A movie that I’m quite fond of is 25th Hour, a Spike Lee joint about three friends in post-9/11 New York City. One of them, played by Barry Pepper, is a bond trader.
I have always had an affinity for short-term interest rates, and it is from my days as an index arbitrageur.
I’ve been writing financial newsletters for 15 years. I have seen a few cycles. There have been good times and bad times, thrills and spills.
Over the last 100 years, the US equity market has returned about 9% annually. What will it return over the next 100 years?
That’s a bold prediction in the title. I believe it will come true.
I write a few newsletters, and I frequently get feedback from my subscribers. Sometimes, they’re just saying hello, and sometimes, they’re ripping on me, but sometimes, they’re telling me about things they see in the economy that are of interest.
First, let me start with a tweet by Larry Summers, though this chart has been passed around by Andreas Steno Larsen and others.
Interest rates are the penalty you pay for purchasing something today instead of postponing consumption until tomorrow. They are also the reward you receive for saving and engaging in delayed gratification.
You put on a trade. You are short bonds, or something like that. It may be tempting to see the people on the other trade as the “bad guys,” while you are the “good guys.”
I am a Wall Street guy, and, being a Wall Street guy, sometimes I forget that 99.9% of the planet has no clue what the stock market is doing on any given day. Or cares. It has zero bearing on their lives whatsoever.
Morgan Stanley strategist Mike Wilson finally capitulated and apologized for getting the market wrong the last nine months. He was everyone’s favorite analyst in 2022. King of the Bears. I haven’t seen that much drooling over a strategist since Abby Joseph Cohen in 1999.
Yesterday, we got a 3.0% inflation reading, which was a touch below expectations. Markets responded about as you might expect.
A month or two ago, people were having a conniption about commercial real estate. An absolute meltdown.
I was watching NBC Nightly News the other night, and they ran a story about how there is no housing inventory because people are trapped in their mortgages.
I was a math major in college. My favorite class was Probability and Statistics, taught by Dr. Wolcin. He warned us from the beginning that the final exam was the grandaddy of final exams—that it was really hard, and he would probably end up curving it.
I once had a cat who liked movies. His name was Otto—he passed away in 2014 at 15 years old. His favorite movie was The Matrix because there’s lots of action and explosions. All the action on the screen could hold his attention.
We are presented with this decision in finance a lot. There is a small probability of something bad happening and a large probability that everything will be fine. What do you do to insure yourself against something bad happening? Because there is no such thing as a free lunch.
I want to write a bit about artificial intelligence from the standpoint of a market person who knows little about technology.
A few months ago, the internet was filling up with predictions that we’d have a 2008-style crash in home prices. The thinking was that the increase in interest rates would cause mortgage payments to skyrocket and price out an entire generation of homebuyers.
When I worked on Wall Street, it was the golden age of hedge funds. They were on the bleeding edge of finance in the mid-2000s, swashbuckling market pirates who did all kinds of exotic stuff to earn alpha for their investors.
Federal Reserve Chairman Jerome Powell said the Fed could hike rates more and more often.
Last week, I spoke at the Mississippi CFA Society’s annual forecasting event.
This is my least favorite time of the year.
Since starting The 10th Man in 2014, I’ve written about gold maybe a dozen times.
What I want to talk about today is this moral panic we’re having about inflation.
We are in the middle of a giant short squeeze, and it is going to get even bigger.
One of the world’s largest derivatives exchanges is making a dangerous play for retail investors.
I had dinner with a local friend of mine last week.
A few weeks ago, I said the bear market was over. What if it isn’t? Don’t interpret this as cold feet—it’s good to understand the other side of the argument.
You can’t randomly scroll on Twitter these days without running into predictions of an impending housing collapse.
The world does not need another take on Jackson Hole. But here we go.
19% off the lows, and people are still bearish.
Does the quality of trade execution matter in the equities market?
Don’t get me wrong — this economy is proving hard to understand. It is very strong in some respects and very weak in others.
It is my belief that the bear market is over.
Twenty years ago, people on trading floors at investment banks worked in silos.
You would think the news that Coinbase Global Inc. had entered into a partnership with BlackRock Inc. to help institutional investors manage and trade Bitcoin would energize the slumping cryptocurrency market.
When it comes to the economy, so-called soft landings are as rare as sightings of Halley’s comet.
Neel Kashkari used to be the most reliably dovish member of the FOMC.
The U.S. dollar has appreciated against every Group of 10 currency this year.
The bond market is weird, but it’s full of clues. We have 8.6% inflation, but the highest interest rates have gone recently is about 3.4%, meaning real rates were still negative to the tune of 5%. This is confusing to me and a lot of other people.
In what has become one of the worst years on record for the stock market, with the S&P 500 Index down 20%, the Solactive Roundhill Meme Index is down much more, tumbling in excess of 50%.
Last Thursday, Elizabeth Warren expressed skepticism about the Fed tightening monetary policy, saying it would make people poor.
West Texas Intermediate crude oil futures fell below $102 a barrel Wednesday, which represents a 22% drop over the past two weeks and meeting the technical definition of a bear market.
Consumer confidence has tanked, with the University of Michigan’s widely followed sentiment index at its lowest since 2011. This is incongruous with the fact that the labor market is very hot.
Liquidity is the lifeblood of the capital markets. It is the ease at which an asset can be turned into cash without disrupting the price of that asset. This was never really a concern in the US, whose markets are prized for being the deepest, most liquid in the world. It’s one reason why the dollar is the world’s dominant reserve currency.
Jay Powell may think he is Paul Volcker, but he is not Paul Volcker.
If you’ve been paying attention to prices of gold and gold mining stocks the last few weeks, you probably noticed that they go up when the stock market goes up, and they go down when the stock market goes down, limiting the usefulness of gold as a hedge. This isn’t the first time this has happened.
We are panicking over interest rates. Estimates of how high the Federal Reserve will raise its main rate to get inflation under control seem to increase daily. The yield on the benchmark 10-year U.S. Treasury note has surged 1.25 percentage points this year, inflicting historic losses on bondholders.
Interest rates are structurally set up to go higher.
