I received undergraduate and graduate degrees in economics and finance from the University of California, Los Angeles, 1968. My professional expertise is in macro-economics; currency and trade strategies; interest rates and yield curve analysis and fixed income strategies. For the past two decades ...
more I received undergraduate and graduate degrees in economics and finance from the University of California, Los Angeles, 1968. My professional expertise is in macro-economics; currency and trade strategies; interest rates and yield curve analysis and fixed income strategies. For the past two decades I advised an independent brokerage firm on capital markets, and yield curve analysis and portfolio management. Prior to that, I worked as senior consultant, with Peat Marwick and Partners (PMP) and A.R.A Consultants, responsible for projects in infrastructure, industrial strategy and public finance. From 1972 to 1980, I was Director of Research at C.D. Howe Institute, overseeing research in Canada-US trade, currency developments, and Canadian monetary policies.
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Latest Comments
Is The Bank Of Canada About To Make A Policy Mistake?
Stagnant income has been the lot of millions this century. Now the US is polarized because all boats have not risen. Stagnation gives rise to income inequality with great political consequences
The Perils Of Forecasting Inflation
Govt spending is NOT the source of inflation. You have to look at revenues less spending--the deficit- in govt. That deficit is very small relative to the size of the economy is less than 10%. The inflation from shortages as we restart the economies is the source of inflation.
10-Year Yields And Implications
Arthur
If long rates were to move up 200bps the impact would be very damaging. Since the investment grade corporate bond spreads are very narrow--approx. 150 pbs, that market would be severely impacted and this would lead to a dramatic sell off in the equity markets. The equity, corporate and govt bond markets are vey intricately tied. A 200pbs move on the 10 yr would mean that 10 yr interest costs more than double and would be very bad for housing and all sectors relying on capital investment. It would kill any nascent recovery.
The Fed will not allow this to happen. It will, as Japan does, introduce yield curve control (YCC) and bring down long rate through selective bond buying. We have had negative real yields for more than a decade and too much of the economy relies on that being maintained. I would not go short on the bonds for this reason.
We’re Not In Kansas Anymore
How does a market crash lead to inflation?
Liquidity Is Trapped In The Banks
The essence of this problem of excess liquidity or the liquidity trap is slow economic growth. And that is why monetary stimulus is not able to do anything when real rates of interest are negative as they are today. The only solution to stimulate growth is expansionary fiscal policy which we now have an abundance because of the pandemic.
Canada's Employment Continues To Sputter As It Struggles With Re-Opening
Very valid point about correlation
Even if We get out of the third wave the output gap will be huge,I do not understand why anyone thinks the BoC will raise its rate next year.
Canadian Banks Are Not In A Lending Mood
I agree that the Fed should keep its mouth shut. Transparency gives the market a chance to game the the Fed's next move. It used to be that way before the 1990s
But then Greenspan started the whole idea of transparency and it's continues to this day.
The Bank Of Canada’s Uncertainty Principle
I think we're all flying at night with instrument panels.
The Fed And Bond Market Similar Inflation Views
Arthur
Do we know what amount of inflation above 2% will the Fed tolerate and for how long? Kinda of vague on their part.
Canadian Federal Government Looks To The Long-Term Bond Market To Finance Deficits
A gamble for whom? The issuer has to payments obligations of 2 % interest paymemts for 30 years...no gamble there. The bond purchaser say a insurer sells an insurance policy that is based on the guarantee 2% annual payment...no gamble for the insurance company.The recent increase in long rates is welcomed by institutional funds who now use their cash flow to improve their returns
The gamble you are talking about is borrowings at short rates and that is what the govts want to get away from by buying more duration