Macro Monitor

GDP growth of 5.0% projected for 2004. But, fast growing U.S. budget deficit is a significant problem for bonds.

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Economy picking up steam in second half. Early Q3 GDP estimate much better than expected.

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New study by The Leuthold Group suggests below average Long T-bond returns can be expected from today’s below average Long T-bond yield of 5.19%.

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New study by The Leuthold Group suggests below average High Yield bond returns can be expected when Junk yields fall below 9%.

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Economy picking up steam in second half. Revised Q2 GDP better than expected.

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Fixed income hedge in portfolios was reduced by one-half in mid-August following the spike in bond yields. TIPS for fixed income investors?…..You can lose money on Treasury Inflation Protected Securities (TIPS). You are protected against inflation but not sharp rise in interest rates.

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GDP growth of +4.0% projected for 2003. But, fast growing U.S. budget deficit is a significant problem for bonds.

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High Yield bonds rated marginally attractive after continued spread narrowing.

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“Risk-free bond returns could become return-free risks.” The Leuthold Group has hedged its fixed income position by shorting U.S. Treasuries. May completely hedge entire fixed income exposure later this month.

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Is the Fed ready to buy Ten Year Treasuries to stimulate the economy? This could certainly lead to another housing/refi boom. But are lower rates really necessary to boost business spending?

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Is the Fed ready to buy Ten Year Treasuries, if necessary to stimulate the economy? This could certainly lead to another housing/refi boom, but will it be the catalyst to boost business spending/borrowing? We think not.

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New bond market timing tool discovered. Testing reveals it has a remarkable forecasting record. Currently signaling bond market top!

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The grand 20+ year secular bull market in bonds is probably topping out.

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We believe High Yield bonds remain attractive. The economy is improving and corporate profits are rebounding from depressed levels.

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The spread between Long Quality Corporates and twenty year Treasury bonds at the pinnacle is back down to a more normal range, as the Treasury shortage elimination-thesis has fallen apart due to rising budget deficits.

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We believe it is still an opportune time to add to High Yield positions. The economy is improving and corporate profits are rebounding from depressed levels.

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High Yield bond only fixed income area strongly appealing to us, currently.

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We believe it is an opportune time to add to High Yield positions. The economy is improving and corporate profits are rebounding from depressed levels.

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While this higher reading is still far from signaling a significant inflation increase, we do believe that mild upward pressures are building.

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Huge secular bull market in bonds (emerging in 1981) is topping out.

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