We continue to see no ‘off the cliff’ sort of declines in the leading economic indicators. Just as there was a disconnect earlier in the year as regards the weakening data and high equity valuations so too, on the lows of 2 weeks ago, there was a disconnect between the weak (though not disasterous) economic data and extremely low equity valuations which (on the lows) were pricing in a disasterous decline in economic activity. These perpetual disconnects between the data and asset market valuations reflect the volatile world we now live in. This world, of course, is a direct consequence of the state sponsored casino created by negative interest rates and a system awash with newly printed money distributed through the bond markets to primary and secondary dealers.
A total joke of a situation but we must learn to embrace this world if we are to protect and grow our capital effectively.
Anyway I’ll stop my waffle there and direct you to the Wells report..
All the best Rich
p.s. I would just in passing also mention that the mortgage rates in the US have risen nearly back to where they were pre ‘operation twist’. This makes the mortgage reits particularly attractive again. They have been weak recently due to the initial decline in the mortgage rates. But credit markets have ‘unfrozen’ again so short term credit is plentiful again between financial participants. Ie the reits can still borrow cheaply at the short end to lend at the long end and pocket the difference. Post ”twist”, they are showing no severe declines in margins so the yields at 15 to 20% p.a could offer value at these levels. Usual culprit of NLY looks the best..
(4 votes, average: 5.00 out of 5)
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