The bond market has had quite a shift since the last Fed meeting. What are the common themes?
Outperformance of credit, especially high yield.
Return of the carry trade.
Tax-free Munis have run.
Underperformance of Treasuries (longer= worse), and foreign bonds, particularly carry trade currencies like the Yen and Swiss Franc.
The willingness to take risks in fixed income has returned, particularly in the last two weeks. I don’t want to tell you that this is a trend that won’t reverse… it might reverse. Remember that bear market rallies tend to be short and sharp, and that the credit bear market in 2000-2002 had several legs. Leg one may be over for this credit bear market, but that doesn’t mean the credit bear market is over; there are still too many unresolved credit issues in housing, builders and investment banks.
Now, to flesh out the changes, I looked at the total returns on 15 major ETFs in different sectors of the bond market. He...
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Book Review: Beating the Market, 3 Months at a TimeFrom: feeds.feedburner.com
Post Date: 2008-04-25 22:50:49
A word before I start: I’m averaging two book review requests a month at present. I tell the PR people that I don’t guarantee a review (though I have reviewed them all so far), or even a favorable review. They send the books anyway.
Included in every book is a 2-6 page summary of what a reviewer would want to know, so he can easily write a review. Catchy bits, crunchy quotes, outlines…
I don’t read those. I read or skim the book. If I skim the book, I ...
more Eight Fed NotesFrom: feeds.feedburner.com
Post Date: 2008-04-24 23:23:15
1) Let’s start out with my forecast. I’ve given it before, but it has become the conventional wisdom — at the next FOMC meeting at the end of April, the Fed will cut by 25 basis points. They will make the usual noises about both inflation and economic weakness, as well as difficulties in the financial system, and comment that they have done a lot already — it is time to wait to see the power flow. The only difficulty is whether we get another blowup in the ...
more Book Reviews: Manias, Panics, and Crashes, and Devil Take the HindmostFrom: feeds.feedburner.com
Post Date: 2008-04-23 23:08:12
Sometimes we forget how bad it can be, and then we howl over minor bad times in the markets. We may be past a mania in residential housing, but we have not really experienced a panic or crash yet. People squeal over how bad the equity market is, but recently we haven’t had anything like the 2000-2002 experience, much less the 1973-1974 or 1929-1932 experience.
Two books come to mind when I think about disaster in a non-fear-mongering way: Manias, Panics, and Crashes, by Charles Ki...
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