Blog Archives

2020 - Coming in Hot

2020 Coming in Hot

2020 has started off with some geopolitical fireworks that have carried over to financial markets as the headline below attests.

U.S. Kill Iranian Military Leader Qassem Soleimani

This is another good example of why having a hedge with U.S. Treasuries (and maybe a little gold as well) can be helpful to provide a counterweight to risk assets that inevitably take a mild beating,

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2019 - A Year in Review

2019 Gary Year in Review

I make a concerted effort to avoid each day rolling into another without any distinction. I never want to look back on my life and have nothing stand out. I think this is one of the reasons I blog each week. It helps me reflect on my life and gives me the opportunity to bring forth those experiences,

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Newton's Third Law and Repo Madness

Fed Repo Newton's Third Law

It’s been said that markets go up like escalators and drop like elevators. There is also Newton’s Third Law which states that for every action there is an equal and opposite reaction. This is where the Fed comes into play when markets drop like elevators.

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Modeling A Recession

recession

Last week were engaged in our annual planning process. As part of this, we come up with key assumptions regarding the operating environment for the next three years or so. Interest rates, of course, are a huge variable in our business and dominated much of the discussion.

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The Road to Zero?

road to zero percent interest

The market didn’t react very well to Jerome Powell’s characterization of Wednesday’s interest rate reduction as a “mid-cycle adjustment.” Investors took that to be a bearish easing of monetary policy. The stock market dropped, the bond market took a future interest rate reduction off of the table,

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Think Globally Act Locally

Think Globally. Act Locally

There has been some criticism of Fed chairman Powell as he has gone from saying this in early October 2018:

Jerome Powell we're a long way headline

To telegraphing this on July 10th:

Jerome Powell Signals Rate Cut

Those who are upset by his dovish turn are irked because they feel like he is kowtowing to the market and Trump who is forcing his hand despite record high stock market averages,

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Much Ado About LIBOR

Last week my daughter and I went to see the Improvised Shakespeare Company in Los Angeles. Wow, what a mind-blowing experience that was. It was extraordinary to see the four actors take an idea thrown out to them by the audience and turn it into a 90 minute Shakespeare play.

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Will The Fed Slash Interest Rates? When the Levee Breaks

Interest Rates cut 2019

As the following headline shows, interest rates fell quite sharply on Friday to current cycle lows in the wake of a very weak non-farm employment report.

10-year Treasury yield plunges

One can see how inverted the 10-year Treasury note yield has become versus the 3-month T-bill yield in the following chart.

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German Negativity

German Yield

Mohamed El-Erian, the former CEO of PIMCO, said recently on CNBC that if you want to know what’s going to happen to U.S. long-term interest rates, then all you have to do is look to Germany. And so that is what I did.

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Federal Reserve Response to the Market’s Beseeching - Power of Structural Forces

Federal Reserve

It’s been a very busy three weeks of travel so I’m going to keep this one pretty short and sweet. And while I often write a thousand words or more, this post will hopefully support the adage that “a picture is worth a thousand words.”

The Federal Reserve finally responded to the market’s beseeching that it pauses its rate increases and not be on a “damn the torpedoes” path of raising interest rates and shrinking the balance sheet.

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