Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Bonds’

Cashing In: Why Cash Should Be in Your Portfolio Again

Posted by hkarner - 6. April 2018

Date: 06-04-2018
Source: The Wall Street Journal

As volatility returns to the markets and interest rates rise, cash is turning out to be a safe asset

The Federal Reserve’s rate increases and the Trump administration’s fiscal profligacy have pushed up the yield on cash and cash-like instruments to the highest level in years.

Holding cash is investment heresy after a decade of the lowest interest rates in history. It is time to consider the sacrilegious and add cash back into portfolios.

The value of cash was demonstrated in the first quarter: Both stocks and bonds lost money—the first quarter that has happened since the aftermath of Lehman’s failure in 2008. Cash turned out to be the safe asset. Den Rest des Beitrags lesen »

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The Clock Is Ticking Faster at Tesla

Posted by hkarner - 29. März 2018

Date: 28-03-2018
Source: The Wall Street Journal

Downgrade of Tesla bonds puts Elon Musk in a tough position

A Tesla Model 3.

Tesla will soon need money again. The trouble is, raising it suddenly looks a lot more challenging.

Moody’s Investors Service downgraded Tesla’s debt on Monday afternoon, citing persistently negative cash flow and continued production issues with the Model 3 mass-market sedan. Moody’s is keeping a negative outlook on the credit due to “the likelihood that Tesla will have to undertake a large, near-term capital raise in order to refund maturing obligations and avoid a liquidity shortfall.”

Tesla’s bonds due in 2025, issued just last summer, were quoted near 90 cents on the dollar after hours. Meanwhile, the stock is down 23% in about a month, making equity more expensive. There are plenty of reasons that Tesla’s magic touch with the capital markets is fading fast. Den Rest des Beitrags lesen »

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Why Aren’t US Bond Investors Panicking?

Posted by hkarner - 28. März 2018

Anatole Kaletsky is Chief Economist and Co-Chairman of Gavekal Dragonomics. A former columnist at the Times of London, the International New York Times and the Financial Times, he is the author of Capitalism 4.0, The Birth of a New Economy, which anticipated many of the post-crisis transformations of the global economy. His 1985 book, Costs of Default, became an influential primer for Latin American and Asian governments negotiating debt defaults and restructurings with banks and the IMF.

Economists may warn that the combination of Trump’s protectionism, big tax cuts, and uncontrolled government borrowing, coming at a time when the US economy is already near full employment, will ultimately fuel inflationary pressure. But financial markets simply do not believe this message.

LONDON – As US President Donald Trump ratchets up his trade war with China and the Federal Reserve Board increases US interest rates, the prospects for the world economy and financial markets, so bright just a few months ago, appear to be darkening. Stock markets around the world have fallen back toward their February lows, business confidence has weakened in Europe and much of Asia, and policymakers worldwide are making nervous noises. Are these events the beginning of the end of the global economic expansion, or is the recent market turbulence just a false alarm? Den Rest des Beitrags lesen »

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Can Markets Handle So Much Trouble at Once?

Posted by hkarner - 25. März 2018

Date: 24-03-2018
Source: The Wall Street Journal

Investors are suddenly facing a trio of negative forces: trade tariffs, tech swoons and central bank tightening

Trouble comes in threes. In isolation, the headwinds facing global markets—fears of a trade war, problems for the highflying tech sector, and central banks tightening policy—could be manageable. Taken together, they spell continued turbulence.

The turnaround in markets has been sharp after January’s bright start. U.S., European and Japanese stocks are all down for the year. Bonds have offered no haven: U.S. Treasurys, investment-grade corporate and high-yield bonds are all sporting negative returns. Emerging markets are faring better, but may suffer if risk aversion persists.

On trade, markets may have become too relaxed last year, when hawkish noises from the U.S. administration failed to turn into anything significant. Even as tensions ratcheted up, economists were quick to argue that tariffs on steel and aluminum would have little direct impact on the global economy. But President Donald Trump’s actions on China, and China’s swift response, clearly increase the risk of a trade war. The Bank of England warned this week that greater protectionism could hit global growth and push global inflation up, a toxic mix.

Meanwhile, the tech troubles centered on Facebook , down 11% this week, are a new shock that may undermine a popular trade that appeared unstoppable until recently. Analysts at Nomura suggest that a regulatory or customer backlash against businesses built around data might burst a bubble that so far hasn’t been seen as one, with investors too focused on past crisis flashpoints like banks and sovereign debt.

It shouldn’t be a shock that central banks are gently removing stimulus: it has been discussed endlessly for months. But ultraloose policy has underpinned markets by suppressing volatility, encouraging investors to pile into risky stocks and bonds.

That increases the chance of sharper market moves even as central banks proceed cautiously. One sign of rising concern is that corporate-bond spreads, which initially appeared robust in the wake of the stock-volatility shock in February, are now moving steadily wider. In both the U.S. and Europe, high-yield bond spreads are some 0.5 percentage point wider than their tightest point this year, while investment-grade spreads are about 0.25 point wider.

Set against all of this is still the sense of momentum in the global economy that supported markets in 2017, and the continued softness of the dollar. But investors fretted about how much those factors had pushed up asset prices last year even when shocks were fewer and further apart. Stocks and bonds are a little cheaper now, but not much, and the threats to the outlook are clearer. Caution is advised.

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Where Will We Get the Cash?

Posted by hkarner - 12. Februar 2018

We already knew interest rates were rising. Recent data suggests they could rise significantly more than many expected just a few weeks ago. If so, that will be a big problem for bonds, stocks, and many other assets – not to mention taxpayers who will bear the cost of swelling government debt, consumers who may face inflation, and everybody who will be hurt by a recession.

The combination of a falling stock market and rising interest rates is historically and statistically rare. Normally, when the stock market goes through a correction, interest rates fall. Looking back through history, we see that 1987 and 1994, two years I have been writing about in connection with 2018, were the other unusual years.

I’ve been relatively optimistic on the economy this year, and I still think the year can end well. But given recent events, the path is more challenging now – and the odds of a rough 2019 are growing.

Burn Rate Den Rest des Beitrags lesen »

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Shares Are Wildly Overpriced. But Bonds May Be Even Worse

Posted by hkarner - 14. Januar 2018

Date: 12-01-2018
Source: The Wall Street Journal

Stocks lose their appeal as yields rise; today’s high valuations suggest lower returns ahead

Bond yields are on the rise again, and it’s making shareholders jittery. They are right to worry, as low yields are the main support for historically high stock valuations, but bonds aren’t creating serious trouble for the equity market yet.

Bonds matter to shareholders in many ways, with the most obvious being that they are the main alternative investment, along with cash. Shares are very expensive compared with their own history on almost every measure, but compared with locking in a paltry 2.5% for 10 years they don’t look so bad. To put some numbers on it, analyst estimates of forward-looking operating earnings are 5.4% of the price of the S&P 500, and forecast to keep rising in future years. Why settle for 2.5% from bonds when the earnings yield on stocks is double that?

The question comes down to one of reward for risk. Earnings are uncertain, so shareholders should get an extra reward for the risk of holding stocks compared with the certainty offered by Treasurys. That reward, known as the equity risk premium, shrinks if bond yields rise faster than the outlook for profit.

Working out this equity risk premium is contentious, to put it mildly. The principle is to estimate how much companies will generate for shareholders in future and compare it with bonds, but there is little agreement on how to do that. We care about the future, and we want something long term, so typically the focus is on estimates for operating earnings, stripping out one-offs. Unfortunately, management know this, and artificially boost operating earnings via one-off losses—not just once, but year after year. Overall earnings also overstate how much investors benefit, as much corporate investment is wasted. Den Rest des Beitrags lesen »

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Four Things Sure to Happen in Markets During 2018

Posted by hkarner - 8. Januar 2018

Date: 06-01-2018
Source: The Wall Street Journal By Jason Zweig

You can’t be certain about anything in this market, except this

Forget Dow 25000. Every year is full of surprises, but there are a few things every investor should expect to see happen in 2018.

With companies moving less in lockstep, professional investors will declare this a “stock pickers’ market.” Asset managers will proclaim that the impending rise in interest rates means you need bond funds that can hold any kind of debt. After years of smooth increases, even a 5% decline will set off cries of panic. And reported returns will shoot upward as the financial crisis of 2008 is jettisoned from 10-year track records. A look at these trends now should help keep you from overreacting — or acting at all — when they transpire.

Correlations, or the extent to which companies move up or down together, are at their lowest in more than 25 years, according to T. Rowe Price.

Whenever stocks rise and fall independently like this, portfolio managers say beating the market becomes easier. Den Rest des Beitrags lesen »

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Many happy returns: new data reveal long-term investment trends

Posted by hkarner - 6. Januar 2018

Date: 04-01-2018
Source: The Economist: Free exchange

Property yields more than shares and bonds; investment returns outstrip economic growth

DATA-GATHERING is the least sexy part of economics, which is saying something.

Yet it is also among the most important. The discipline is rife with elaborate theories built on assumptions that turned out to be false once someone took the time to pull together the relevant data. Accordingly, one of the most valuable papers produced in 2017 is an epic example of data-retrieval: a piece of research that spells out the rates of return on important asset classes, for 16 advanced economies, from 1870 to 2015. It is fascinating work, a rich seam for other economists to mine, and a source of insight into some of today’s great economic debates.

Rates of return both influence and are influenced by the way firms and households expect the future to unfold. They therefore find their way into all sorts of economic models. Yet data on asset returns are incomplete. The new research, published as an NBER working paper in December 2017, fills in quite a few gaps. It is the work of five economists: Òscar Jordà of the San Francisco Fed, Katharina Knoll of the Bundesbank, Alan Taylor of the University of California, Davis, and Dmitry Kuvshinov and Moritz Schularick, both of the University of Bonn. (Messrs Jordà, Schularick and Taylor have spent years building a massive collection of historical macroeconomic and financial data.) For each of the 16 economies, they craft long-term series showing annual real rates of return—taking into account both investment income, such as dividends, and capital gains, all net of inflation—for government bonds and short-term bills, equities and housing. Theirs is the first such data set to gather all of that information for so many countries over so long a period. Den Rest des Beitrags lesen »

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Income Investors: It’s OK to Be Sad, But Don’t Get Desperate

Posted by hkarner - 8. Oktober 2017

Date: 07-10-2017
Source: The Wall Street Journal By Jason Zweig

Old bull markets don’t produce new ideas. They just produce new ways for investors to hurt themselves with old ideas.

With stocks at record highs and the income on bonds not far from record lows, circumstantial evidence suggests investors are getting restless — if not desperate.

Chasing “yield,” or trying to get higher investment income, is one form of desperation. Last month, $1.6 billion in new money poured into exchange-traded funds holding high-yield corporate bonds, according to FactSet. Den Rest des Beitrags lesen »

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Das Gerangel um die Jahrhundertanleihen

Posted by hkarner - 3. Oktober 2017

Österreich sammelt mit einer 100-jährigen Anleihe Milliarden ein. Die Nachfrage kommt von Versicherern und Pensionskassen. Doch gibt es auch Risken.

Frankfurt. Auf der verzweifelten Suche nach Rendite packen sich Investoren immer häufiger extrem lang laufende Staatsanleihen in ihre Depots. Selbst mit 100-jährigen Bonds sammelten Österreich und Argentinien kürzlich Milliardengelder ein. Kanada denkt über einen neuen 50-jährigen Schuldschein nach, und Experten erwarten, dass auch die USA bald mit einem solchen Wertpapier an den Markt gehen.

Für die Länder sind solche Papiere interessant, weil sie sich über einen langen Zeitraum niedrige Zinsen sichern. Fachleute warnen aber Investoren vor einem unberechenbaren Risiko bei dieser Form der Geldanlage. „Es ist eine klare Tendenz hin zu ultralangen Anleihen zu erkennen“, sagt Analyst Elmar Völker von der Landesbank Baden-Württemberg. „Vor der Finanzkrise war das Höchste der Gefühle eine 30-jährige Anleihe. Inzwischen finden selbst Länder mit einer höheren Verschuldung Abnehmer für länger laufende Bonds.“ Im Oktober 2016 emittierte Italien eine 50-jährige Anleihe – obwohl die dortigen Banken in einer schweren Krise stecken und das Land so stark verschuldet ist wie kaum ein anderer Staat in Europa. Argentinien, das schon mehrfach bankrott war, sammelte im Juni 2,8 Mrd. US-Dollar (2,37 Mrd. Euro) ein, die erst 2117 zurückgezahlt werden müssen.  Den Rest des Beitrags lesen »

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