Category Archives: Structured Products and Derivatives

AIG Was Broke

There’s a significant problem when you are a supremely big and connected financial institution: your failure will have an impact on the financial system as a whole.  Further, there is no one big enough to rescue you unless we drag out the public credit via the US Treasury, or its dedicated commercial paper financing facility, the […]

Time to Chase Bill Gross?

Jason Zweig at the Wall Street Journal had a very good piece on whether to follow Bill Gross as he goes from Pimco to Janus.  Let me quote one paragraph: Morningstar estimates that over the past five years, the average investor fell behind Pimco Total Return’s 5.6% annual gain by 1.6 points a year—largely as […]

Volatility Can Be Risk, At Rare Times

There is a saying in the markets that volatility is not risk. In general this is true, and helps to explain why measures like beta and standard deviation of returns do not measure risk, and are not priced by the market. After all, risk is the probability of losing money, and the severity thereof. It’s […]

The Art of Extracting Large Commissions From Investors

The dirty truth is that some investments in this life are sold, and not bought.  The prime reason for this is that many people are not willing to learn enough to save and invest on their own.  Instead, they rely on others to corral them and say, “You ought to be saving and investing.  Hey, […]

The Shadows of the Bond Market’s Past, Part II

This is the continuation of The Shadows of the Bond Market’s Past, Part I.  If you haven’t read part I, you will need to read it.  Before I start, there is one more thing I want to add regarding 1994-5: the FOMC used signals from the bond markets to give themselves estimates of expected inflation.  Because of […]

The Shadows of the Bond Market’s Past, Part I

  Source: FRED Above is the chart, and here is the data for tonight’s piece: Date T1 T3 T5 T7 T10 T20 T30 AAA BAA Spd Note 3/1/71 3.69 4.50 5.00 5.42 5.70 5.94 6.01* 7.21 8.46 1.25 High 4/1/77 5.44 6.31 6.79 7.11 7.37 7.67 7.73 8.04 9.07 1.03 Med 12/1/91 4.38 5.39 6.19 […]

On Current Credit Conditions

This should be short.  Remember that credit and equity volatility are strongly related. I am dubious about conditions in the bank loan market because Collateralized Loan Obligations [CLOs] are hot now and there are many that want to take the highest level of risk there.  I realize that I am usually early on credit issues, but […]

Questions from Readers

Miscellaneous questions post — here goes: Thank you very much for your blog! I am hooked since I found it and have been getting smarter by the day! I like Safety Insurance Group, found it through your blog, noticed you were no longer long. They don’t do life insurance, just cars and houses – I […]

Classic: Changes in Corporate Bonds

This was a two part article that was published at RealMoney July 19-20, 2004: =-==–==-=-=-=-=-==-=–==–=-=-==-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= Two changes have taken place in the corporate bond market in recent years. The first change deals with credit default swaps, which I’ll discuss in today’s column. In Part 2 I’ll talk about how corporate bonds are analyzed differently now. Surviving […]

Why it is Hard to Win in Investing

Before I start this evening, I want to say something about many investment books that I have been reading of late.  In terms of information toward the stated goal of the book, there is often a lot of build up, some of it necessary, some not, some of it interesting, some not, occasionally some unique […]