Lowest Margin EVER IN HISTORY between TBILLS and Investment Grade Long Bonds - cash as a weapon.

I enjoy reading Christopher White at Loop Capital every day. He has a perspective on fixed income markets often not available to equity focused traders.

“According to Goldman , IG bonds offer the smallest extra yield margin ever compared to 3-month bills. The biggest IG ETF . LQD, 30-day SEC yield , according to Blackrock is 5.02% .  Why would one want to take credit and duration risk by buying IG Corps when 6-month Bills offer the same yield? “

MY TAKE:
You have to really believe that inflation is back to a normal 2-3% and the economy is going to get really bad for this to make sense.   And if it does make sense this would be a disaster for equities which are currently near historic high valuations.  High valuations like this usually happen in the middle of a bad economic cycle when earnings are about to take off.

Rising interest rates, worries about a recession while equites are at high valuations and rising reminds me of the set up before the 1987 crash.   That crash recovered fairly quickly and was a great time to buy.    But to buy in a moment like that you need cash.    And today cash is yielding 5.0% in the right places.   It pays to wait and miss out on exciting rallies.  Now more than ever cash is set up to be an offensive weapon in the portfolio.

The Euro Reaches Parity with US Dollar

Posted an answer to questions I've been getting about the recent move through a nice round number for the Euro/USD exchange rate. https://www.linkedin.com/feed/update/urn:li:activity:6968549702870953984

Perspective on the Shanghai Slide

My buddy, and market cognitive psychology expert, Stephen Duneier of Bija Advisors puts some perspective on recent market movements.  His two points: first,   the correlation between US and Chinise stock markets (.215 monthly) is low, very low.    He notes that the two markets moved in the same direction in only 57% of months - that's pretty close to random.   Secondly, when you look at recent US market movements in the attached rolling monthly chart going back to 2009 they don't look so special.

FinalPitch at With Sarah Lawrence College

I was recently a judge the Sarah Lawrence College Final Pitch Entrepreneur Contest.  The three finalists included a media technology startup idea, a non-profit service organization, and an artist showcase application.

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Why Is Good Friday A Stock Market Holiday

U.S. stock exchanges have had a strange relationship with Good Friday. After being closed on Good Friday off and on, 1907 was the final year in which the exchange was open on Good Friday. However, Good Friday is not a national holiday. The Fed wire and thus, the bond markets are open. While most European countries close for several days around Easter, the United States has no such holiday.

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FINRA Test Confusing to Investors

There is list little quiz at the Finra website on investor education.  It has one confusing question.

Which type of bond is the safest?

A. U.S. Treasury bond

B. Municipal bond
C.  Corporate bond

 D. Don't know/Not sure

FINRA's Answer
"Treasuries" are issued by the federal government. Unlike corporate or municipal bonds, they are backed by the "full faith and credit" of the U.S. government, which guarantees that interest payments will always be made and the bonds redeemed at maturity. To learn more about what makes Treasury bonds unique, read Investment Choices.

The regulator charged with protecting individual investors (among other things) thinks that the U.S. government is the least risky place to stash your money.   Standard and Poors seems to disagree with FINRA. They rate the bonds of Exxon and Microsoft all AAA, while the rate the U.S. treasury one-notch lower at AA+.   To be fair to FINRA for most of the history of financial academia governemnt bonds were always considered the risk free asset.  It's just ironic now that that the ratings agencies are worried a bit more about Uncle Sam than Big Brother (IBM). 

Goldman Misses The Point: Equities Aren't Cheap Bonds Are Insanely Expensive

Goldman portfolio strategists Peter Oppenheimer and Matthieu Walterspiler are out with a report getting big of attention.  The report presents the generationally important bullish case for stocks relative to bonds. 

I'm worried this report will be the case for everyone to go 100% into equities and then get clobbered when the bond bubble bursts.  I agree that equities are stupidly undervalued relative to government bonds but it's only because EVERYTHING is at an historic low valuation relative to government bonds.

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Kapitall in Barrons

When students ask me what books to read to learn about investing, I tell them to start reading Barron’s.  I started reading Barron’s in college.  Yes, I was a serious finance nerd then too.  It is my favorite and most educational financial publication.   I am old enough to remember the first Barron's online brokerage survey 17 years ago.  I never dreamed that when I saw the first list I would be part of a team that would create a broker from scratch that would be included ON the list.  For me, this is a thrilling moment and the biggest milestone at Kapitall so far.

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Four Easy Ways to Save Money On Your Monthly Bills

I was on with Live at Five News Anchor Marni Hughs today talking about saving money on your bills without changing your lifestyle or spending habits.

Four Money Saving Ideas for 2012:

1. Getting rid of their home phone

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Made My Annual Donation to Wikipedia Today