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REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.

State Governments Rack Up the Debt

On August 2, 2010, in Bonds, Debt, by Tim

Here’s a thoroughly depressing way to look at what your state budget shortfall means to you as an individual, organized as an interactive graphic over at CNN/Money.

Actually, this isn’t a whole lot of money per capita as compared to the Federal debt where, depending upon how you count it, liabilities of between $13 trillion and up to $100 trillion is divided up amongst 310+ million citizens with the result being anywhere from $43,000 to hundreds of thousands of dollars per person. All of a sudden, the $4,859 per resident of Connecticut looks quite modest.

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Doug Kass is Even More Bullish

On July 22, 2010, in Bonds, Stocks, by Tim

Doug Kass of Seabreeze Partners is sticking by his recent prediction that the lows for the year have already been seen for equity markets. He talked to the fast-talking crew of CNBC’s Fast Money yesterday to share some of his latest thinking.

Kass favors the upside noting, “we could get this massive asset reallocation out of fixed income into equities”, arguing that pensions funds and retail investors who shunned stocks because they were too risky will flock back to equities after the bond bubble bursts.

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A Different View on Sovereign Credit Ratings

On July 13, 2010, in Asia, Bonds, by Tim

As Moody’s, Standard and Poor’s, and Fitch go about their business of assessing the credit risk of corporations, financial instruments, and sovereign nations around the world after having done such a fine job leading up to the global crisis a few years ago, another ratings agency is making headlines today – China’s Dagong Global Credit Rating Co. – and they have a slightly different view of things as detailed in this report in the Telegraph.

Chinese rating agency strips Western nations of AAA status

China’s leading credit rating agency has stripped America, Britain, Germany and France of their AAA ratings, accusing Anglo-Saxon competitors of ideological bias in favour of the West.

Dagong Global Credit Rating Co used its first foray into sovereign debt to paint a revolutionary picture of creditworthiness around the world, giving much greater weight to “wealth creating capacity” and foreign reserves than Fitch, Standard & Poor’s, or Moody’s.

The US falls to AA, while Britain and France slither down to AA-. Belgium, Spain, Italy are ranked at A- along with Malaysia.

Meanwhile, China rises to AA+ with Germany, the Netherlands and Canada, reflecting its €2.4 trillion (£2 trillion) reserves and a blistering growth rate of 8pc to 10pc a year.

Other losers were Japan and South Korea, while top AAA ratings were given to Australia, New Zealand, Norway, Denmark, Luxembourg, Switzerland, and Singapore.

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Who’s Buying all that U.S. Debt?

On July 12, 2010, in Bonds, Debt, by Tim

James Hamilton looks at who’s been lending the U.S. Treasury Department so much money over the last couple of years in this item over at his Econbrowser blog.

Change in holdings of U.S. Treasury securities between December 31, 2007
and December 31, 2009. Data source: Flow of Funds, Table L.209.

Aside from a bigger increase in the Banks category, I’m not sure what I was expecting to see. Weren’t the big banks supposedly borrowing from the Fed at zero percent and using that money to buy Treasuries at a higher rate? Interestingly, over just the last year, the Money Market Mutual Fund category has dropped sharply – since the end of 2007, it’s doubled from $200 billion, but it was as high as $577 billion at the height of the financial crisis.

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It Was a Good First Half For Some…

On July 2, 2010, in Bonds, Commodities, Stocks, by Tim

In updating the graphic for the companion investment website Iacono Research at the conclusion of the second quarter the other day, I couldn’t help but notice that the last decade’s best performing mutual fund, Ken Heebner’s CGM Focus (CGMFX), didn’t do so well and the model portfolio at Iacono Research is now back out in front.

You can see why the Pimco Total Return fund (PTTRX) has become so popular in recent years – slow and steady seems to have won them a lot of new clients despite the four percent front-end loads. Of course, the real lesson in the performance data above might be that simpler is better – if you had only sold your stocks and bought dumb ‘ol gold coins back in 2000, you’d be far, far ahead of just about any other investment on the planet.

For Iacono Research subscription details (where fees are far lower than Pimco’s), click here.

Full Disclosure: Long the model portfolio at time of writing.

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A Look at Relative Performance in 2010

On June 7, 2010, in Bonds, Commodities, Currencies, Stocks, by Tim

Spotted over at Paul Kedrosky’s blog earlier today was this chart from Finviz (no link, apparently) showing the  year-to-date performance of various asset classes. Don’t get too excited about hogs and cattle (as Paul did) as a wicked contango persists in these markets that is killing investors, the iPath DJ-UBS Livestock TR Sub-Idx ETN (NYSE:COW) now up a whopping one percent for the year despite what you see directly below.

Practically speaking, the trade-weighted dollar and gold are battling it out at the top while the only equities still in positive territory for the year are the small cap Russell 2000 stocks with gains of 1.0 percent, but, down 1.08 percent today, they too should be painted red. Bringing up the rear are a host of agricultural goods that Jim Rogers and a few others have been recommending for the better part of a year now, but they just keep going down.

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