Bond Market

The bond market is the venue in which debt securities are traded prior to maturity. An investor in the bond market buys a debt instrument, which stems from what is essentially a loan to a corporation or government. In exchange for this money, the bond investor receives an interest rate. Debt instruments make interest payments at fixed intervals and for a fixed period of time; therefore, they are called fixed-income securities. The interest rate that the issuer pays is called a coupon. At maturity, the full amount of capital is returned to the investor. For investors in the bond market, two main criteria for buying a debt instrument is duration and credit quality. Duration for the bond market represents the length of the investment; credit quality refers to how strong the borrower is and how able they are to repay the full amount of debt.

About That 500% Jump in Interest Rates…

By Monday, September 22, 2014

Economy and Stock Market Handle a Five-Fold Jump in RatesThe verdict is in…
Last week, at the end of its regularly scheduled meeting, the Federal Reserve said:
1)      It would continue to reduce the amount of money it creates each month. The Fed said it will be out of the money printing business by the end of this year. By that time, the Federal Reserve will have created more than $4.0 trillion new American dollars (out of thin air)…. Read More

If You Think Our Stock Market Is Overpriced, Wait Until You See This

By Friday, March 7, 2014

Why We Are Reaching a Stock Market TopThe stock market in France has been on a tear! Below, I present a chart of the French CAC 40 Index, the main stock market index in France.
Looking at the chart, we see the French stock market is trading at a five-year high. With such a strong stock market, one would expect France, the second-largest economy in the eurozone, to be doing well. But it’s the exact opposite!… Read More

Bond Market: Something Wicked Cometh This Way

By Tuesday, March 4, 2014

Bond Investors to Face Severe Losses in 2014The bond market is in trouble.
As we all know, the Federal Reserve has been the biggest driver of bonds since the financial crisis. The central bank lowered its benchmark interest rate to near zero, then started quantitative easing, all of which resulted in the bond market soaring as yields collapsed to multi-decade lows.
The chart below will show you what’s happened to the U.S…. Read More

Why the Federal Reserve Can’t Stop Printing

By Friday, November 15, 2013

The strong jobs market report last week started the chatter again that the Federal Reserve would start to reduce the pace of its quantitative easing program. Some have said the Fed will reduce the amount of its asset purchases as early as December, while others are saying the quantitative easing will start to diminish by March 2014.
I have a different opinion: I believe the Federal Reserve can’t stop quantitative easing, because the market has become so dependent on it…. Read More

What Happens to the Market When Stock Buyback Programs Stop

By Friday, November 15, 2013

Stock Buyback ProgramsThe International Monetary Fund (IMF) expects the global economy to increase by 2.9% this year and 3.6% in 2014—forecasts which I believe are too optimistic. Why?
First of all, we have the Japanese economy, the third-biggest in the global economy, suffering an economic slowdown. Tertiary industry activity (activity in the service businesses) slowed in September from a month ago…. Read More