Tuesday, July 26, 2016

Bonddad Tuesday Linkfest

Here is the problem: Facebook and Google built successful, wildly profitable businesses because they have figured out a way to make money on digital content without actually getting into the messy, expensive business of producing it. Verizon, on the other hand, is buying up assets that require huge investments in exactly that. AOL owns The Huffington Post, TechCrunch, and a wide variety of digital video assets. Under Mayer, Yahoo poured millions into original content, hiring Katie Couric and producing television shows like Community. This stuff does not come cheap, and once you make it, there’s no guarantee that people will watch it or advertisers will want to be associated with it.

Three and a half years ago I wrote The Future's so Bright .... In that post I outlined why I was becoming more optimistic. It is time for another update!

For new readers: I was very bearish on the economy when I started this blog in 2005 - back then I wrote mostly about housing (see: LA Times article and more here for comments about the blog). I started looking for the sun in early 2009, and recently I've been more optimistic.

Here are some updates to the graphs I posted 3+ years ago.  Several of these graphs have changed direction since that original post.  As example, state and local government employment is now increasing, and household deleveraging is over (as predicted).

Nearly 90 percent of companies in the S&P 500 Index that have changed previously disclosed expectations for future earnings have raised the target, among those that reported results between June 1 and July 21, according to data compiled by the bank. That’s the highest since 2010 and near the upper end of a range dating back to December 2003, analysts led by Chief U.S. Equity Strategist Lori Calvasina wrote in a report on July 22.

The Dollar Catches a Post-Brexit Bid

Before Brexit, the dollar was moving toward the 93 level.  However, post-Brexit, it has clearly caught a safety bid, rallying almost 4%.

Emerging markets have in turn become a favoured asset class as sovereign bond yields have plunged across the globe, with some $13tn of debt trading with a sub-zero yield. Investors say the market has been buoyed by the attractive rates offered on riskier debt alongside the expectation that global monetary policies will remain loose.

Funds invested in emerging market debt counted $4.9bn of inflows in the past week, eclipsing a weekly record set earlier this month and lifting the haul since the year began to more than $16bn.

Weekly Chart of the Emerging Market Bond ETF