Terry Grennon

Toxic TIPS 

Despite rising inflation, the Bloomberg Treasury-Inflation Protected Securities Index (TIPS) recorded a negative return in January owing to rising bond rates.  When buying TIPS, investors must predict future inflation.  TIPS will generally outperform conventional bonds when real inflation is greater than projected, and underperform conventional bonds when actual inflation is lower than…

With pandemic-induced saving plus several rounds of stimulus spending, consumers spent money on stuff for their homes, overwhelming the supply chain. Many blamed increased vehicle and gas prices on supply chain difficulties. They weren’t entirely wrong: chip shortages led to car shortages. Inflation in the US diminished demand and prices.  Recent inflation data illustrates this.  Remember…

The New York Fed reports lower inflation expectations

The NY Fed’s January 2022 consumer forecasts show lower short- and medium-term inflation estimates.  Inflation predictions for the year declined from 6.0 percent to 5.8 percent in January.  Dropping 0.5% to 3.5% was projected.  Inflation expectations declined across all categories in the first month since 2013. These indices are still above pre-COVID-19 values.  The commodity price change…

IBM Watson Has Been Picking Stocks For The Last Five Years

First of all, a five year track record is not meaningful in the grand scheme of asset management. A true testament of any investment approach is start to finish: one secular bull ( or bear) followed by one secular bear (or bull) measured by cumulative growth. The AI Powered Equity ETF (AIEQ), which debuted in October 2017, is the first active stock picking ETF to rely on artificial…

Is It Safe To Predict Future Stock Returns of 10%

“The process of selecting a portfolio may be divided into two stages. The first stage starts with observation and experience and ends with beliefs about the future performances of available securities. The second stage starts with the relevant beliefs about future performances and ends with the choice of the portfolio.This paper is concerned with the second stage.” Dr. Markowitz did not outline…

A Trend Analysis of the Three Major Indices 

Starting with the S&P 500, it has now encountered resistance twice, once at its now downwardly sloped 50-day moving average and once at the 200-day moving average, which is also on the verge of turning bearish.  The Nasdaq chart appears to be considerably more precarious. In both of its most recent rally attempts, it was unable to even get back to its 200-day moving average before exhausting…

Becoming the Next Warren Buffett

When people consider the worst stocks of the last three decades, Lehman Brothers, Enron, and Arthur Andersen are just a few of the illustrious names that instantly spring to mind.  Professor Hendrik Bessembinder of Arizona State University’s W.P Carey School of Business studied the worst (and best) performing stocks over the last 30 years and reported the findings in his paper “Long-term…

The Importance of Focusing on Cumulative Growth

The majority of investors have been conditioned by the financial services industry to believe that relative performance is all that matters.  The cumulative growth of the portfolio as a whole, measured on a year-over-year basis, is known as absolute performance.  The reason the industry concentrates on relative performance is to condition investors to constantly compare and contrast different…

Here’s What “Drives” Interest Rates

Is it true that the Federal Reserve determines the trend in interest rates?  It is expected that the Federal Reserve will raise its federal funds rate by 25 basis points at least twice in 2022, according to expectations on Wall Street.  Some Fed watchers predict that the rate will be raised as many as four times.  That rate is set by the central bank, to be sure.  What many investors may not…

Is It Possible The Fed May Just Meet Their Economic Goals

Put aside for a moment and consider what the Federal Reserve has done so far in terms of employment creation.  Take a look at the top chart and how this employment recovery has fared so far in comparison to past ones.  And what is the most probable course of inflation?  After reaching a zenith, it is expected to diminish when the epidemic declines and the maximum amount of harm to global…

The Yield Curve is Still Flattening Despite Rising Bond Yields

Is the Fed’s yield curve flattening a sign that trouble is on the way before it even starts hiking?  The yield curve spreads over time are depicted in the top graph. That is, the difference in yields from two separate time periods.  A flattening yield curve signals the start of a recession.  Although the three-minus-one spread has been rising, it is the part of the curve that is most…

ETFs may be used to create a bond ladder

Invesco and iShares presently provide target-maturity bond exchange-traded funds, which are similar to individual bonds that you purchase and hold until they mature.  The funds shut in December of their target year and refund all of the cash to owners.  This is primarily why these funds are simple to include into a bond ladder.  Laddering achieves many objectives: it offers a consistent stream…

A Simple Bond Strategy in a Rising Rate Environment 

Fixed-income investors have been paralyzed by the fear of rising interest rates. Many investors have elected to hold cash rather than to reinvest farther out on the yield curve in maturities that offer higher interest rates.  Although an immediate rise in interest rates does cause a decline in the value of bonds, the loss of higher yields investors incur while they wait for better prices can be…

The Bond Market Can Tell Us Something About Stocks

The term premium is a fascinating component of the bond market that deserves to be explored further.  The rate of return on long-term bonds is compared to the rate of return on short-term bonds that have been rolled over to the same maturity. Making a one-year investment and rolling it over nine times rather than a 10-year investment, for example.  A simple definition is that the term premium…

The Bond Market Affirms Coming Rate Hikes

Even while “real” interest rates continue to hover around 0%, the Federal Reserve’s next rate-tightening cycle begins.  Job data on Friday crushed expectations that poor employment numbers would force an early end to the Fed’s rate-hiking dance.  The yield on the two-year Treasury note jumped 13 basis points to 1.32 percent, the greatest one-day surge since the upheaval of March 10, 2020, and…

Within 2.9 Million of Full Employment 

The employment numbers for January surprised economists and went against predictions.  It’s the latest surprise plot twist in the Covid-19 economy, and it once again demonstrates that no one can predict what will happen next.  Job losses were expected by Goldman Sachs and JPMorgan.  According to a study of economists, only small increases were predicted.  Last month, the United States economy…

The 5 Phases of a Bubble

After a system shock is given, bubbles begin to form as a result of the displacement phase. As a result of deregulation, technological improvements, financial crises, or monetary policy moves, people may find themselves out of work. Displacement results in the emergence of new opportunities in a particular industry. Take, for example, the tremendous increase in use of computers, the internet, and…