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Tag: recession

Inflation Will Ease, Fed Hikes Will Not: Richard Excell (Szn 4, Ep 24)

Published September 14, 2022

Richard Excell, former prop trader and portfolio manager and currently a professor of finance at Gies College of Business, joined the podcast to discuss his outlook on the economy, inflation, Federal Reserve interest rate policy, and more.

Content Highlights

  • The outlook on inflation: 5% by December, but don’t expect the Fed to ease off of rate hikes (7:14);
  • Can the Fed engineer a soft landing? It has succeeded just three of the last 14 times it hiked rates… (9:34);
  • We may not see a housing price decline on a national basis anytime soon (14:05);
  • Expect a 75 basis point rate hike at the next FOMC meeting on Sept. 20 — and again at the subsequent meeting in November, even though the economy should not start to brake until next year (16:11);
  • Background on the guest (22:02);
  • Views on asset allocation: more constructive for bonds than equities at present (27:03);
  • A recession will happen. The good news: it may be mild… (32:30);
  • How much of a concern are global issues in Europe and China? (35:40).

More Information on the Guest

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MoreInflation Will Ease, Fed Hikes Will Not: Richard Excell (Szn 4, Ep 24)
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Convertible Bonds Offer Protection Against Stagflation, Other Ills Facing Markets: Daniel Partlow (Szn 4, Ep23)

Published September 6, 2022

Daniel Partlow, chief risk officer at Advent Capital Management, joins the podcast to discuss convertible bonds. Partlow is a specialist in these securities, having written a book on the subject titled ‘Convertible Securities: A Complete Guide to Investment and Corporate Financing Strategies.’

Content Highlights

  • First, the basics: What are convertible bonds and how do they work? The asset class has actually been around for more than three centuries… (3:29);
  • Some of the characteristics of converts include a maturity of about four to five years but with low interest rate sensitivity of much shorter duration bonds (6:42);
  • A typical balanced convert will provide downside protection (via the bond floor) and upside potential through the equity participation (9:18);
  • Converts have done well in inflationary environments, with less volatility than stocks (11:44);
  • The default rate for converts is a fraction of high yield and leveraged loans (20:38);
  • Background on the guest (24:59);
  • The specter of stagflation and how converts can protect against that (27:50);
  • Where might there be particular opportunities in the converts market right now? (33:07);
  • Examples of individual securities that may be of interest (37:52).
MoreConvertible Bonds Offer Protection Against Stagflation, Other Ills Facing Markets: Daniel Partlow (Szn 4, Ep23)
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Back to School

Published September 6, 2022

The following is an amended version of the Sept. 6 Daily Contrarian. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack.

It’s Back to School week in the U.S. People are back from holiday. They may still be working from home but schools are back in session. In France they call this la rentrėe, the return.

Back to School sale at Walmart in Newburgh, N.Y. Source: Wiki
Back to School sale at Walmart in Newburgh, N.Y. Source: Wiki

Trading volumes should no longer be subdued this week. Major indexes in the U.S. are staring at three straight weeks of losses. The Nasdaq is actually down the last six days in a row. The energy crisis in Europe is a known event now, though there will likely still be shakeout like insolvencies that have maybe not been reckoned with.

Remember that a common trait of bear markets is to see a rally from futures and in the early trading hours that soon gives way to selling. We had that a couple of days last week and today (Monday) it is playing out again.

Having said that, the day-to-day movement is the domain of day traders, aka gamblers. We try not to get distracted by that. Has there really been something to reverse the negative sentiment? The Fed is still raising rates. Quantitative Tightening is here. The punch bowl is being removed from the party. Already has been, in fact.

Consumers are still going strong in the U.S., inflation or no. Anecdotally, your author visited a suburban Home Depot (HD) this Labor Day and found it packed with shoppers. See the instagram for more.

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