Jun

30

Allen Gillespie has delivered a shocking rich tapestry of ideas for profit and research that overwhelms the senses. I studied many of these things 50 years ago and wish I had the expertise to follow up on them. The Confederate paper is particularly interesting and brings to mind what one is often told that the price of stocks on the French Stock Exchange during the Guillotine area kept rising apace. Laurel and I had the pleasure of meeting Mr. Gillespie when he was a budding momentum buyer of growth stocks and recognized him as an extraordinary talent. His growth in many areas is most pleasant to memorialize and note as one of the shining memories of a not entirely nondescript career.

Allen Gillespie writes: 

For what it is worth, tonight's bond retest of the high looks like a classic rest of a high after a momentum break and in equities, many crashes end when the YTD performance goes negative. People hate giving up their year. 

Counterparty Risk was what drove a lot of the de-risking in 2008. Since that time the Fed have made banks hold increasing amounts of capital in "safe" assets (aka government bonds). In announcing that everyone passed the stress test and releasing capital for buybacks and dividends, the bond market has sold off. We already discussed the end of central bank buying but if counterparty risk is deemed to have declined - then the sell-off in safe non-earning assets might have a ways to run.


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