Bonds & Interest Rates
I have talked from time to time about how the policies of the U.S. Federal Reserve have ignited a “Dash For Trash” as investors chase anything that looks like it has an above average yield to compensate for the low yields on U.S. government and high-grade corporate debt. REITs, high-yield bonds, companies with high dividend payout ratios, and bonds issues by suspect governments around the world have benefitted.
One of the examples that I have focused on are the 10-year bonds issued by the Government of Rwanda back in April. They were initially priced to yield under 7% and investors snapped them up. I found it surprising that an agrarian economy dependent upon foreign aid in a region that is only a decade and a half removed from eye-popping mass carnage and ethnic cleansing was able to securing financing at these rates.
Well, Rwanda is back in the news. Adversaries of the current leadership have been threatened and some are showing up dead. ( http://www.usatoday.com/story/news/world/2014/01/02/rwanda-spy-chief-dead/4287373/ ) All the while, the current yield on the Rwandan 10-year bond is still at 7.4%, thanks in part to the policies of the Fed.
The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results.
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Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.
Yesterday it was announced that China’s manufacturing for December came in below expectations. However, this shouldn’t be too much of a surprise as Chinese manufacturing has been flailing away for about three years now.
As the chart above shows, Chinese manufacturing was declining about three years ago and then for the last two has been skidding along the breakeven line that separates economic expansion and contraction.
What is really astounding is that this has occurred during massive Quantitative Easing in the U.S. which spills over its borders and floods the world’s economy with liquidity. Also, over this period, China has been extremely loose with credit.
Most people now conclude that China is an important component of the global economic engine. If U.S. Quantitative Easing combined with lax lending standards in China can’t spark growth in Chinese manufacturing, then what will?
The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results.
Richardson GMP Limited, Member Canadian Investor Protection Fund.
Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.
HAI’s must-read stories of the year.
2013 has been a tumultuous year for commodities. From the spectacular surge in crude oil and natural gas production to the record corn harvest, it was an eventful year for the asset class. But without a doubt, no commodity was more talked about than gold, which will register its first annual loss in 13 years. Thus, it’s no surprise that the majority of HardAssetsInvestor’s top stories for this year are related to the yellow metal.
Following are our top 10 articles for the year.
10. Roubini Sees $1,000 Gold, Stronger US Growth
Drew Voros | July 29, 2013
In 2005, economist Nouriel Roubini warned of the American housing collapse that would follow a few years later. That, along with his other bearish calls that have played out, have earned him a reputation as a “permabear” and the nickname “Dr. Doom.” In this interview, Drew Voros spoke to Roubini about commodities as well as different aspects of the global economy, but it was hardly all doom and gloom.
….read the full article HERE
WASHINGTON (MarketWatch) – The Institute for Supply Management’s index of U.S. manufacturing conditions is expected to fall slightly in December but remain on the stronger side, according to economists polled by MarketWatch … full article
Summary
To us, there are four main parts to 2014’s potential rally – the loss of QE, can Europe make a comeback, employment/data has to be strong and whether stocks overvalued after an amazing 2013 run. These four elements will definitely predict how the market does in the new year. For QE, the market will have to start to stand on its own as the Fed will likely continue to taper their asset purchases. Can the market stand on its own and how will the Fed do with unloading their assets? Is Europe going to continue to make their comeback in 2013? They need to stay strong in the coming year to help global markets. Further, we need to see strong data continue to improve as the market is going to have to stand on its own without the Fed more and more. Finally, 2013 was such a great year that many believe that stocks are overvalued and buyers are tired. We will dig into historical valuations as well as current market participation to understand that.
….read the whole article HERE
ABOUT THE OXEN GROUPRistau and team have been working in stocks for several years and has developed a knack for identifying winning short-term and long-term investments.
The site, www.theoxengroup.com, has been in existence since 2008. We are also now working with Marketfy.com. Check us out there at: http://marketfy.com/product/options-spread-portfolio/
The Oxen Group’s daily financial articles pick various stocks that show single day opportunities to make 2-4%, medium term opportunities for 3% and more, and long term investments with buy, sell, and …More
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