Thursday, March 21, 2019

Inversions out to 7 years, 2s-10s still haven't broken

The one month T-bill is paying 2.51%. That is better than anything else on the curve out to 10 years at 2.54%. The 7 year note is paying 2.44% We are still teasing the 2-10 inversion with a spread of 13 basis points, but so far, the recession indicator is holding. Since the 3rd quarter last year, the Fed has done almost a 180 on forward guidance. They eliminated rate increases for 2019 and plan to end the balance sheet run off in September. They are following the Bank of Japan script after the Japanese housing bust, but with better stock market results. Chairman Powell said in his conference yesterday that he didn't really pay much attention to the equity markets, but I don't know what else could have spooked him. Other major indicators have only slowed a little. I remain on inversion watch.

Monday, December 24, 2018

Merry Christmas you filthy animal



Worst drop on Christmas Eve, EVER. Can Trump and Mnuchin manage to scare markets even more before the new year? Can Trump fire all the Fed presidents? Can he fire Bloomberg for reporting bad news? I can't fathom what is going on in the White House or at the Treasury. All I know is that I am relatively much wealthier than 3 months ago compared to equity owners.

Thursday, December 20, 2018

2s-5s inversion, only 14 basis points separate the 2 and 10

We are inching closer to a 2-10 yield curve inversion. For locking your money up for an extra 8 years, you get rewarded with 14 basis points or an extra $1.40 of interest per year for every $1,000 in 10-year bonds you buy. Not a handsome payoff.

It's also interesting that 5-year I Series savings bonds pay more than the 10-year at 2.83% (with some inflation protection!).

Quantitative Tightening is starting to bite. I am not sure if the delays have been the same with QE vs QT, but it seems QT is having a faster impact as money that used to be rolled as it matured from the Fed balance sheet evaporates into the void. And the process is really just getting started. There is still over $3 trillion that was created during QE that must be burned to get the balance back to where it started in 2008. Somehow, I doubt the Fed will make it all the way back below $1 trillion before something big blows up.

Thursday, December 6, 2018

3s-5s inversion 2s-10s on the watch list

I mentioned a possible inversion this year back in January: "I'll be looking to see if we have any curve inversion as rates move up.".

And here we are with the 3 year note (2.81) yielding more than the 5 year (2.79) . The classic inversion is the 2 year (2.80) and 10 year (2.863). That's pretty close and a reliable recession indicator, although there is usually a long lag time, sometimes up to 2 years. The Fed's December rate decision will be very telling. If they continue to hike and also stay on course with quantitative tightening (not rolling their treasuries and/or MBS), it could be a bumpy ride for stocks in 2019.

Wednesday, January 10, 2018

MarketWatch skewers Jamie Dimon


Oh so delish. Get woke, Jamie.

Tuesday, January 9, 2018

Bill Gross Says Bond Bear Market Confirmed

I am not as sure about a bond bear market as Bill Gross. Today, the 10-year treasury closed above 2.5%, but I would not call a bear market until it breaks 4.0%. With a fair amount of my IRA in a bond ladder, higher interest rates just mean the next rung on my ladder will earn a higher rate. I own individual bonds, so even though the market price will move inversely with interest rates, I plan to hold all of them to maturity. It doesn't make any difference what the market price of the bonds is as long there are no defaults. I don't own crazy synthetic mortgage tranches, just A and AA corporates and AAA treasuries.

If we do have a bear market in bonds, the higher rates should attract more money and that might drain money from other investments. It could mean a bear market in stocks and/or other asset classes. High rates killed the stock market in the late 70s and early 80s. The Fed is rumored to have 2-3 more rate hikes in store for 2018. I'll be looking to see if we have any curve inversion as rates move up. It will be interesting to watch.

Monday, December 25, 2017

The frozen money of cryptocoin dust

I have taken profits on my ethereum from back in August and went one level deeper, a dream within a dream. Coinbase is considered the "safe" exchange in the US. They have state of the art security (nothing is guaranteed), cold storage, and clean interface. They only offer trades in 4 cryptocoins, so if you want to get in on what are termed "altcoins", or alternative crypto projects, you have to find another exchange.

A little research led me to Binance. After creating an account, I found the ETH address of the online wallet there and was able to do a direct transfer of ETH from my coinbase wallet. The ETH network was a little clogged and my first direct transfer through the blockchain took 3 hours. During that time, my money was in limbo, it didn't exist in either place. Since then, transfers have only taken a couple of minutes. That's a pretty big time gap. With a wallet full of ETH, I was able to do quick and low cost cryptocurrency swaps on binance. I got in and out of a few coins reaping small profits and eventually some small losses, too.

What I didn't expect was for fractions of crypto to be left behind when I sold it. Most of the currencies and tokens use ledgers that go to 6 digits, ten millionths of a unit. For example, in one of my wallets, I sold as much as I could to convert back to ETH and ended up with 0.00670500 ICX. Most blockchains require a transaction fee so I didn't have enough ICX to convert back to ETH or anything else. It was left over coin dust. I have about 8 wallets with dust that are just sitting there. The only way they would ever be unfrozen is if the coin rose enough in price to allow a conversion. It just a funny side effect of the trading platforms and 6-digit precision.