U.S. Economy

Goldman Says Overweight Cash On Mounting Global Risks

Goldman Says Overweight Cash On Mounting Global Risks

More and more are jumping on the "sell in May and go away" bandwagon but for good reason. As U.S. stocks base around in short term trading awaiting more cues about a potential June rate hike from the April FOMC minutes to be released later today, the big players have their eye on the bigger picture.

This is something we've talked about on these pages, and something we buy, on the caveat that technical factors turn conducive. The month of May has historically heralded volatility in the financial markets.

The key takeaways from Goldman are: Overweight cash, avoid equities, look to profit from up in quality carry, and perhaps buy some volatility.

Bill Gross: Worry About "Return Of Capital" Instead Of "Return On Capital"

Bill Gross: Worry About "Return Of Capital" Instead Of "Return On Capital"

In this month's investment outlook, Janus Capital's Bill Gross warns about the mounting stresses in the global financial markets and why you should be much more concerned about the return of your capital, than the return on your capital.

Clearly for the bond king, size does matter. The size of recent market movements, during a time when most central banks in major developed markets have stopped their balance sheet expansion programs, is telling us participants that all is not well and that there may be something lurking behind the shadows.

Gross talks about how nearly 8 years of zero bound interest rates and QE have led to a global economy that is now so out of whack it would take a shock, in the form of secularly higher interest rates and borrowing costs, to fix. But therein lies the rub. Markets get absolutely spooked on any mention of a rate hike or a cut back in existing expansionary monetary policies (ECB, BoJ, PBoC, ect...).

 

Grexit, U.S. & Canada Contraction

Grexit, U.S. & Canada Contraction

Greece is now back in recession while a €1.5bn IMF payment looms just 2 days away. Greece, now led ever deeper astray by a stubbornly defiant Government, is undeniably the champions when it comes to perpetually kicking the can down the road.

Tuesday's data showed that inflation in the currency union warmed to 0.3% YoY from 0.2% in April - yet another sign that Greece is being left far in the wake of a ship that has long set sail.

The toil of staying in the Eurozone, being in a constant and never ending tug of war, and having to cede to the demands of its creditors whom will ultimately have their way just adds fodder to the chimeric spirit of a once independent and free Greece.

All these indicates to us that the risk of a Grexit (Greek Exit) has never been greater, although it might not seem so on the surface.The impetus to leave the Euro and write off just about all of its external liabilities looks to be the path of least resistance to us. The upside risks of a Grexit is undervalued and which probabilities are overly discounted.