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Archives for June 2013

Dudley Unleashed: Catching a Tiger by the Tail

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At a presentation billed as a speech on whether or not recent college graduates are finding good jobs, New York Federal Reserve Bank President William C. Dudley signaled his desire for continued stimulus in a strong way. Only a small portion of the speech talked about college or job opportunities, while the majority focused on national economic conditions and Dudley’s preferred policy prescriptions. Dudley places the blame for continued economic sluggishness directly on the so-called “sequester” cuts and less directly on the very large tax increases instituted earlier this year. He says the … [Read more...]

Fidelity or Vanguard?

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When it comes to choosing a custodian for your money it’s simply a question of Fidelity or Vanguard. I like Fidelity because of its superior technology and the fact that you can buy Vanguard funds. Don’t fool around with any other custodians. Here’s yet another example why as reported in today’s Journal: Federal regulators on Thursday filed civil charges against former MF Global Holdings Ltd. Chief Executive Jon S. Corzine and a top lieutenant for overseeing the misuse of almost $1 billion in customer funds, saying Mr. Corzine "bears responsibility" for the New York commodities brokerage's … [Read more...]

Central Bank of Central Banks Says it’s Time to End QE

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In its recent annual report, the Bank for International Settlements (BIS) slammed the world’s major (and minor) central banks for their profligate monetary policies since the days of the financial crisis. While the BIS doesn't go so far as to say intervention wasn't needed, it leaves readers of the annual report with the distinct impression that QE has gone on long enough. Here are some excerpts from the annual report that we found interesting. (Our emphasis added in bold). Two major interrelated trends have characterised the conduct of monetary policy over the past five years. First, policy … [Read more...]

Bond Funds’ Biggest Losers

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Closed-end bonds funds have taken a huge hit recently. Leverage can be a killer when rates go up. As Tom Lauricella at The Wall Street Journal reports: Worries about Federal Reserve policy have hit a favorite destination for mom-and-pop investors: closed-end bond funds. These mutual funds have suffered outsize losses during a rough month for bond funds overall. The average high-yield closed-end bond fund is down 10.7% in the past month through Thursday, according to Morningstar Inc. That compares with a 3.4% decline for its open-end counterpart. The same features that help closed-end … [Read more...]

Why You Should Beware Bond ETFs

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Recent market volatility has been jarring for some investors. The volatility has whacked bond ETFs particularly hard. Last week bond ETFs sold off sharply and their prices diverged from their net asset values (NAVs). If one considers the characteristics of ETF investing, deviations from NAV should not happen. Especially hard hit last week were emerging market bonds, as evidenced by the iShares JPMorgan USD Emerging Markets Bond Fund (EMB). On Friday the discount of EMB shares to NAV was 1.93% (Chart 1). While that may not sound like much, in today’s low interest rate environment, that is … [Read more...]

Entrepreneurs from Developing Markets Lead the Field in Wealth Accumulation

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In 1989 only 21% of the people on the Sunday Times Rich List had made their money themselves, the rest were heirs to great wealth. Now, in 2013 the Rich List has essentially flipped, with 80% of those on the list earning their fortunes themselves. A new study from Barclay’s says that globalization and technology have created a path for entrepreneurs to earn vast fortunes of the type that were once restricted to wealthy heirs. The outcome of these twin forces of globalisation and  technology has been an explosion of entrepreneurship  around the world and a decline in inheritance as a  … [Read more...]

What We’re Reading 6-21-13

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A roundup of articles we found interesting this week. The Young Won't Buy ObamaCare, Holman W. Jenkins, The Wall Street Journal Bernanke Rides the Bull, Review & Outlook, The Wall Street Journal Fitch says China credit bubble unprecedented in modern world history, Ambrose Evans-Pritchard, The Telegraph QE addiction may be hard to kick, Satyajit Das, Financial Times Second-quarter profit warnings target record, Matt Andrejczak, Market Watch Volcker: Fed Is Too Big for Its Britches, Gene Epstein, Barron’s Corporate Share Buybacks Often Disappoint Investors, S.L. Mintz, … [Read more...]