Sober Look's Contributions

Why Won't the Fed Raise Rates?

When the Federal Reserve's Open Market Committee (FOMC) meets this week, there will be pressure from various quarters to raise the federal funds rate. Jamie Dimon, chairman of JP Morgan, has stated blankly “Let’s just raise rates."

US Corporations Are Engaged in a Massive Debt-Binge - Here’s Why

Just as governments are cutting back on issuing new debt, the corporate sector has taken up the role of being the largest source of new debt in the United States. This shift in debt issuance is readily apparent in Chart 1.

The Big Disconnect in the Pension Industry

When two of the biggest US pension funds reported very disappointing financial results this month, it became apparent that the pension industry needs a reality check. For the past fiscal year the California Public Employees...

The Looming Shortage in Government Bonds

Ever since the 2008 financial crisis, there has been a persistent shortage of high-quality government debt. More than just a safe haven in times of financial stress—the so-called 'flight to quality'—the supply of high-quality sovereign debt has been steadily shrinking. This shortage became acutely apparent with the results...

What the Bond Market Is Telling Investors

Over the past month, the global bond markets have been sending out signals that all is not well with the global economies. Initially, the surge in negative nominal rates in Europe and Japan rattled many investors in both the fixed income and equities markets.

The Fall in Commodity Prices Hits the Canadian Banks

With the release of Canadian banks’ second-quarter results, investors are beginning to measure the impact of the oil price collapse on the domestic financial industry. Widespread are the write-downs and other provisions...

Fiscal Policy to the Rescue?

When appearing before their political masters, central bankers, invariably, urge them to adopt an expansionary fiscal policy. Ben Bernanke and now his successor, Janet Yellen, have pleaded with Congress to adopt a more stimulative fiscal policy...

Understanding Negative Interest Rates

When the central banks of three European countries and the European Central Bank (ECB) itself introduced negative interest rates (NIR) in mid-2014, many considered it be a temporary measure, a new experiment in monetary policy.

The Fed Could Be Back in Play in 2016

One or more rate hikes by the Federal Reserve in 2016 remains a real possibility. Why would the Fed consider such a policy action given the recent collapse in inflation expectations? Over the past couple of months many analysts and...

Canada's Changing Financial Landscape, Part 1: The Securities Industry

The worldwide collapse in commodity prices is now working its way through the financial markets in Canada. Canada is just now experiencing fundamental changes in the financial community, the sector better known as F.I.R.E. (Finance, Insurance and Real Estate)...

Gold Is Spiking – Here’s Why

Some people say that gold is dead. They point to deflationary pressures and a bear market that started back in September of 2011. The bulls have been wrong for years; however, that may be about to change. At present, there are multiple...

US Consumer Is the Last Defense Against Strong Dollar Drag on the Economy

We continue to receive questions about the impact of the recent dollar strengthening on the US economy. The most immediate impact of course is on trade, which has created an immediate drag on the GDP growth.

Big, Bad China – What You Need to Know

It seems like every day we are inundated with news out of China. Investors are already concerned. The offshore renminbi (CNH) is more international than the onshore one (CNY), which is tightly managed by the government. As such...

6 Reasons Why the Market Is Out of Step With the Fed on Rates

As discussed previously, the markets have completely discounted the stellar US payrolls report when projecting the Fed's policy path in 2016. Futures-implied probability of 4 rate hikes (or higher) is only 6.5%. Why is the market so "dovish" relative to the FOMC?

Negative Interest Rates for Canada?

In his December 8th speech, the Governor of the Bank of Canada, Stephen Poloz introduced the possibility of negative interests as a policy tool. He was adamant that the Bank was not embarking upon this policy, rather it was exploring the implications of using such an unconventional policy...

A Contrarian Perspective on the Short Euro Trade

As the euro continues to drift lower, it has become the accepted wisdom that we are headed for parity with the dollar. Indeed it is widely expected that the ECB will expand its securities buying program in size, duration and scope (the ECB has been exploring buying municipal bonds for example).

Canada’s Growth Potential: Tempering Our Expectations

How fast can the Canadian economy grow? What can Canadians expect now that commodity prices have plunged and the country is running a trade deficit? These questions take on greater significance with the shift in political power to the Liberals who campaigned on growth through...

The Possibility of a 2015 Rate Hike in the US Should Not Be Ignored

Futures-implied probability of a 2015 rate hike in the United States remains below 40%. Some market participants have all but dismissed this possibility as they look at weak global growth as well as soft inflation...

Canada and the Oil Price Shock

Canada is no stranger in dealing with oil price collapses. The sharp fall in the price of crude in 2014 is not unprecedented. Over the past 30 years, there have been five major declines in the price of crude that have hit world...

Canada Joins the Currency Wars

Devaluation is now the preferred tool to reinvigorate slowing economy. On a traded-weighted basis, the US dollar is at its highest level in over a decade. Resource-based countries have seen their currencies tumble...

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