Dangers of High Yield Hunting

Fixed income investors that were accustomed to earning 5% on a portfolio of government bonds are now getting 2% for the same securities. The steep drop has interest starved investors hunting for yield. As usual, the easiest way to increase yield has been to increase risk, and investors have taken the path of least resistance. … Continue reading Dangers of High Yield Hunting

Twist and Shout

The markets are quivering in anticipation of what the Federal Reserve may or may not announce later today.  The consensus is that it will decide on implementing "Operation Twist."  In this situation, the Fed would maintain short-term rates while reaching out to lower long-term rates, effectively "twisting" the yield curve. The idea is that lowering long-term rates will encourage borrowing, spending, and investment. However, … Continue reading Twist and Shout

Bernanke Put

The markets seem to be hoping that good ol' helicopter Ben will come through with another round of quantitative easing (QE) tomorrow.  Doing so would extend the legacy of  the "Greespan Put" and probably ignite a speculative risk-on rally.  Analysts like Dave Rosenberg and Bill McBride have pointed out how equity markets seem to be dancing around the Fed's QE activities, shown for … Continue reading Bernanke Put

What’s up with the Debt Ceiling

We are within an arm's length of reaching a "debt ceiling" in the United States.  In other words, the government has basically maxed out the national credit card (based on limits established by US law).  The Treasury Department has indicated that unless Congress authorizes additional borrowing (which only Congress can do through its lawmaking functions), the United States will not … Continue reading What’s up with the Debt Ceiling