europe; 40 per cent in the US; and 51 per cent in the UK – all worse than in the Depression. If recovery rates are zero, the implied default rates range from 24 per cent to 31 per cent.
The worst five-year default rate since 1970, in all three jurisdictions, was 2.4 per cent.
Nothing has changed in the two weeks since Deutsche ran the numbers, even as equities have rallied. Bonds rated BAA by Moody’s now trade at a spread of 6.78 percentage points over Treasury bonds, near last year’s high of 7.2 percentage points. In February this spread was much tighter at 6.14 percentage points.
What do we learn from this? First, equities and credit cannot both be right, so those who like equities should pile into credit.
Second, there are only two explanations for the divergence. Either the credit market is so illiquid that these numbers bear no relation to the outcomes that investors expect; or we are in for a re-run of the Depression. The success of the rescue plan, the rally in equities, and much else besides, is predicated on the first explanation being correct. |
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rffrydr
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| Posted: Wed Mar 18, 2009 2:29 pm Post subject: |
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rffrydr
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| Posted: Mon Mar 09, 2009 2:12 pm Post subject: |
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| rffrydr wrote: | As the yield spike in bonds has shown little correlation to inflation the working idea is "demand for money" which equals growth which equals bull times ahead.
It would be doubly ironic if the extent that this "demand" may be Chinese entry into Private Equity et. al. while BIS statements about China paralleling a Japanese credit bubble of the the 80's works it's way to the fore.
Irony comes first. |
So it didn't work then and it's not working now --but the new and improved version is taking hold:
http://ftalphaville.ft.com/blog/2009/03/09/53370/hsbc-underweight-equities-and-overweight-credit/
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rffrydr
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rffrydr
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rffrydr
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