Bonds & Interest Rates

Bond Market Matters

Posted by Levente Mady

on Monday, 16 April 2012 15:35

The bond market traded in a fairly narrow range last week, as it held key support at 140 through the period.  The 10 Year Treasury Note yield is back below 2% again, kicking around the bond bears in the process.  There was no renewed talk of QE3 from any talking Fed Heads, but the nervousness in stocks coupled with rising European Sovereign yields was more than enough to provide solid support for bonds in spite of the heavy issuing calendar and negative seasonal influences.  The auctions last week were mediocre, but good enough not to cause any concern.  Traders were astute enough again to take down the 30 year tranche at the lowest prices of the week.  The bond market was relatively stable considering the roller coaster we had in stocks and a few other things.  Stocks and bonds are quite close to fair value. So there is no compelling reason to stick our neck out on that front other than the momentum that is rolling from stocks into bonds.



Timing & trends

Heading for a Turn? Trade Accordingly

Posted by Victor Adair

on Monday, 16 April 2012 10:11

For the past couple of months I've been anticipating that the rally in "risk assets" would run out of steam but I have been waiting for confirmation...I think we are seeing that confirmation over the last two weeks or so...trade accordingly.

Over the past couple of years I've frequently asked the question, "What are we trading?" And my answer has been "perceptions of central bank liquidity." I think the rally in stocks since the lows of Oct 4 has been fuelled by liquidity injections from the G4 (US, Euro, UK, Japan) and by anticipation of more liquidity injections to come. These injections have created false optimism in the markets.

The LTRO injections in the Euro zone in Dec and Jan created a "Lull" in the Eurozone bank/sovereign debt crisis....it appears the "Lull" is over as yields rise on the weaker credits, Spain in particular. I think we will see stress build in Europe in reaction to austerity programs, weak economies, elections, and high unemployment. The weaker Euro countries are headed into a vicious cycle of faltering economies and higher interest rates. Social unrest will rise, populist politicians will call for "re-negotiations" and possibly a withdrawal from the Euro.

The S+P 500 and the DJI made a "M" double top around the end of March/early April with (very nearly) perfect weekly key reversals down last week...both have fallen ~3.5% from last week's highs to today's close.

The psychology change this past week was interesting. Stocks fell sharply on Monday in response to the weaker-than-expected UE data released on Easter Friday. On Thursday, stocks rallied sharply on anticipation of fresh Fed liquidity injections (two Fed Governors made dovish speeches) but today those gains were reversed as the Euro crisis moved back to centre stage.


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Gold & Precious Metals

Could Gold Rise on One Country’s Meltdown?

Posted by Dave Gonigam

on Monday, 16 April 2012 08:45

By Dave Gonigam

Gold is ending the week doing a little more backing and filling. After yesterday’s run-up, the spot price has pulled back to $1,665.

$2,000 looks far off in the distance. To say nothing of last September’s $1,900 high.

Then again, it could happen with the snap of a finger.

“A push on toward $2,000 is definitely on the cards before the year is out,” says Philip Klapwijk, “although a clear breach of that mark is arguably a more likely event for the first half of next year.”

Mr. Klapwijk is global head of metals analytics at the consultancy Thomson Reuters GFMS. The catalyst for $2,000 might well be, in his estimation, Spain. A meltdown there — coupled with continuing strong demand from China — could give gold a whole new “safe haven” glow.

That said, he also sees a short-term dip to the year-end 2011 level of $1,550 within a couple of months. You’ve been warned.

“U.S. investors might sleep better at night with an allocation to gold in the face of continued negative real interest rates,” says U.S. Global Investors chief and Vancouver stalwart Frank Holmes.

“The chart below shows how gold has historically climbed when interest rates fell below 0%, with a ‘strong correlation from 1977-84, and again recently when rates turned negative in early 2008,’ according to Desjardins Capital Markets.”

Read More HERE



Personal Finance

Don't Believe Every Energy Dividend Story You Hear

Posted by Marin Katusa, Casey Research

on Sunday, 15 April 2012 17:46

By Marin Katusa, Casey Research

My most recent trip to Calgary gave me a welcome chance to catch up with friends and colleagues in Cow Town's oil and gas sector. I found out about new projects, investigated companies of interest, and came away with an improved feel for the current state of affairs – what's hot, what's not, and why.

I also came away reminded of one of the dangers that lurk within troubled markets – and today's markets are troubled. Since mid-March, North America's exchanges have struggled, with the Dow Jones losing all the momentum that had propelled a spectacular 17% gain over the previous five months while the Toronto Stock Exchange also sputtered and slid, turning downward to lose its slight gains from January and February. Fundamental economic problems remain unresolved in the United States and Europe, while uncertainty grows over China's ability to control inflation and maintain growth.

The outlook from here is not great. When markets turn bearish, investment strategies often turn toward income stocks, and rightly so: if market malaise is expected to keep share prices in check, dividends become a very good place to look for profits. But whenever a particular characteristic – such as a good dividend yield – becomes desirable, it also becomes dangerous. The sad truth is that scammers and profiteers jump aboard the bandwagon and start making offers that seem too good to refuse.

It was just such an offer that reminded me of this danger. In the question-and-answer period following my talk in Calgary at the Cambridge House Resource Conference, an audience member asked my opinion of a new, private company that was offering a 14.7% monthly dividend yield.

Yes, you read that right: a 14.7% monthly yield, from a new, private, natural gas company.


dividend trap


Stocks & Equities

Does Another Cruel Summer Lie Ahead For Stocks?

Posted by Eric Parnell

on Sunday, 15 April 2012 17:30

By: Eric Parnell 

The stock market has made one thing abundantly clear in the early days of the second quarter: It still cannot stand on its own at current levels without the continued support of additional stimulus from the U.S. Federal Reserve. And with the latest Fed stimulus program set to end in June, it may be shaping up to be another cruel summer for stocks.

It all began on April 3 with the release of the latest Fed minutes from the March Open Market Committee meeting. Although nothing was included or discussed that we haven't already heard from the Fed many times before over the last several years, the market decided that the key take away from the latest minutes was that no further quantitative easing would be coming from the Fed any time soon. Stocks (SPY) immediately recoiled on the news, sliding lower for the remainder of the holiday shortened trading week. Then came the disappointing employment numbers on Friday and the uneasy response by investors once the stock market reopened early this past week. All of the sudden, the additional Fed stimulus that so many had concluded was off the table merely one week earlier was all of the sudden back on once again.


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