hfoelsing

3rd October 2016 Arminius monitors bond defaults on a global basis, not only because of the disruption which they cause to financial markets and the banking sector, but also because of the lasting damage which they inflict on the real economy. Chart 1 below shows how bond defaults have risen sharply in the last eighteen months. Most of the increase in defaults so far is a direct consequence of the halving of oil prices in 2014. Many US shale oil producers had funded their development expenditures by issuing junk bonds when oil was over USD$100 per barrel and with oil [...]

22nd September 2016 On 21 September the US Federal Reserve decided not to raise interest rates, but fourteen of the seventeen board members indicated that they expected one more rate rise in 2016. This has pretty much telegraphed to financial markets that, so long as economic statistics remain reasonable, the Fed will go for a rate rise at its December meeting. This December is an excellent time for a rate rise, regardless of the state of the US economy, because it is a period of low public scrutiny. It has the advantage of being after November’s Presidential election but before [...]

15th September 2016 It is now two years since oil prices halved in the second half of 2014. The chart below reminds us that this fall was far less severe than the oil price collapse during the GFC, when prices recovered very quickly. Why aren’t prices beginning to recover now? The causes of the two price falls were very different. The 2008 collapse was triggered by factors outside the oil market – specifically, the GFC’s liquidity crisis which shut down bank lending and trade finance, followed by lower demand as a result of the recession in developed countries. But when [...]

31st Aug, 2016 Our proprietary metrics indicate that the US and Australian share markets are very expensive at present. Although we are confident of the sound statistical basis of our metrics, it is reassuring to know that we are in good company: in recent months several very successful global investors have warned that US equities are over-priced, or have stated very clearly that they have taken out portfolio protection. For example: Legendary hedge fund managers George Soros and Paul Tudor Jones have both increased their short positions on the S&P500. Carl Icahn said in June, “I don’t think you can [...]