The Best and Worst Investments During The Last 10 Years

It’s almost time for the month-end, year-end and, yes, decade-end retrospectives from various investment banks.

And so, without further ado, here is “2010s did you know…”

  • Central banks: most activist…Brazil (25 cuts, 24 hikes); least activist…Japan (1 cut, 0 hikes).
  • Population growth: most…India +149 million since 2010; least…Syria -4 million since 2010.
  • US jobs: in the 2000s US economy lost net 1 million jobs; in the 2010s US economy created net 22.4 million jobs.
  • Negative yielding debt: $0 of bonds were negative yielding in 2010 vs. $17 trillion at peak in 2019.
  • Government bonds: best…30-year Treasury $1 in 2010 = $2.08 today; worst… Turkey govt $1 in 2010 = $0.61 today.
  • Equities: best…US equities $1 in 2010 = $3.46 today; worst…Greece $1 in 2010 = $0.07 today.

A little something for the goldbugs:

  • Commodities: best…gold $1 in 2010 = $1.34 today; worst…oil $1 in 2010 = $0.74 today.

And last but not least:

  • Asset class: best…Bitcoin $1 in 2010 = $90,026 today; worst…Myanmar Kyat $1 in 2010 = $0.004 (spot) today.

Sources: ZeroHedge

Corporate America and The Junk Bond Market May See A Wall of Higher Interest Rates

Much has been said about the threat that some $3 trillion in BBB-rated bonds (out of a total investment grade universe of $6.4 trillion)present to the credit market, with growing fears that the next economic slowdown will see over $1 trillion in “fallen angel” credit swamp the junk bond market, sending yields and spreads sprinting higher. Less has been said about the risk of higher-rated A and AA bonds being downgraded to BBB on their way to junk (although we touched on this threat too last Friday in “A Record $90 Billion A-Rated Bonds Downgraded To BBB In Q4“).
As the following chart from BNP Paribas shows, a wall of maturing debt is about to slam head on into S&P 500 companies. Commenting on the chart, BNP understandable writes that it is “concerned by the maturity wall of bonds that need to be refinance over the next few years.” And, as Bloomberg’s Sebastian Boyd observes, said maturity wall is made even scarier by adding the amount available in untapped revolvers, which is money that in theory doesn’t need to be paid back and splits the counterparty risk with the company’s bank lenders (see GE).


BofA reveals that “net buying of Tech in the 1H was entirely buyback-driven.”

Supreme Court Rules Will Limit Collective Action Bargaining… This Is Negative For Unions

In what will likely be remembered as an epic decision to America’s unions, the Supreme Court ruled 5-4 on Monday – in a decision split along ideological lines – that businesses can force employees into individual arbitration to resolve disputes, virtually eliminating the threat of a class-action lawsuit.

The Washington Post described the ruling as “an important outcome for business interests.”  The decision could make life much harder for unions fighting for better conditions and wages. 

Justice Ruth Bader Ginsburg called the decision “egregiously wrong”. She argued that individual complaints can be very small in dollar terms, or “scarcely of a size warranting the expense of seeking redress alone.” The justice read a summary of her dissent aloud in the court.

In a comment that broke with the administration’s official view, the National Labor Relations Board argued that requiring employees to waive their right to collective action conflicted with national labor laws. Bodies representing business were united in support of the ruling.

Meanwhile, lower courts had been split over the issue. Two rulings had been issued – two in which appeals courts ruled that such agreements can’t be enforced and a third in which the appeals court said they are valid.

According to the New York Times, the Court had ruled back in 2011 during the AT&T Mobility V. Concepcion case that companies could forbid class actions in contracts with consumers. These contracts typically require two things: That disputes be resolved and claims brought through arbitration.

The justices were asked to determine whether these same conditions apply to employees.


The 4 Year Presidential Cycle Enters Weakest Year

The 4 Year Presidential Cycle Enters Weakest Year

The following chart depicts this election cycle, i.e., the average four-year pattern of the Dow Jones Industrial Average over more than a century. On the left hand side you see the pattern during the election year, followed by the first post-election year. Thereafter comes the mid-term pattern – which is highlighted by a red circle – and lastly the pre-election year pattern.

In the past 116 years the DJIA delivered the strongest performance during election and pre-election years on average. Post-election years typically also managed to generate gains. The mid-terms were typically the weakest time period.

Given that prices on average barely rise in mid-term years, there is obviously a heightened probability of declines. Thus there is a threat of a sizable fall in stock prices in 2018.