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Matthew Salter  

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  • Finding An Oasis In A Bond Liquidity Drought [View article]
    The topic of liquidity risk in the bond markets is definitely a hot topic (amazing what interests people like me that follow bond markets). I teach (including at AllianceB) new investment professionals on bonds (and various other things) and recently in one class we were running through the various risks attached to fixed income (market, credit, currency, etc) and how each risk has an appropriate market hedging tool. Except for liquidity! Noting that your strategies above could well be effective, but if we (the market) could design a liquidity index with appropriate derivatives to trade it, then we may be some steps to dealing with the liquidity drought - which (I share your view) is probably here to stay.
    Mar 31, 2015. 08:34 AM | Likes Like |Link to Comment
  • Understanding Fluctuations In The High Yield Bond Market And The Impact On The S&P [View article]
    That may be true, but if you are going to base an entire article on the connection between yield levels and equities, then it would be wise and correct to present evidence that shows yield levels and not spreads.
    If you weren't aware of the difference, then hopefully this should be helpful to now be aware and it could be worthwhile to present the evidence above using yield levels.
    If you were aware of the difference, then you should have pointed out you were using graphs using spreads and not yields - though why you would do that is very strange, when you could have just used yields and you have not referred to spreads at any point.
    (I would have hoped it is the sort of thing that would be picked up by an editor).
    Mar 23, 2015. 01:40 PM | Likes Like |Link to Comment
  • Understanding Fluctuations In The High Yield Bond Market And The Impact On The S&P [View article]
    Anthony - you are using graphs showing the BofA Merrill Lynch US High Yield Master II Option-Adjusted Spread - this shows a spread to the Treasury spot curve. An increase in spread can happen even if bond yields come down and vice versa.

    Your article may be valid for talking about changes in the spread, but throughout you talk about increases and decreases in yield, not spread.
    Mar 23, 2015. 03:58 AM | Likes Like |Link to Comment
  • Is The High Equity Risk Premium (ERP) Due To Low Yields Or High Cash Flow? [View article]
    I think you have misinterpreted the NYU Stern data. ERP is the premium of the market returns over a risk free rate. In your table, in which you have omitted the column headings, the first column is S&P 500 and the second column is 3-month bills (effectively the risk free rate). So the ERP from the NYU data is 11.53% - 3.53% i.e. 8.00%. You can't just quote the S&P return as the ERP.
    I think you may need to look at this again.
    Mar 15, 2015. 01:50 PM | Likes Like |Link to Comment
  • Still Fishing For The Bottom [View article]
    Hi Marc
    Another source of demand for buying bonds at negative rates comes from Central Banks who hold large reserves, and simply have nowhere else to park billions of dollars of reserves. Credit limits allow for investments to be made in only certain countries, and force Central Banks to buy at negative returns simply because there is no other choice.
    (I have personal experience of having done just that).
    Feb 15, 2015. 07:51 AM | Likes Like |Link to Comment
  • A Day Of Reckoning For The Euro Has Arrived - $26 Trillion In Currency Derivatives At Risk [View article]
    Michael, you say that "If no agreement can be reached and Greece does leave the eurozone, the euro is going to fall off a cliff.". I wouldn't take the euro falling of a cliff as a fait acompli - it all depends on what comes next. A stronger, more robust and unified eurozone may end up (perhaps after an initial weakness) with a stronger euro.
    Feb 10, 2015. 03:21 AM | Likes Like |Link to Comment
  • Week In FX - Currency War Debate Alive After CHF Crash [View article]
    The currency wars that most commentators talk about, refer to Central Bank's racing to outdo each in devaluing their currency (cue the Yen, etc). The SNB oversaw (perhaps not entirely as planned) a 20% or so increase (i.e not devaluation) in the value of their currency.
    So, I'm not sure that I would say the SNB move is a particular sign that "currency wars are alive and kicking". In fact, it suggest perhaps that the hype over currency wars may be a bit overdone.
    Though, it makes for good headlines!
    Jan 18, 2015. 06:10 AM | Likes Like |Link to Comment
  • The Best And Worst Performing Assets Of 2014 [View article]
    You have an error with the changes you have quote in bond yields:

    For example: "The US 10 Year saw yields fall -0.857 basis points". I think you mean 85.7 basis points - the same error with the positioning of the decimal point, seems to be true for the other quoted bond yields as well.

    Jan 12, 2015. 06:07 AM | Likes Like |Link to Comment
  • An Interesting Twist On The Active Versus Passive Debate [View article]
    Yup, plenty of studies that have shown something similar. You're absolutely correct.
    Jan 3, 2015. 12:41 PM | 1 Like Like |Link to Comment
  • Secular Stagnation Or Regular Recession? A Summary, Investment Implications And Paddle Boats [View article]
    Thank you for your comments. And for me making me aware of the name Kondratieff - I had heard of his ideas but didn't know they were attributed to him. Unfortunately, it seems like his own personal story didn't have a happy ending.
    Jan 2, 2015. 04:44 AM | Likes Like |Link to Comment
  • Secular Stagnation Or Regular Recession? A Summary, Investment Implications And Paddle Boats [View article]
    Thank you - glad you enjoyed it. Feedback is always appreciated.
    Jan 2, 2015. 04:42 AM | Likes Like |Link to Comment
  • Gold: Some Interesting Graphs To Round Off 2014 [View article]
    Jenna, gold can lose money and suffer significant negative returns. Cash in a bank may suffer from inflation erosion, but is unlikely to suffer from 20%+ losses as gold has done in the past. I am not saying don't hold gold over cash if you want to, but be aware of the losses you could suffer.
    And thank you Visioen, I agree :)
    Jan 2, 2015. 04:37 AM | Likes Like |Link to Comment
  • Farewell Secular Stagnation [View article]
    Hi David. We obviously share a common area of interest, in macro-economics. I had an article published yesterday on secular stagnation ( which looked at a number of factors other than just interest rates. I am curious as to why you place such an emphasis on interest rates - secular stagnation is defined by a number of factors that don't necessarily contradict the fact that real interest rates aren't falling. Matthew
    Jan 1, 2015. 03:13 PM | Likes Like |Link to Comment
  • Daily State Of The Markets: A Year Of Underperformance - The Horror! [View article]
    What's the take-away lesson of this article? I really don't want to be rude or offensive, so apologies if any is caused. But I am struggling here. It seems to be saying that sometimes one approach succeeds. And sometimes another approach succeeds. That is, no asset class or approach outperforms every single year. Which is pretty obvious, no? And you've illustrated that with a set of fictional numbers? What an I missing?
    Dec 30, 2014. 09:09 AM | Likes Like |Link to Comment
  • Stock Market Outlook For 2015 [View article]
    Ha ha, no predictions from me - I think you're just deflecting the core point I'm making :)
    Your picture may fit together nicely, but I still think it's worth refuting the fact that your second bullet point, which you obviously wished to highlight ("GDP growth is a likely indicator for how the market will perform going forward") has no historical basis or power as a predictive factor for stock market returns.
    But we can have it over a Xmas drink!
    Good luck.
    Dec 24, 2014. 12:36 PM | Likes Like |Link to Comment