Yves Lamoureux

Yves Lamoureux's picture

Gold’s recent move down is tracking our forecast.We saw an initial shock to gold as the pressure of higher rates moved through the system. What is perhaps lost on most market observers is the slowing pace of global liquidity flowing into the system. You could call the current situation a problem of velocity synchronicity.

Guest Post: Liability-Driven Investing & Equity Duration: Implications and Considerations for Investors

Some contrarian views on asset allocation from Yves Lamoureux: "We have already suggested looking at grains and soft commodities on top of long treasuries to be adequately immunized. I did by the way recently warn that it was too crowded a place. With the recent correction in Treasuries, it does give us a further entry point and, yes I am still in the bull camp. I have also been a strong hard asset follower for quite some time. I am now worried that this trade has become too crowded. Let me explain. Let’s take, for example, an inflatable life raft. If maximum capacity is 12 people and 36 poor souls looking for escape and survival climb aboard, the life raft will sink and will defeat its purpose. This is perhaps the tragedy in the making now in gold and corporate bonds. High uncertainty surrounding markets supports behaviour pricing big risk premiums in anticipation of events."

Guest Post: This Strip Is G rated

One of the biggest bond bulls, whose recommendations have yielded a 25% return YTD, is shifting out of bonds, arguing that continued "deflation is unsustainable." So does this mean jumping into stocks? Not so fast, says Yves Lamoureux and explains why there are several key catalysts that have to occur first before putting any capital into public equities.

Leo Kolivakis's picture

In the first quarter, the US economy grew by 3.7%, revised up from an originally reported 2.7% increase. But growth estimates all the way back to the start of 2007 were revised lower. Moreover, the level of real GDP in Q1 was revised down by $100 billion. Does this mean the secular bull market in bonds will continue? And are Treasuries the "last diversifier left"?

Guest Post: Generation Alpha

What most people believe today is that they can extrapolate trends and have great success at placing odds with certainty. Why is it then that most people fail to see that the long-term interest-rate trend is down and going lower? - Yves Lamoureux

Guest Post: Black Swan Meets White Swan

How would you hedge against a Black Swan event today? We put our observation cap back on to find that, amid all the hedging going on, one bet stands out. In our search to find clues that determine future directions of financial markets, we find that inflation risk offers the most widespread cause for concern. Inflation, the White Swan, is a fundamental macroeconomic risk factor for a broad range of investments and therefore an obvious cause of anxiety. The prevailing wisdom is that, to protect against this risk, one should hold onto positions in emerging stock markets and commodities. We also find the use of Treasury Inflation-Protected Securities (TIPS) on the bond side very popular. In essence, these tactics are widely considered to be sure bets to safeguard against the inflation that will surely follow the large increase in the money base.
However, we constantly argue that poor immunization and assets mismatch will lead to a dynamic rebalancing act. We feel we are closer now to this event. - Yves Lamoureux

Guest Post: Are Repos Signaling A Buy Or A Sell Opportunity?

The study of repurchase agreements (or repos) gives us a recent insight into the big players’ view. Repurchase agreements are an important tool of the Federal Reserve that allows them short-term control of money. In the face of this market correction, is there going to be an encore of purchasing agreements that leads to a probable rebound? Up until about early 2008, the correlation had moved up to 0.86 or 0.75 squared. It broke down after that period. This is one reason that we will show the larger, updated version today. I feel that the ascending rate of cumulative repos is simply unsustainable.

Guest Post: The Amazing Shrinking Put/Call Ratio!

Have you noticed lately the behaviour of the put/call ratio? Once you read the next few lines, you will agree with us that it is a rare event. We have tracked this interesting behaviour since 2007. It is a compression event taking place in the ratio. The put/call ratio is usually defined between a mathematical range. The best example is provided at the left of the graph. The ratio will bounce around from the mean to +3 standard deviation on a sudden drop of the Dow Jones, taking it to under 13,000. That would be normal behaviour. In our present circumstances, something very different is happening.

Guest Post: Surprise! The Dollar Is Rallying... Or Is It?

If you have been wondering what is the real reason for the recent upswing in the US dollar, read on. I am very bullish on its future rise. This report follows our early December comments, which were appropriately called “The carry trade now in trouble.” Very clearly, we stated, “The carry trade as a barometer of things to come will show the unwind at the early stage. From my perspective it is here and now that the carry trade ends.” My recent enthusiasm is largely based on evidence gathered since 2007 of the loss of velocity in money aggregates. In other words, the money base is contracting or slowing down its expansion phase.

Guest Post: There's Something Happening With Oil


For the last two decades the trend of inflation has been easing. The same as applied to the general trend of the percentage growth in the GDP. One big problem for managers is to drive looking forward rather than manage backward. Oil as an echo bubble will quickly fade away and will bring better prospect at anchoring inflation expectations.

Guest Post: The Carry Trade Is Now In Trouble

I don’t share the recent stock optimism as the tail is wagging the dog. The higher the stock index goes the greater the number of bulls and the greater the amount of decimated bears. Those burned bears will not be adding to the buy side at lower prices to cover shorts. Good news about this will also turn out to be bad when the party is up.

Guest Post: Is The Yen A Proxy For Yuan (rmb) Devaluation Or Carry Trade Déjà Vu?

I have been bullish on the Japanese currency since March 2007. What I think defines broad movement in currencies is perception along with broad relative monetary actions. The expansion or contraction of monetary aggregates in one currency versus another is in essence its purest denominator. We show today such a timing model in the yen/usd rate of exchange. Notice that timing simply based on monetary aggregates can be not forgiving for quite some time until the new trend establishes itself.

Guest Post: Unemployment Projections Based On High Yield Default Rates

The base case number one takes the view that high yield default rates are peaking and will start to drop from this level now. The rate of unemployment ranges from 10% to 11.5% with this given scenario. In the base case number two, I am using a composite of both peaks in 1991 and 2002 to suggest that default rates may carry upward one percent more. The resulting effect on unemployment targets will range from 11% to 13.5%. In our final analysis base case number three will use the peak at 13% in default rates established in 1991. Unemployment rates in this scenario show a range of 12.5% and 15% before possibly peaking.