Thursday, October 31, 2013

Financial conditions reach a new high

Bloomberg's index of financial conditions reached a new all-time high today. Swap, muni, agency and credit spreads are generally low, liquidity conditions are excellent, the yield curve is positively sloped, implied equity index volatility is relatively low, and yields on Treasuries and corporate bonds are relatively low. With financial market conditions are as positive as they are now, a near-term recession is highly unlikely. I note that this index turned down more than four months before the last recession, and years before the 2001 recession.


Benjamin Cole said...

Great chart..tons of money on sidelines...look out above?

William said...

ECRI Weekly Leading Index Increases to 4 Week High

A measure of future U.S. economic growth rose to a four-week high.

The Economic Cycle Research Institute said its Weekly Leading Index stood at 131.5 in the week ended Oct. 25, up from 131.1 the prior week.

The index's annualized growth rate was 1.7 percent, the lowest since August 2012, down from 2.0 percent the previous week.

William said...


Monthly September

Equity Fund Inflows $29.8 Bil;

Taxable Bond Fund Outflows -$5.3 Bil

xETFs - Equity Fund Inflows $7.9 Bil;
Taxable Bond Fund Outflows -$5.6 Bil

Weekly 10/30/2013

Equity Fund Inflows $11.8 Bil;

Taxable Bond Fund Inflows $1.3 Bil

xETFs - Equity Fund Inflows $3.1 Bil;
Taxable Bond Fund Inflows $1.2 Bil

Weekly 10/23/2013

Equity Fund Inflows $16.4 Bil;

Taxable Bond Fund Inflows $3.1 Bil

xETFs - Equity Fund Inflows $6 Bil;
Taxable Bond Fund Inflows $1.8 Bil

Weekly 10/16/2013

Equity Fund Inflows $12.7 Bil;

Taxable Bond Fund Outflows -$1.4 Bil

xETFs - Equity Fund Inflows $2.2 Bil;
Taxable Bond Fund Outflows -$394 Mil

McKibbinUSA said...

No doubt, owning dividend and rent-earning equities is a good plan -- unfortunately, most Americans simply do not own enough equities to survive -- anyone who does not have at least a million dollars in equities accumulated before age 30 is behind the top 1% of Americans who are or will become financially independent -- and make no mistake, America runs on equities -- my best advice for young Americans continues to be that you do whatever you must to acquire world-class skills that earn premium wages that you can then convert into dividend and rent-earning equities over a life time -- only 1% of Americans are or will become truly financially independent (and especially of government) -- to join that club requires a determined effort to create, invest, and protect wealth over one's entire life, and as job one -- an attitude of paying yourself first is part of wealth creation process -- the current state of the economy is strongly supportive of accredited investors (i.e., people with incomes >$300K annually, and equity holdings >$1 million) -- the key is to do whatever one must to become accredited -- share this mantra with your children and everyone you care about.

William said...

Citi Private Bank Survey of 50 "Family Offices" around the Globe

A new survey of family offices by Citi finds that the wealthy are cash heavy-meaning they may fall short of the investment returns they're expecting.

Wealthy families have about 39 percent of their assets in cash, according to a recent poll of more than 50 large family office representatives from 20 countries conducted by Citi Private Bank.

Stocks represented about 25 percent of portfolios on average. Bonds were about 17 percent of the asset mix and various classes of less liquid and alternative investments amounted to 19 percent.

"Using these weightings, our own return expectation for the portfolio ... comes to just 4.4 percent annually."

Read the commentary here:

William said...

Federated Investors Survey of Clinets with $500,000 of invested assets

Federated Investors Inc. has released its 2013 Investor Mindset Survey and the results reflect a growing preference for equities among in the high net worth bracket.

Twenty-four percent of the investors surveyed plan to invest more in equities over the next year, as compared with 10% for bonds. Linda Duessel, senior vice president, senior equity strategist and senior client portfolio manager of Federated, attributes the shift to the “long anticipated 'Great Rotation.'”

“High-net-worth investors appreciate that they can't just go with a bond strategy anymore,” she said. “The rotation comes from the realization that you can actually lose money in government bonds.”

theyenguy said...

While Global Financials, IXG, traded higher, on November 4, 2013, Swiss Banks, UBS AG, UBS, and Credit Suisse, CS, traded strongly lower. South Korea Banks, KB Financial, KB, and Shinhan Financial, SHG, as well as Royal Bank of Scotland, RBS, and National Bank of Greece, NBG, traded lower. It is these banks that are pivoting the Global Financials, IXG, lower.

The Ongoing Combined Google Finance Chart of Global Financials, IXG, Transportation, XTN, Global Industrial Producers, FXR, Small Cap Pure Value, RZV, and Small Cap Pure Growth, RZG, reflects that it is the Global Financials, IXG, that are leading World Stocks, VT, and Nation Investment, EFA, lower.

The trade lower in World Stocks, VT, Semiconductors, XSD, Nation Investment, EFA, Global Financials, IXG, Copper Miners, COPX, established Wednesday, October 23, 2013, as an epic and pivotal day in economic and political history, as fears arose that the greatly interventionist monetary policies of the world central banks have turned “money good” investment bad, and have thus turned Major World Currencies, DBV, and Emerging Market Currencies, CEW, such as the Brazilian Real, BZF, lower in value. The fiat money system died, and the diktat money system came into being turning the financial markets from bull to bear.

The Great Bear Market of 2013, commenced on October 23, 2013, as confirmed by the Market Off ETN, OFF, rising in value.

The world passed through peak nation state sovereignty and seigniorage on October 23, 2013, as World Stocks, VT, Nation Investment, EFA, and Global Financials, IXG, turned lower from their PBOC Monetary Stimulus, and US Fed No Taper, and ECB Bank Supervision Rally highs.

And on October 23, 2013, The US Ten Year Notes, TLT, rose to strong resistance at 108 and turned lower, and on Friday November 1, 2013, fell parabolically lower when the Interest rate on the US Ten Year Note, ^TNX, rose to 2.62%.

Friday November 1, 2013, will be known as Black Friday for Bonds, as the following traded strongly lower, 30 Year US Government Bonds, EDV, 10 Year US Government Note, TLT, Government Short Term Bonds, SHY, Long Duration Corporate Bonds, BLV, Corporate Bonds, LQD, International Treasury Bonds, PICB, World Treasury Bonds, BWX, Emerging Market Bonds, EMB, Municipal bonds, MUB, Junk Bonds, JNK, Mortgage Backed Bonds, MBB, and even Short Duration Bonds, FLOT. The failure of liberalism’s credit was complete. There be no safe Bonds, BND, anywhere in the world.

Debt deflation enabled the currency traders to commence competitive currency devaluation in the beginning of what will be an epic currency war against the world central bankers, with the result that the US Dollar, $USD, stopped falling in value, and the Australian Dollar, FXA, Euro, FXE, British Pound Sterling, FXB, Swedish Krona, FXS, Swiss Franc, FXF, Brazilian Real, BZF, Indian Rupe, ICN, Emerging Market Currencies, CEW, all traded lower in value. The collapse of currencies is seen in their combined ongoing Yahoo Finance chart together with the 200% Dollar ETF, UUP.

In response to the downturn, the world central banks have came out with a new end game, that is to roll out the antifragile financial system, an Alberto Mingardi Econolog Econolib term, where banks are integrated into government, and serve as the bedrock for regional governance which replaces democratic nation state rule.

More details at

Unknown said...

$1M net worth is probably not in the top 10% by now. Lucky if it is still at the top of the 89%'ers.