Global Fixed Income: Performance Review

Bonds have been widely scorned on the assumption that interest rates are set to rise for an extended period. Fair enough, but the world of fixed-income pulls in a lot of territory and so it’s a mistake to lump all corners of the planet’s bond markets into one lumpy blob. Despite what you may have […]

You Say Bubble, I Say Fluctuating Risk Premia

David Stockman says that “we have bubbles everywhere” in markets, including stocks, junk bonds and housing. But one man’s bubble is another man’s time-varying risk premium that reflects a fluctuating expected return that’s linked in no small degree with the business cycle. Whew! Yes, one’s easier to say and the other’s a mouthful. Yet these two narratives […]

Asset Allocation & Rebalancing Review: Can You Say Rebound?

Can you say “rebound”? Mr. Market can. Asset prices have taken a sharp turn higher in September, or at least some of the recently battered markets fall into that category, as today’s comparison with the previous update on August 28 reminds. The general change since then is striking, considering the breadth of negative momentum as last month […]

Tactical ETF Review

The punditocracy is calling it the great rotation—selling bonds and buying stocks in 2013. Just as this buzz-phrase went viral, so did the warnings that the trend isn’t long for this world. Perhaps, but the momentum in favor of equities is certainly transparent so far in 2013. Reviewing our set of ETF proxies for the major […]

QQQE: Equal Weight Nasdaq

Traditional QQQ Weighting click for larger graphic  Source: Nasdaq Long overdue and excellent idea: Part of the problem with the Nasdaq QQQ’s has bee on the oversize weighting of a few giant market names in it. Certainly Apple (AAPL), but also Microsoft (MSFT), Google (GOOG) and others. Note that chart above dates from 12/31/2012 — after […]

Major Asset Classes: August 2012 Performance Review

Most of the major asset classes posted handsome returns in August, delivering another strong month for multi-asset class portfolios along the way. The Global Market Index (GMI), an unrebalanced, market-weighted mix of all the major asset classes, climbed 1.6% last month. For the year so far through August, GMI is ahead by a solid 7.2%. […]

Protect the Bondholders?

The latest twists and turns in the Greek bailout fiasco have combined with a disturbing insight into FSA attitudes here in the UK to make me concerned that the system may now be distorted beyond peaceful reform. In fact, the danger of harmful destabilisation may be much worse because supervisor actions reinforce poor outcomes. I […]

Debriefing Nakheel – Wider Implications for the Sukuk Market

The recent debt restructuring of Dubai World and the last minute rescue of property subsidiary Nakheel, which issued one of the largest Islamic bonds three years ago, has shaken the confidence in Islamic finance owing to growing controversy about the interaction of shari’ah compliance and principles of investor protection in times of distress. As creditors are about to sign their settlement agreements in late April 2010 there remains general concern about whether shari’ah compliance might hamper an orderly dispute resolution under conventional law and about the legal enforceability of asset claims under the current Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) recommendations on sukuk structures. With the clear benefit of hindsight, this brief note speculates on possible outcomes of legal proceedings if the Nakheel sukuk had defaulted and discusses some potential implications for the wider sukuk market. The note also briefly touches upon the recent UK ruling in the Investment Dar case.

More Proof the Bubble Is Back

A correspondent e-mailed me about his belief that credit market valuations are more than a bit dubious. For instance, subordinated tranches of commercial real estate bonds, which at the lows of last year were trading at 30 cents on the dollar are now at 90 cents. He thinks (and this is a space he knows) that a lot of it will go to 5 cents on the dollar.