Monday, December 07, 2015

Financial Sarcasm Roundup for 12/07/15

Forbes thinks we should buy stocks before the Federal Reserve raises its interest rate target. Some editors forgot to mention that even a slightly higher cost of capital will force companies with weak balance sheets into serious trouble. I shake my head whenever a media publication that is obviously not a licensed brokerage purports to give financial advice to readers whose personal situations it cannot know. There's more to bank stocks than book value. Buying one without knowing its Texas ratio or capital adequacy ratio is like buying a pig in a poke.

Lower oil prices offer some support to long-term bond prices. I'll believe that correlation holds when someone shows me data for a time series longer than 48 hours. Interest rates still govern the yield curve in every country with a bond market. Any rise in the Fed's target rate means oil loses its hold on bond prices and the long end of the curve comes under downward pressure. It must be a slow news day when bond traders need to swallow an argument for tracking oil prices instead of the risk-free rate of return. I never ignore sovereign credit risk, but that concern escapes bond fund managers who take their eye off the ball and get distracted by oil.

I have noticed lots of mixed reactions lately about the IMF's acceptance of the Chinese yuan as a reserve currency. There's always an echo chamber blathering about how this is some harbinger of China's renewed rise to world dominance. Gimme a break already. When China matches the US's ranks on various data indexes for development and the rule of law, it will be trustworthy as a regional hegemon. I think a lot of the noise about the yuan is driven by portfolio managers who would like their Chinese positions to be more liquid in case they have to sell out quickly. Chinese elites buying vacation homes in California are already selling out.

Once again, there is no financial advice to be found at Alfidi Capital. I don't write this way to help anyone. I amuse myself when nutty market events are on my radar.