The Market

The US dollar recorded its second consecutive week of gain for the week ending May 2nd. Is this the start of a trend, or time to leave the party, reduce dollar exposure? To fix the balance of trade between the US and the world, tariffs are the tool of the day. But tariffs are not the only tool that can be used. A US dollar devaluation can do the trick too. Tariffs discourage consumption of foreign...

Savers are “consumers” that give up present consumption for future consumption. Here, the key word here is consumption. Therefore, savings must be looked at through the lens of a consumer product as opposed to an investment product. To do this correctly, savings products must be developed that make savings easy to access across the whole wealth range of a consumer base. Consumers of savings must h...

Crypto seems to be winning its war of acceptance. But is it a pyrrhic victory, a victory that brings harm to the victor, a harm that differs little from defeat? In times past highly regarded bankers and investors have called crypto a Ponzi scheme, a scam. Banks have threatened their employes with severe actions if they traded crypto. Crypto has had very, very few fans in traditional finance. The s...

Kansas was a safe place for Dorothy, but a twister turned her life upside down. A twister dropped her into Oz, a land full of threats, forcing her to set upon a treacherous path to get home again, besieged by witches, talking trees, and poppies. Metaphorically, US Bonds and the US dollar have just experienced a twister and landed in an Oz-like setting. Until recently the US dollar and bonds enjoye...

James Carville in 1992 said “The Economy, stupid”. Substitute the word “policy” for “Economy” and you might sum up the present situation in the United States. Inconsistent policy has many people concerned about the US dollar and the US fiscal position. Oak Tree co-Chairman Howard Marks, a great credit investor, summed it up best, “If people don’t like the dollar, don’t like investing in the US, do...

Given the price movements of the Mexican peso in the last month, you must respect Mexico and its currency. On the back of US tariffs, the Mexican peso should be getting slaughtered. Mexico’s exposure to the US supply chain for industries like autos puts it right in the cross hairs of tariffs, no escape. Tariffs were originally announced beginning February, and Mexico was given a 30-day reprieve. W...

If a country wants to grow in greatness, it must increase its rate of personal savings. To do this, countries need to create products that allow savings habits to be developed across the whole income range of the population. The masses must have a means to save large, small, and micro amounts. At present, there are countries that have good savings mentalities and some that don’t. In Germany the sa...

The last post suggested weakness in the US dollar was forthcoming. Factors noted were: · Excessive borrowing by the US government. · The risk of losing Federal Reserve Independence. · A forced restructuring of US bonds held by foreigners, also known as the possible Mara Lago Accord. · Rumors of a tax on foreigners buying bonds. · A loss of “Good Faith” from countries that hold US debt. These are a...

“Core and explore” is an investment strategy involving one stable yield bearing asset, or assets, and a growthier asset class. In a “core and explore” strategy you get paid in yield while your “growth” or “explore” asset goes after capital appreciation. In short, the “core” asset is your base and the “explore” an aggressive pursuit of return. “Core and explore” can also be called “yield and growth...

The US economy strives to become more competitive internationally in trade and investment. There are two ways to achieve this goal; apply tariffs, raising the cost of imported goods to encourage more US manufacturing and exports. Or, devalue the US dollar, so US goods cost less in overseas markets. So far, the US has chosen tariffs , and they are being used as a bully club. But hold on a moment, a...

The European Union is united as it has ever been since the US hinted at cutting them loose from defense support. Thus it is clear that Europe is re-arming, and spending will be in the trillions of Euros. The European economy has been struggling, and defense spending will help revive it. At the same time, Europe can allow interest rates to go up because they have inflation at a moderate level. In t...

Selling a currency short, or any security for that matter, can be a good strategy to enhance investment returns. You go short, the security goes down, you make money. Companies like Etherfuse offer this product in currencies and bonds to a wide range of investors. Given US tariffs and all the volatility being created, there are probably some good short selling opportunities at present. The first o...

The US dollar has weakened by about 6% versus the Brazilian Real year-to-date. Against the Mexican peso, the US dollar is down 2%. Against the Euro, and UK pound it is unchanged. Finally, the US dollar index DXY, the value of the US dollar versus a range of currencies, is down 3%. The US dollar is weak. Intriguing is that Brazil, Mexico, and Europe are US tariff targets, and US tariff threats shou...

When President Trump won the US election, the euro fell, and it looked like it was heading to 1 to 1 or parity with the US dollar. Tariff fears were hammering economic sentiment. Political uncertainty was present; France was in the middle of political crisis and Germany was heading to a contentious election. Add to that very low interest rates, meaning you received little investment return on an a...

The latest UK government ten-year bond sales saw the highest demand from investors ever, beating the previous month, which was the previous highest demand ever. This demand has created volatility in bond yields. The UK ten year recently spiked to 5% and then went back to 4.5% on strong demand. UK Yields were near multi-year highs, and investors wanted them. Further to demand, a wide range of inves...

President Trump gave Mexico a reprieve from tariffs for thirty days at the beginning of February. This reprieve does not mean tariffs won’t happen. With all the inconsistencies and mixed messages coming out of Washington DC, it is hard to conclude anything. So who or what can best assesses whether tariffs on Mexico come about or not? I think the peso us dollar market is the best predictor. If the...

Gold and cash-like instruments are safe-haven assets. Investors buy them when uncertainty and/or fear is rising. Given the price of gold climbing steadily to a record high of $2,860, one could say fear and/or uncertainty is rising. What could be driving fear and uncertainty, making gold and cash like investments attractive? Well, it seems there are more than a few explanations. First, inflation ex...

That didn’t take long. One call with the President of Mexico and president Trump is reconsidering tariffs? Was it because president Sheinbaum really convinced him that they would make a dent in the fentanyl problem, and help with the immigration crusade? Was it just a bluff from president Trump to get talks going? Or, perhaps, some wise person in the administration said tariffs on Mexico were a ba...

Hockey great Wayne Gretzky had a saying “skate to where the puck is going to be, not where it has been”. Right now, currencies are like a hockey puck travelling across the ice. No one knows where they are going, but we do know the direction. Down. US tariffs on Mexico and Canada set these currency moves in motion. Now, the US has its sights set on Europe. China is still an unknown. Times like thes...

Well, it happened, tariffs on Mexico and Canada were announced by the United States. While there is some uncertainty as to what will be tariffed, like Canadian oil, tariffs were announced, and currencies reacted as expected. The Mexican currency went down about 1. 67% after the announcement and has stayed roughly at that level. The key question is what will happen from here to the Mexican peso? An...

According to Bloomberg, JPM Morgan Chase’s latest client survey shows the biggest net long position in US government debt in almost 15 years. Is confidence driving exposure to US government debt to a 15 year high? Or is it worry? If rates are cut, yields across the maturity horizon from 1 to 30 years will go down, and prices will go up. Confidence in lower interest rates could be driven by the per...

Too much attention towards Mexico has focused on the potential of US tariffs. Tariffs, which by the way, have not yet happened. For most of 2024, investors paid little attention to Mexico’s economic fundamentals Now, attention is being paid to fundamentals. This claim is supported by recent Mexican debt sales. At the beginning January Mexico placed 8 bn USD of debt-a good number in times. This deb...

When investing in government bonds, both long-term and short-term, interest rates and inflation are key. Declining inflation leads to lower interest rates, making long-term bonds a good investment. Uncertainty surrounding inflation and interest rates, supports investing short-term bonds. The United States influences interest rate trends worldwide, thus inflation and interest rates in the US must b...

Knowing how to interpret data is something we should continuously work on. But, to some, data is scary. We don’t always know what we should be looking for, and how. But there are two ways of looking at data anyone can use. First, how was the data versus expectations? Second, is the direction of the change supportive or not? How the data did against expectations is easy to get a grasp on, like a gu...

Less than one week ago potential US tariffs, higher market rates than official rates in the US market (mortgages), and weak currencies, in both emerging and developed markets were investor concerns, bordering on fear. Now, after a few positive data releases, investors seem to be more comfortable with investment exposure to the US, Europe, and emerging markets Complacency seems to be growing. Some...