Salient to Investors: Charles Comiskey at Bank of Nova Scotia said the market is finding its bottom and becoming a range trade again – there’s no change in the big picture. Brian Barry at Investec said the economic backdrop is weak and sees no sustainable improvement in economic indicators. Gary Shilling at A. Gary Shilling & Co said
READ MORE... →Salient to Investors: BlackRock is reducing holdings of speculative-grade munis and buying those rated A to AA as the US faces the fiscal cliff. Laurence Fink at Blackrock said the economy may go into recession next quarter as companies curb hiring. Sean Carney at BlackRock said there’s ample liquidity in the high-yield market as everyone wants it. Peter
READ MORE... →Salient to Investors: FRB Governor Jeremy Stein said: Diminishing returns from Fed purchases of Treasurys indicate it should instead buy mortgage-backed debt – corporate borrowers can already secure inexpensive credit. A strategy of deliberately seeking higher inflation to spur economic growth would be a mistake and take the Fed away from one leg
READ MORE... →Salient to Investors: Investors are shunning bonds from the neediest borrowers on a default rate at the highest level since 2009. S&P says the default rate of these borrowers reached 27.2 percent in August, up 10 percentage points from a year earlier. Dan Newhall at Vanguard said there’s not a
READ MORE... →Salient to Investors: Pimco said 5 percent of the Total Return Fund was in municipal debt last month, the first that high a percentage in consecutive months since at least 2006. City and state debt has returned 3.7 percent in 2012 after accounting for price swings, versus 0.6 percent for Treasuries – would
READ MORE... →Salient to Investors: Homeowners, cities and companies are cutting borrowing, undermining the downgrading of the nation’s credit rating. Total indebtedness – including federal and state governments and consumers – is at 3.29 times GDP, the least since 2006 versus a peak of 3.59 four years ago. Private-sector borrowing is down by $4 trillion to
READ MORE... →Salient to Investors: Paul Krugman of Princeton University said: The US and EU are nowhere close to ending the financial crisis and German-led austerity efforts may lead to a 1930s-style economic depression. The US needs maximum help from the Fed and another round of stimulus -which should be directed to distressed individuals
READ MORE... →Salient to Investors: Ramin Toloui at Pimco says: Brazil, South Africa and Mexico offer the best emerging market local-currency bonds because they offer higher yields than the debt of developed nations – very slow global growth and very low core industrialized yields are a strong force pulling rates down over time. Flows into emerging-market debt will
READ MORE... →Salient to Investors: Peter Hooper at Deutsche Bank said it’s clear the stock market is the most important transmission mechanism of monetary policy – the stock market will have to carry the load. Hooper says the Fed will stick with the bond-buying strategy through next year, and end up buying $800 billion of Treasuries
READ MORE... →Salient to Investors: The traditional move to fixed-income-heavy asset allocation in retirement planning poses risks and limitations, especially given expanding life expectancy. First, today’s unconventional monetary policy raises the inflation risk. Second, long-duration government bonds and high-grade debt carry the risk of capital loss. A 10-year Treasury and similar debt could decline more
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