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Headline round up!

Compression!

Investor Alert: The 30 year US Treasury interest rate fell near 2.5% this week underscoring an important fixed income strategy update in this week’s powerful interview with Dominique Henderson, MGAM Director of Trading.

Uncle Sam Wants YOUR IRA!

April 6th, 2016: Department of Labor issues 1023 pages of new fiduciary guidance and standards assuming authority of IRA’s
What Does It Mean for Your IRA?

IRS Blocks Allergan Pfizer Merger!

April 4th, 2016: The Internal Revenue Service issues 359 pages of additional rules designed to block mergers that reduce corporate taxes.
Double Jeopardy: U.S. Shareholders and Investors Now Captive to Highest Corporate Tax Rates in the World Before Dividends Can Be Paid and Then Taxed Again!

PANAMA! The release of the Panama Papers slams countries and governments around the world with evidence of self dealing, tax evasion, and misappropriations.

  • Iceland’s Prime Minister Resigns!
  • Austria Banking Executive Resigns!
  • AMRO Board Member Resigns!
  • Argentinian President Macri Failure to Disclose
  • Ukrainian President Set Up Secret Offshore Company
  • Syrian President Assad’s Cousins Get Oil and Telecom Benefits!
  • Pakistan President Nawaz Sharif Offshore Assets Revealed!
  • Even Jackie Chan’s Kung Fu Riches Exposed!
  • South African President Jacob Zuma’s Oil Deal with Congo Exposed!

Featured Research Solutions

Q2 2016 MGAM Client Updates

The first 3 months of 2016 appeared to reflect significant changes in the perspective of investors, apparently moving to extreme pessimism and back to realistic optimism. The corrections of 2015 and early 2016 culminated with what could be diagnosed as a temporary freeze in global credit markets, based upon the pricing of US high yield corporate bonds at the February 11th discount of 75% of par value as measured by HYG, the Dow Jones Industrial Average twice approaching 15,500, and the concurrent implosion of domestic oil prices to $27 per barrel.

Springtime appeared to change perspectives: anxiety melted, trees bloomed, and investors bought investments that pay reliable cash flow as evidenced by increases in the Utility Index and US Corporate High Yield Index:

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Graph courtesy of Bloomberg L.P.

What is a yield panic?

One relevant scenario is 2012.  The premise that interest rates could stay lower for longer was put forward, prior to 2012, by Scott Minerd of Guggenheim. During 2012, the values of high cash flow assets paying substantially more that U.S. Treasuries generally rallied in price.  It appeared that investors, realizing rates did not have to rise, began to purchase allocations that could provide yield advantages.

pic1-1

Graph courtesy of Bloomberg L.P.

Conclusions for 2016-2017

March appears to indicate that the 2012 yield panic scenario could continue to push prices up for high cash flow assets.  While discounts to maturity value under control are available, investors should continue to consider that capital flows at the end of the first quarter of 2016 could signal opportunities for the remainder of this year as well as 2017.

conculusion

Graph courtesy of Bloomberg L.P.

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