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Michael Gayed: The Fed is Screwed
There is a deflation pulse in the Treasury market.
Michael A. Gayed    

"If you could kick the person in the pants responsible for most of your trouble, you wouldn't sit for a month." - Theodore Roosevelt

The human mind always wants to find a narrative to explain why patterns exist.  Often times, the narrative is only constructed with hindsight, and back fitted to explain why markets move the way they do.  Markets rally?  Because weak European economic growth means more stimulus.  Markets fall?  Because of weak European economic growth.  I reference Europe here because that data has largely been more negative, and recent action in Germany's bond market is being used as the excuse for why Treasury yields in the U.S. are falling.

The argument being made is that falling European bond yields makes our ultra-low Treasury yields look cheap by comparison.  In other words, what is driving interest rates lower is relative pricing compared to Europe's own sovereign debt.  I don't buy this argument one bit.  What is pushing our yields lower in the face of the Fed ending Quantiative Easing is a continued deflation pulse that is simply not unique to just Europe.  The relative behavior of U.S. defensive sectors, which our equity sector ATAC Beta Rotation Fund (Ticker: BROTX) can position fully into, proves this to be the case given overall strength in 2014.

Don't believe me?  Take a look below at the price ratio of the iShares Barclays TIPS Bond Fund ETF (TIP) relative to the PIMCO 7-15 Year U.S Treasury Index Fund ETF (TENZ).  As a reminder, a rising price ratio means the numerator/TIP is outperforming (up more/down less) the denominator/TENZ.  A falling ratio means the opposite.  Note the breakdown in recent weeks.



Put simply, a rising ratio means money is favoring inflation protection by bidding up Treasury Inflation Protected Securities at a faster pace than nominal Treasuries.  A rising ratio is one way of seeing that inflation expectations are rising.  By extension, a falling ratio means a deflation pulse is beating.  The most recent action in the above ratio suggests that the drop in yields now is not simply a function of European yields dropping, but perhaps renewed concerns that deflationary pressures remain.

This is a humongous problem for the Fed.  If the marketplace does not believe inflation is coming, after trillions of dollars in stimulus, then what is it going to take for reflation to finally take hold?  The fact that this is happening at the same time the Fed is going to be ending Quantitative Easing is, to put it mildly, somewhat disturbing and suggests that equities may be nearing a moment of truth as bonds scream that things are nowhere near as optimistic as all-time stock market highs would lead you to believe.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

The fund as of 08/14/2014 does not invest in any of the following investments: TIP, or TENZ.  Fund holdings are subject to change and are not recommendations to buy or sell any security.  Current and future holdings are subject to risk.

The Fund's investment objectives, risks, charges, expenses and other information are described in the statutory prospectus, which must be read and considered carefully before investing.  You may download the statutory or summary prospectus or obtain a hard copy by calling 855-ATACFUND or visiting www.atacfund.com.  Please read the Prospectuses carefully before you invest.

Mutual fund investing involves risk. Principal loss is possible.  Because the Funds invest primarily in ETFs, they may invest a greater percentage of its assets in the securities of a single issuer and therefore is considered non-diversified.  If a Fund invests a greater percentage of its assets in the securities of a single issuer, its value may decline to a greater degree than if the fund held were a more diversified mutual fund.  The Funds are expected to have a high portfolio turnover ratio which has the potential to result in the realization by the Fund and distribution to shareholders of a greater amount of capital gains.  This means that investors will be likely to have a higher tax liability.  Because the Funds invest in Underlying ETFs an investor will indirectly bear the principal risks of the Underlying ETFs, including but not limited to, risks associated with investments in ETFs, large and smaller companies, real estate investment trusts, foreign securities, non-diversification, high yield bonds, fixed income investments, derivatives, leverage, short sales and commodities.  The Fund will bear its share of the fees and expenses of the underlying funds.  Shareholders will pay higher expenses than would be the case if making direct investments in the underlying funds.  The Beta Rotation Fund is new with no operating history and there can be no assurances that the fund will grow or maintain an economically viable size.

All investing involves risks.  Investing in emerging markets has more risk such as increased volatility, relatively unstable governments; social and legal systems that do not protect shareholders, economies based on only a few industries and securities markets that are substantially smaller, less liquid and more volatile with less government oversight than more developed countries.  Investing in small cap companies involve additional risks such as limited liquidity and greater volatility than large companies.

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

MA(4) = 4 week moving average

References to other securities should not to be interpreted as an offer of these securities.

ATAC Beta Rotation Fund is distributed by Quasar Distributors, LLC.  No other products mentioned are distributed by Quasar Distributors, LLC.


Twitter: @pensionpartners
< Previous
  • 1
Next >
No positions in stocks mentioned.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Michael Gayed: The Fed is Screwed
There is a deflation pulse in the Treasury market.
Michael A. Gayed    

"If you could kick the person in the pants responsible for most of your trouble, you wouldn't sit for a month." - Theodore Roosevelt

The human mind always wants to find a narrative to explain why patterns exist.  Often times, the narrative is only constructed with hindsight, and back fitted to explain why markets move the way they do.  Markets rally?  Because weak European economic growth means more stimulus.  Markets fall?  Because of weak European economic growth.  I reference Europe here because that data has largely been more negative, and recent action in Germany's bond market is being used as the excuse for why Treasury yields in the U.S. are falling.

The argument being made is that falling European bond yields makes our ultra-low Treasury yields look cheap by comparison.  In other words, what is driving interest rates lower is relative pricing compared to Europe's own sovereign debt.  I don't buy this argument one bit.  What is pushing our yields lower in the face of the Fed ending Quantiative Easing is a continued deflation pulse that is simply not unique to just Europe.  The relative behavior of U.S. defensive sectors, which our equity sector ATAC Beta Rotation Fund (Ticker: BROTX) can position fully into, proves this to be the case given overall strength in 2014.

Don't believe me?  Take a look below at the price ratio of the iShares Barclays TIPS Bond Fund ETF (TIP) relative to the PIMCO 7-15 Year U.S Treasury Index Fund ETF (TENZ).  As a reminder, a rising price ratio means the numerator/TIP is outperforming (up more/down less) the denominator/TENZ.  A falling ratio means the opposite.  Note the breakdown in recent weeks.



Put simply, a rising ratio means money is favoring inflation protection by bidding up Treasury Inflation Protected Securities at a faster pace than nominal Treasuries.  A rising ratio is one way of seeing that inflation expectations are rising.  By extension, a falling ratio means a deflation pulse is beating.  The most recent action in the above ratio suggests that the drop in yields now is not simply a function of European yields dropping, but perhaps renewed concerns that deflationary pressures remain.

This is a humongous problem for the Fed.  If the marketplace does not believe inflation is coming, after trillions of dollars in stimulus, then what is it going to take for reflation to finally take hold?  The fact that this is happening at the same time the Fed is going to be ending Quantitative Easing is, to put it mildly, somewhat disturbing and suggests that equities may be nearing a moment of truth as bonds scream that things are nowhere near as optimistic as all-time stock market highs would lead you to believe.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

The fund as of 08/14/2014 does not invest in any of the following investments: TIP, or TENZ.  Fund holdings are subject to change and are not recommendations to buy or sell any security.  Current and future holdings are subject to risk.

The Fund's investment objectives, risks, charges, expenses and other information are described in the statutory prospectus, which must be read and considered carefully before investing.  You may download the statutory or summary prospectus or obtain a hard copy by calling 855-ATACFUND or visiting www.atacfund.com.  Please read the Prospectuses carefully before you invest.

Mutual fund investing involves risk. Principal loss is possible.  Because the Funds invest primarily in ETFs, they may invest a greater percentage of its assets in the securities of a single issuer and therefore is considered non-diversified.  If a Fund invests a greater percentage of its assets in the securities of a single issuer, its value may decline to a greater degree than if the fund held were a more diversified mutual fund.  The Funds are expected to have a high portfolio turnover ratio which has the potential to result in the realization by the Fund and distribution to shareholders of a greater amount of capital gains.  This means that investors will be likely to have a higher tax liability.  Because the Funds invest in Underlying ETFs an investor will indirectly bear the principal risks of the Underlying ETFs, including but not limited to, risks associated with investments in ETFs, large and smaller companies, real estate investment trusts, foreign securities, non-diversification, high yield bonds, fixed income investments, derivatives, leverage, short sales and commodities.  The Fund will bear its share of the fees and expenses of the underlying funds.  Shareholders will pay higher expenses than would be the case if making direct investments in the underlying funds.  The Beta Rotation Fund is new with no operating history and there can be no assurances that the fund will grow or maintain an economically viable size.

All investing involves risks.  Investing in emerging markets has more risk such as increased volatility, relatively unstable governments; social and legal systems that do not protect shareholders, economies based on only a few industries and securities markets that are substantially smaller, less liquid and more volatile with less government oversight than more developed countries.  Investing in small cap companies involve additional risks such as limited liquidity and greater volatility than large companies.

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

MA(4) = 4 week moving average

References to other securities should not to be interpreted as an offer of these securities.

ATAC Beta Rotation Fund is distributed by Quasar Distributors, LLC.  No other products mentioned are distributed by Quasar Distributors, LLC.


Twitter: @pensionpartners
< Previous
  • 1
Next >
No positions in stocks mentioned.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

More From Michael A. Gayed
Michael Gayed: The Fed is Screwed
There is a deflation pulse in the Treasury market.
Michael A. Gayed    

"If you could kick the person in the pants responsible for most of your trouble, you wouldn't sit for a month." - Theodore Roosevelt

The human mind always wants to find a narrative to explain why patterns exist.  Often times, the narrative is only constructed with hindsight, and back fitted to explain why markets move the way they do.  Markets rally?  Because weak European economic growth means more stimulus.  Markets fall?  Because of weak European economic growth.  I reference Europe here because that data has largely been more negative, and recent action in Germany's bond market is being used as the excuse for why Treasury yields in the U.S. are falling.

The argument being made is that falling European bond yields makes our ultra-low Treasury yields look cheap by comparison.  In other words, what is driving interest rates lower is relative pricing compared to Europe's own sovereign debt.  I don't buy this argument one bit.  What is pushing our yields lower in the face of the Fed ending Quantiative Easing is a continued deflation pulse that is simply not unique to just Europe.  The relative behavior of U.S. defensive sectors, which our equity sector ATAC Beta Rotation Fund (Ticker: BROTX) can position fully into, proves this to be the case given overall strength in 2014.

Don't believe me?  Take a look below at the price ratio of the iShares Barclays TIPS Bond Fund ETF (TIP) relative to the PIMCO 7-15 Year U.S Treasury Index Fund ETF (TENZ).  As a reminder, a rising price ratio means the numerator/TIP is outperforming (up more/down less) the denominator/TENZ.  A falling ratio means the opposite.  Note the breakdown in recent weeks.



Put simply, a rising ratio means money is favoring inflation protection by bidding up Treasury Inflation Protected Securities at a faster pace than nominal Treasuries.  A rising ratio is one way of seeing that inflation expectations are rising.  By extension, a falling ratio means a deflation pulse is beating.  The most recent action in the above ratio suggests that the drop in yields now is not simply a function of European yields dropping, but perhaps renewed concerns that deflationary pressures remain.

This is a humongous problem for the Fed.  If the marketplace does not believe inflation is coming, after trillions of dollars in stimulus, then what is it going to take for reflation to finally take hold?  The fact that this is happening at the same time the Fed is going to be ending Quantitative Easing is, to put it mildly, somewhat disturbing and suggests that equities may be nearing a moment of truth as bonds scream that things are nowhere near as optimistic as all-time stock market highs would lead you to believe.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

The fund as of 08/14/2014 does not invest in any of the following investments: TIP, or TENZ.  Fund holdings are subject to change and are not recommendations to buy or sell any security.  Current and future holdings are subject to risk.

The Fund's investment objectives, risks, charges, expenses and other information are described in the statutory prospectus, which must be read and considered carefully before investing.  You may download the statutory or summary prospectus or obtain a hard copy by calling 855-ATACFUND or visiting www.atacfund.com.  Please read the Prospectuses carefully before you invest.

Mutual fund investing involves risk. Principal loss is possible.  Because the Funds invest primarily in ETFs, they may invest a greater percentage of its assets in the securities of a single issuer and therefore is considered non-diversified.  If a Fund invests a greater percentage of its assets in the securities of a single issuer, its value may decline to a greater degree than if the fund held were a more diversified mutual fund.  The Funds are expected to have a high portfolio turnover ratio which has the potential to result in the realization by the Fund and distribution to shareholders of a greater amount of capital gains.  This means that investors will be likely to have a higher tax liability.  Because the Funds invest in Underlying ETFs an investor will indirectly bear the principal risks of the Underlying ETFs, including but not limited to, risks associated with investments in ETFs, large and smaller companies, real estate investment trusts, foreign securities, non-diversification, high yield bonds, fixed income investments, derivatives, leverage, short sales and commodities.  The Fund will bear its share of the fees and expenses of the underlying funds.  Shareholders will pay higher expenses than would be the case if making direct investments in the underlying funds.  The Beta Rotation Fund is new with no operating history and there can be no assurances that the fund will grow or maintain an economically viable size.

All investing involves risks.  Investing in emerging markets has more risk such as increased volatility, relatively unstable governments; social and legal systems that do not protect shareholders, economies based on only a few industries and securities markets that are substantially smaller, less liquid and more volatile with less government oversight than more developed countries.  Investing in small cap companies involve additional risks such as limited liquidity and greater volatility than large companies.

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

MA(4) = 4 week moving average

References to other securities should not to be interpreted as an offer of these securities.

ATAC Beta Rotation Fund is distributed by Quasar Distributors, LLC.  No other products mentioned are distributed by Quasar Distributors, LLC.


Twitter: @pensionpartners
< Previous
  • 1
Next >
No positions in stocks mentioned.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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