“Whatever It Takes”

As recently as this week Spanish bond yields had been roiling the markets as they crossed the 7% threshold that is considered the point of no return. With system risk rising anew, the onus was on policy makers to get moving in another attempt to bring down spreads and calm global markets. In the last…

The Humility Helmet

I just returned from a trip to Canada that took me from Niagara Falls to Toronto to Montreal to Old Quebec, and then back to the U.S. Our final stop before getting on the plane home was the Norman Rockwell museum in Brockton, Massachusetts. The museum owns hundreds of Rockwell’s original paintings, many of which…

Neutral is STILL a Moving Target

A few weeks ago, I introduced you to the concept of pro-forma portfolios, and explained how we use them to estimate our current portfolios’ position in terms of volatility and beta. There is an Italian saying that could be translated as “to trust is good, not to trust is better.” While the pro-forma portfolios give…

Economics and the Problem with Assumptions

Two of the most destructive forces for the economy are the words “let’s suppose” and the use of the = sign. When we put the two together, they form a combustible combination that gives seemingly well-intentioned and rational investors the power to disintegrate assets at will. This is because investors have a desperate need for…

One Step Forward, Two Steps Back

Last Friday, after the 19th European emergency summit, markets rallied on the idea that the 19th time might be the charm, and Europe might finally be awakening to the gravity of the current situation. Spreads on Spanish and Italian bonds came in handily, and equity markets around the globe rallied furiously after European leaders pulled…

‘Who Could Love Me?’

With Seinfeld on my mind, who could love Coal and Steel stocks right now? From April 2011, as measured by the SPDR S&P Metals & Mining ETF (XME), these stocks plummeted 50% through June 26. Analysts hate the fundamentals as China has stalled with continuing hard landing fears, costs are soaring for coal and steel…