Entries by Simon Lack

Hopes for a Trade Deal Slipping

Article I of the U.S. Constitution gives Congress the “…Power to lay and collect Taxes, Duties, Imposts and Excises…” Congressional control over tariffs has never been so strong since. The Reciprocal Trade Agreement Act of 1934 granted President Roosevelt the authority to adjust tariffs and to negotiate bilateral trade agreements without prior congressional approval. Other […]

Pension Funds Keep Interest Rates Low

The Equity Risk Premium reveals that stocks are cheap relative to bonds (see Stocks Offer Bond Investors an Opening).  A corollary of this insight that bonds are expensive is that you can replicate the return on $100 in ten year treasury notes with a combination of stocks and cash. It relies on a few assumptions, […]

Bond Buyers Should Buy Pipeline Stocks

Yields on McDonalds’ Euro-denominated bonds recently joined European sovereign debt in negative territory. It’s a headline writers dream (juicy burgers, not yields…customers and investors pay to do business, etc). $17TN in publicly traded debt now yields less than zero – 30% of the entire investment grade market. Debates rage about what this means. Bond investors […]

Trade Wars: End in Sight

Last week’s fears of global recession herald the late stages of Trump’s trade war. It’s already possible to see the outlines of a triumphant victory speech. The U.S. trade deficit with China is on track to fall for the first time in at least 30 years. After it reached a new record last year, critics […]

Art of the Tariff

Yesterday’s White House announcement that newly imposed tariffs on Chinese goods would be delayed three months sent stocks higher. The trade dispute hasn’t hurt the U.S. that much, although there’s widespread evidence of financial distress among farmers. Agriculture Secretary Sonny Perdue showed his sledgehammer wit in a joke aimed at farmers complaining about tariffs. China […]

Canada Looks North to Export its Oil

Infrastructure projects can require a lot of planning, but the proposed link by the Alaska – Alberta Railway Development Corporation (A2A Rail) traces its roots back to 1898, when a charter to build a line to Alaska was awarded to the Edmonton & District Railway Company. Canada is perennially challenged to move its bitumen-based crude […]

Stocks Offer Bond Investors an Opening

The Federal Open Market Committee probably feels pretty good about last week’s decision to cut rates. We noted the multiple macro issues confronting decision makers (see Fed Ponders Multiple Uncertainties). With Chinese trade negotiations moving away from a deal, diversification isn’t helping as all risk assets are lower. Government bonds provide a useful counterweight at […]

Pipeline Earnings Confirm Positive Trends

Energy remains probably the least loved of the S&P500’s 11 sectors. Over-investing in new projects has turned off many investors, who would like to see more cash returned via buybacks and dividends. And the Democratic primary debates remind that an anti-fossil fuel stance is needed to excite the party’s hard core, introducing some electoral uncertainty […]

Fed Ponders Multiple Uncertainties

If not today, then within a few weeks the Federal Reserve is likely to acquiesce to President Trump’s call for lower rates. Ten year U.S. treasury yields are low by most measures at 2.05%, but they’re the highest in the G7, and even higher than Greece’s. The President has criticized Fed policy as creating unnecessary […]

Brexit Meets the Shale Revolution

Britain’s new prime minister, Boris Johnson, sports a mop of blond hair, shuns conventionality and routinely spins facts to suit his purpose. The photo is from a 2006 charity soccer game in London against Germany, when he head-speared an opponent in a maneuver better suited to wrestling. It’s an appropriate metaphor for the upcoming Brexit […]

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