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  • This Is The Key To American Capital Agency [View article]
    "...the company has positioned its hedge portfolio to see growth in net asset value when the yield curve flattens."

    That surely was the right strategy for 2014-2015, but now I'm not so sure. Consider the 10-year/2-year yield spread as indicated by the ETN, STTP.

    Looks like a long term bottom might be forming. I guess the theory, encountered more often these days, is that the Fed will increase short rates and the long end will not rise as much or even come down. Didn't I read somewhere that they've also reduced leverage considerably. If so, I don't see how that benefits when the yield curve flattens.
    Sep 2, 2015. 11:38 PM | Likes Like |Link to Comment
  • mREITs Impacted By Enormous Price To Book Swing - MORL Yielding 27.6% [View article]
    A big margin call if the long rate hedges can't handle a large drop in MBS prices (possible in an illiquid market with wide bid ask spreads?).
    Aug 31, 2015. 07:48 PM | 1 Like Like |Link to Comment
  • Phillips 66 - Buy This Refiner During The Crash [View article]
    "It has already managed to reduce its share count by 15%, and has the ability to increase it by several more percent with the current buyback plan." "Increase" should be "decrease" if you are referring to share count.
    Aug 30, 2015. 08:16 PM | Likes Like |Link to Comment
  • This Is Not A Game The Federal Reserve Wants [View article]
    I'm wondering whether a 0.25% rise in Fed funds will affect LIBOR rates similarly. There are still many millions of US homeowners stuck in ARMs that adjust up or down every six or twelve months according to changes in the 6-month and 1-year LIBOR rate. They are the ones who still can't qualify to refi to fixed rates with HARP or standard mortgages for various reasons. The prime ARMs now have fully adjusted rates of only 2.625-3%, and subprime ones have much higher rates. If a quarter point rise in Fed funds causes a 0.25% rise in 6-month and/or 1-year LIBOR rates, that will be hard on a lot of homeowners. Of course, a 0.25% rise in mortgage rates won't help the housing market any either.
    Aug 30, 2015. 06:48 PM | Likes Like |Link to Comment
  • The Stock Market Speaks - We Learn Irrationality Isn't Always Associated With 'Exuberance' And 'Euphoria' [View article]
    "There is nothing, nothing that I have seen with this fundamental backdrop, whether it be Chinese fears, positioning, valuation, or any other factor, to suggest that we are indeed headed into a bear market."

    I believe the most serious problem for the stock market has nothing to do with the current state of the economy, but is the massive margin debt and massive negative net credit balances.

    Corporate debt is also an issue. The composite leverage (debt/equity) of the S&P 500 is now 4.72, way above the average of 3. Credit spreads have been increasing for many months (HYG, JNK, HYLD). The economic recovery has been built on a binge of margin debt and corporate debt and the situation has gotten dangerous.

    Have you considered the possibility that it is drops in the stock markets that cause recessions and not the other way around? Change in stock market level is a variable in the leading indicators (only 3.94% weight, but if it drops a lot it has a growing importance in damping investment growth).
    Aug 29, 2015. 10:07 AM | Likes Like |Link to Comment
  • Yield Spreads: This Selloff Is For Real [View article]
    The Treasury yield curve has not gotten flat or inverted, which one might expect before any recession or serious bear market (at least absent ZIRP or QEs, I suppose), however, has anybody studied the junk bond yield curve relationship to recessions? I notice that the AdvisorShares Peritus High Income Fund, HYLD, with short duration (2.7 effective duration, no derivative hedges) has a 9.7% current yield while JNK with duration of 4 has about 6% yield, which would indicate inversion. Long HYLD with put hedge.
    Aug 26, 2015. 11:39 PM | 1 Like Like |Link to Comment
  • Hedging Municipal Bonds [View article]
    Why not just use exchange traded options on HYMB to hedge directly?
    Aug 22, 2015. 03:57 PM | Likes Like |Link to Comment
  • The FOMC Gets Slower Still [View article]
    Nattering: thanks very much. Looks like I've got some reading to do!
    Aug 19, 2015. 09:17 AM | Likes Like |Link to Comment
  • Home Depot EPS in-line, beats on revenue [View news story]
    To SA editors: the above Home Depot news is erroneously linked to a headline under "Top News" "Atlanta Fed tracking model sees 1.3% Q3 GDP growth." Could you please fix the link to the Fed article?
    Aug 18, 2015. 06:47 PM | 1 Like Like |Link to Comment
  • The FOMC Gets Slower Still [View article]
    Wonderfully written as always. Did you write any article(s) explaining in detail what you mean by the "unwinding of the Eurodollar standard," which you've alluded to in other articles?
    Aug 18, 2015. 06:43 PM | Likes Like |Link to Comment
  • QE Or Not, Europe Goes Nowhere [View article]
    I read most of your work because you know so much about the workings of international banking and currency markets, provide interesting graphs, and I can see you are very passionate and have strong points to make. Unfortunately most of what you are talking about is way over my head and contains many terms and acronyms with which I'm unfamiliar. However, one point you make strikes a chord among many SA writers and commentators: "These economies were built intentionally on debt at the margins (credit-based "money"), so without that financial element they just go nowhere (and worse) no matter how much or what type of "stimulus" is unleashed." All the many manipulations of central banks for the last many years has reduced consumer debt service for mortgages, but simply has done very little to directly expand what is the essential ingredient for economic growth in an era of excessive debt burdens, namely, consumers' real incomes.

    We get targeting of wealth effect via low interest rates and targeting of inflation via money creation I suppose, but the wealth effect is lost on 90% of the populace and the inflation element has been destroying consumers' real incomes for decades. If the legislative powers don't start doing the many things needed to restore growth of consumer real incomes then there won't be much growth, just a long drawn out period of debt deflation while banks mark time sucking on the teets of government debt. If they're waiting for more growth in consumer debt to provide the growth they'll be waiting for a couple of generations because consumers are maxed. Too bad the health of the banks depends on growth in debt and high interest rates. The era for big profits from that is long gone. Well I guess they can also keep floating doomed loans for over-investment in production facilities that can't be supported by consumption trends.
    Aug 16, 2015. 12:07 AM | 4 Likes Like |Link to Comment
  • ECA Marcellus Trust I - Pure Play Priced Right For A Natural Gas Rebound [View article]
    It's what's on the K=1 Partnership statement; might show some return of capital or capital gains/losses, but usually mostly ordinary income, not qualified dividends.
    Aug 15, 2015. 10:37 PM | Likes Like |Link to Comment
  • What Lies Ahead For Dividend Stocks? [View article]
    Insiders in NRZ recently sold 93.78% of their total positions.
    Aug 15, 2015. 09:45 AM | Likes Like |Link to Comment
  • What Lies Ahead For Dividend Stocks? [View article]
    They are-self fulfilling to the extent that many investors, including institutional ones, use the 50-day and 200-day moving averages, and the death cross, to define whether it's a bull or bear market. The death cross will take some investors out of the market as buyers, and switch them to sellers to some extent. It will be even more significant if the slopes of the 50-day and 200-day moving average become negative and that too will eliminate more buyers and increase sellers relative to buyers. At present the 50-day averages are sloping downward but the 200-day are not. For many investors, including institutional investors, the status of the moving averages has significance about the likely direction of the market since they have had some predictive value in the past. Pooh-pooh them at your risk. In addition you should note whether the main indices have begun to trade below their recent one or two year trading ranges. When large number of recent buyers are underwater with recent purchases the selling pressure is greater than otherwise.
    Aug 15, 2015. 09:01 AM | 1 Like Like |Link to Comment
  • Avoiding The Big Drawdown: Is Downside Protection Helpful Or Heresy? [View article]
    "The only way to earn high returns, but limit the risk, is to develop a timing methodology that identifies how to sell the high-returning asset before it decides to jump off a fiscal cliff." While a timing method is certainly a prime candidate to limit risk and increase returns, I don't think it's the only method. Other possibilities include either arbitrage or hedging with options. My feeling is that hedging with options is potentially the most effective, but typically involves considerably more transactions than a timing method.
    Aug 14, 2015. 08:45 AM | Likes Like |Link to Comment