How The Fed Put Has Affected Risk Assets
The US Federal Reserve (Fed) asset purchases significantly affect the value of risk assets (equity, commodity, real estate, etc.). We recently completed an extensive research project to learn more about this effect and how we might use this information to better trade the financial markets….
ProfitScore Update – April 2022
To the clients and friends of ProfitScore: Institutional investors know ProfitScore primarily for our US Treasury work, but few investors know about our expertise in trading US equities. ProfitScore has provided equity research and sub-advised equity programs to the RIA channel for over two decades. In…
ProfitScore Update – January 2022
To the clients and friends of ProfitScore: The expectation of heightened volatility for 2022 did not disappoint in January. The VIX rose to just short of 32 in late January, its highest level since January 2021, settling at 24.38 by month’s end. According to weekly data published…
ProfitScore Update – December 2021
To the clients and friends of ProfitScore: One of the time-tested valuation measures is the CAPE (Cyclically Adjusted PE ratio) developed by Prof Robert Shiller at Yale. Below is a chart using Shiller’s data. On the x-axis is the CAPE ratio at any given point…
ProfitScore Update – November 2021
To the clients and friends of ProfitScore: Our flight-to-quality indicator had been building towards the end of November and went long on the Wednesday before Thanksgiving. This trade can last for a few days or several weeks. It can also chop around depending on the…
Demographic Obstacles to Increasing Yields
The ground is littered with dead bodies of investors/traders who have bet on rising US rates/yields. Is this time different? Why is this trade so difficult? It is my very humble opinion that when the history books are written about this time in financial history,…
The Currently Odd Volatility of Long-term US Treasuries
The US sovereign bond market is traditionally viewed as a safe-haven by investors. When US equity markets are under stress, investors generally purchase US Treasury bonds, pushing yields lower and bonds higher. Traders seeking convexity prefer buying the long-end of the yield curve, which causes the…
World War C: Will Rising U.S. Deficits Steepen The Yield Curve?
Estimated Deficit Spending for 2021 Modern Monetary Theory (MMT) – Version 1.0 The U.S. Dollar Stays Strong Drowning Out The Noise What Opening Up May Look Like The economic toll, as measured by deficit spending, is going to set new records across most modern economies. Even…
Why The Unwind Of The Carry Trade Is Increasing Volatility
Central bank interest rates are of fundamental importance to exchange rates and foreign exchange flows as they determine the direction and profitability of carry trades. When the interest rate differential between two central banks is positive, it is generally possible to borrow a currency at…
World War C: Illiquidity is CRUSHING Corporate Debt Markets
Cumulatively the markets are at or near record highs in illiquidity. What makes this collapse so devastating is the breadth of illiquidity across most sectors of the market. The Volcker rules that were passed in 2009 to protect banks had unintended consequences. Banks stopped making markets in…
World War C Continues: Quick Update On The Fed’s Battle Lines
The long end of the yield curve, as measured by the TLT ETF, experienced a -9.8% intraday peak-to-valley drawdown on Wednesday. The TLT finally bottomed at 2:40 est. This was the exact time of the Fed’s last auction where it began purchasing 30-year US Treasuries. This auction was unscheduled…
The Treasury Market Broke Last Week
The $18 trillion US Treasury market broke last week! As of today, no one knows for sure all of the reasons for its collapse, but everyone agrees it is a severe problem. One of the main culprits seems to be caused by the pricing of…