The Flattening of the Yield Curve and the Migration of Risks: The Path of Hedging Holdings and a Contrarian View on Market Trajectory
Historically, the inversion of the yield curve is a good predictor of recessions. On top of this when spreads of high yield bonds reach the current level of 850 bps (i.e. 8.5% above Treasuries) the probability to experience a recession within 8-12 months is between...Weekly Market Update
Market Action Global markets posted another wild week even though Chinese markets were closed due to the New Year. Volatility out of Japan and Honk Kong and the poor performance of the financial sector weighed heavily on stocks despite a relief rally on Friday. Oil...The Banking Sector, Collateral Velocity, and Credit Creation, Part I: Where are we Headed?
Modern finance depends on credit. Credit creation depends on inter-bank trust. Inter-bank trust depends on asset valuation. Asset valuation is an opaque process that is a function of several parameters (economic, financial, geopolitical, strategic, among others). For...Weekly Market Update
Market Action Markets continued their poor start to 2016 with another down week. Technology and Biotech names were sold off especially hard due to a combination of poor earnings from some key names and regulatory scrutiny over drug prices. The U.S. employment report...Market Hysteresis and Capitulation: Financial Stress and Secular Trends
It takes some time for the market to comprehend when stress is built up in the economic and financial systems. This is part of the hysteresis reality. When financial stress builds up for some time, a crisis ensues that is followed by a recession. The graph below from...Sign Up for Our Publications
