Yield curve

Bill Gross: About Helicopter Money

Bill Gross: About Helicopter Money

Technology and mass robotization are probably the single biggest threats to our jobs. Jobs of both the blue and white collars are gradually being replaced by robots that are much more cost efficient and productive. Plus, robots have no want for minimum wages, or hold strikes in protest for what is now a huge skill deficiency in the labor force across the world.

So will politicians and central planners dabble with the risk of upsetting the status quo for a potential change in direction? Unlikely.

Rather, Janus Capital's Bill Gross believes central planners will stick to what they have always been best at: Printing money (QE), lowering interest rates or bringing them sub zero as we've seen recently, and fiscally stimulating economies with debt funded programs thereby creating a false impression of prosperity when there isn't.

What The Smartest Minds Think Of The Current Rout

What The Smartest Minds Think Of The Current Rout

2016 is shaping up to be like the latter half of 2015 but with a lot of additional dynamic forces warping and twisting the financial markets. Higher than average volatility has been the common theme so far but we're also noticing an incredible rapid shift in cross asset correlations. All this means that the current market environment is extremely rough, giving traders (ourselves included) a hell of a hard time.

It is no surprise that this is indeed the case. Policy uncertainty amongst central banks, oil prices that are stick in a moribund rut, very idiosyncratic technical flows that have caused traditionally lower beta assets to trade like mad donkeys, and of course the deep polarization of sentiment across the board.

It is on this note that we turn to JP Morgan's quantitative desk for answers, albeit nebulous. The desk analyzes markets in a less traditional manner, approaching this landscape with mathematical and technical tools most retail traders have zero access to.

Bill Gross: QE Has Failed Terribly

Bill Gross: QE Has Failed Terribly

Central banks aren't stupid, they're just stubborn. The unintended consequences, a palpable word for not heeding the lessons of history, of zero bound rates have never been further reaching.

Businesses lose foresight they used to have. Savers and pensions suffer the most because savings cannot earn a high enough return to justify the value of time and opportunity costs. It's all about the yield curve, which has never been as flat as it is today.

Things have gotten so out of whack that even Gross himself openly admits that the 'necessary' changes will most probably not be effected. Entire financial systems have been built on this new paradigm.

Unfortunately for the real economy, this new paradigm has hindered long term economic growth and stability. Will anything change? Perhaps not.

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...).

 

April Review & Looking Forward (Part 2: Strategy)

April Review & Looking Forward (Part 2: Strategy)

In Part 1 of this note reviewing the eventful month of April, we spoke about how the tide was shifting in many of the developing economies with Europe's economy and financial conditions showing good signs of improvement while the American economy was undoubtedly slowing. We also spoke about macro economic cycles and how such polarities in the major economies have created exclusive opportunities in the financial markets.

With the current market climate hallmarked by panic, fear, and ephemeral swings, we have detected a couple of opportunities over the last couple of weeks that look promising in their own rights. In the last 2 weeks alone, a few records have already gone down the record books. This is heaven for opportunists.

In today's note, we wish to share our views and ongoing opinions on how we view the current market landscape and the strategies that we are and will likely be implementing to take advantage of the substantially different dynamics in today's environment.

April Review & Looking Forward (Part 1: Analysis)

April Review & Looking Forward (Part 1: Analysis)

April is set to close with a bang on what is easily the busiest week in terms of economic data releases for a long time. We have various sets of CPI and employment data releases from Europe the developed economiesGDP figures are also set to hit the wires, chiefly from the UK, US, and Canada

Central banks will be in hard focus where Australia's RBA fired the first salvo, followed by the FOMC, with New Zealand's RBNZ following suit. The BoJ will also hold its press conference. It is safe to say the market's attention will be fixated on the US 1Q15 GDP figures and the ensuing FOMC statement and press conference.

In this note, we will briefly go over some of the key developments we have seen in April across the globe from the American economy, to the renewed conflagrations in the tug of war between Greece and its creditors, to China's economic woes and financial troubles.

In Part 2, we will touch on the various markets we cover, present our views and purported strategies to trade them going forward.