Seeking Safety

By | 2017-07-17T16:45:21+00:00 July 12th, 2017|Global Market Update|

Are there any safe places? Photo: Ben Tubby. Source: Wikipedia During the Cold War the superpowers relied on a doctrine called “Mutually Assured Destruction,” or MAD. The idea was that neither party would initiate a nuclear first strike, because enough of the other side’s nuclear arsenal would survive to retaliate. The global devastation would be so complete that both sides would lose. To average folks, the doctrine seemed “mad,” indeed. There was a low-grade fear surrounding everyday life. If someone irrational got hold of [...]

The Search for Security

By | 2017-07-17T12:22:09+00:00 February 4th, 2016|Global Market Update|

The Search for Security Where can investors find safety? Photo: Josh Rogan. Source: Morguefile The answer to this question is far from obvious. In the past fifteen years we’ve seen spectacular failures among both large and small companies: Lehman, Fannie Mae, Quicksilver. And even more companies have fallen dramatically in price and never recovered, like Citigroup or AIG. Now the entire energy sector may be downgraded. When the giants fail, where do you go for safe, blue-chip growth? The short answer is, there’s no [...]

Searching for Safety (Part 2)

By | 2013-06-04T09:38:06+00:00 June 4th, 2013|Global Market Update|

Where can investors find safety? Traditionally, safety was found in the bond market. Treasury Notes and Bills offered the highest possible credit protection, and their short maturities protected against inflation. The more conservative investors wanted to be, the shorter the maturity they would choose. But short doesn’t equal safe anymore. Inflation is running between one and two percent, based on what measure you use. And the Fed has kept short-term rates at zero for four-and-a-half years now. Through the magic of financial repression, the [...]

Searching for Safety (Part 1)

By | 2017-07-17T12:34:39+00:00 June 3rd, 2013|Global Market Update|

“I just want my money to be safe.” That’s what countless investors have said. But with the Fed buying half of all new Treasury and Mortgage issues, corporate and personal deleveraging, and excess savings coming from the developing world, there seems to be a safety shortage. Indeed, one market analyst has estimated that the global economy is facing a shortage of $1.5 trillion in safe assets, and that this shortage is likely to grow in years ahead. Increasingly, investors have turned to annuity-like cashflows [...]

The Search for Safety

By | 2012-01-10T10:39:46+00:00 January 10th, 2012|Global Market Update|

What is a safe asset?For many, safety means credit risk, full stop. Johnson & Johnson bonds are less risky than Ford bonds—the company has less leverage, stronger cashflow, and more steady revenue growth. But safety is more than just having a AAA rating. […]