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Abe Vigoda is Dead, but the Bull Market for Fixed Income Is Not

Posted by Eric Salzman   |  January 17, 2018 at 9:07 AM

“Tom, can you get me off the hook, for old time’s sake?”—Sal Tessio

Abe Vigoda was a beloved American actor who played a key role (Sal Tessio) in one of the greatest films in American movie making, “The Godfather.” After “The Godfather” in the early 1970s, Mr. Vigoda played the role of Detective Fish on the very popular TV series “Barney Miller.” Abe was so good that he even got his own spinoff show, “Fish.”

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Avoid Tuning the Wrong String

Posted by Eric Salzman   |  January 8, 2018 at 10:00 AM

“When the facts change, I change my mind. What do you do, sir?” – John Maynard Keynes

A couple of nights ago, I was helping my son tune his cello. I have no musical talent or knowledge of string instruments other than I like how they sound. However, my son tells me I do a pretty darn good job turning the tuning pegs to help him get the instrument in tune.

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Where, oh Where, Have the Bond Vigilantes Gone?

Posted by Eric Salzman   |  December 18, 2017 at 10:00 AM

Back in the days of yore—before the financial system blew itself up—there was a group known not by individual name but rather by the title of “Bond Vigilantes”! This mysterious group was known to keep order and exact punishment when they believed that central banks were running monetary policy too accommodative or governments were increasing fiscal deficits.

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Death and Taxes: the Former is Certain, the Latter Not So Much

Posted by Eric Salzman   |  December 4, 2017 at 9:00 AM

“The only difference between death and taxes is that death doesn’t get worse every time Congress meets.”

—Will Rogers

High drama in Washington, D.C.! The GOP tax bill hangs precariously as the Senate Parliamentarian has ruled that “triggers” would raise taxes if tax cuts do not promote enough economic growth to cover a decline in tax revenues from the tax cuts.

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Threading the Needle

Posted by Eric Salzman   |  November 21, 2017 at 9:25 AM

A very interesting article appeared in Bloomberg News this week: “Trump Counts on Fed to Help Sustain Economic Bump from Tax Plan.

As written in the article, “The Trump administration is banking on the Federal Reserve not to squelch any bump in economic growth from the Republican tax plan. White House chief economist Kevin Hassett argues that the tax overhaul will boost productivity, allowing the U.S. economy to grow more rapidly without risking a damaging bout of higher inflation that would be an anathema to the Fed.

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Disintermediation: Time to End the Conversation

Posted by Alex Spencer   |  November 16, 2017 at 4:47 PM

Disintermediation is a very sophisticated-sounding word that we might feel smart for using but is one that I think should be retired from the lexicon of the retail investment program space. I can share data and personal success stories proving that not only can financial institutions and investment programs peacefully co-exist, but investment programs actually provide a tremendous benefit to banks and credit unions. If you still aren’t quite convinced, you need only consider the huge impact the baby boomer generation will have on your business.

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The "Bank of Amazon" Shouldn't Happen

Posted by Eric Salzman   |  November 13, 2017 at 10:51 AM

In 1999, I lived in Great Falls, Virginia, working for Freddie Mac. Many of my neighbors were part of the “dot-com” boom. One night, one of my neighbors (who was then a millionaire on paper from his company that built websites) and I went down to the local pub, where we met one of his “dot-com” friends. From what I could tell, neither of their companies was even close to making money, yet their companies’ stock prices were soaring.

Meanwhile, at Freddie Mac, which had a net profit of billions, my stock had dropped quite a bit. Back then, everyone was using the terms “new economy” and “old economy.”

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The 800-Pound Gorilla Skipped Lunch

Posted by Eric Salzman   |  October 30, 2017 at 8:40 AM

This past week was a bad one for the bond market, no question. The 10-year Treasury note broke through 2.40%, all three treasury note auctions (2-year, 5-year, and 7-year ) went pretty poorly, even at elevated yields, and big-name investors like Jeff Gundlach started talking about a 3% 10-year on the not-so-distant horizon. I think that in ordinary times, the improvement in the global economy would definitely warrant such concerns. In fact, I think we have gotten so accustomed to a 10-year Treasury note yield under 3% that 3% seems like a fabulous deal! Yet, when you step back and look at it, taking the duration risk of a 10-year treasury note for a yield of 3% is still a pretty lousy bargain in ordinary times.

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Quantitative Easing and Money Magic

Posted by Eric Salzman   |  October 25, 2017 at 9:00 AM

This month, the Federal Reserve (Fed) has begun to “taper” the reinvestment of its $4.2 trillion balance sheet and wind down its extraordinary monetary policy of Quantitative Easing (QE). The Fed will do this by instituting caps on reinvestment of Treasury notes maturing and Mortgage Backed Securities (MBS) paying down principal. The program will reinvest Treasury proceeds over $6 billion and MBS proceeds over $4 billion to start. For example, if $20 billion of treasuries mature and $20 billion of MBS pay down, the Fed will reinvest $14 billion of Treasuries and $16 billion of MBS. This has the effect of decreasing total reinvestment by $10 billion a month. The plan is to increase these caps very gradually.

The Fed’s QE program is probably one of the most significant policies executed by either our government or an institution such as the Fed that is overseen by the government (somewhat at least) in decades. However, for much of the financial world, the policy is what Winston Churchill once called the Soviet Union: “A riddle wrapped in a mystery inside an enigma.” The two main questions most people have are how did the Fed create money and when they wind it down, how do they make the money go away?

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Global Investment Outlook: Oct. 2017

Posted by Josh Lynch   |  October 23, 2017 at 4:45 PM

Yesterday marked the 30-year anniversary of “Black Monday,” a day when the Dow Jones Industrial Average (DJIA) fell 508 points in a single trading session, representing a market cap loss of nearly 22%. Even more fascinating than the speed and size of the decline, was that there were no major announcements released over the preceding weekend, leaving investors struggling to make sense of the sell-off.

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About the LenderHub Blog

SWBC's LenderHub blog is a one-stop resource for lenders. Come here to learn tips and best practices for risk management, income generation, marketing, operational improvement, and customer retention, as well as to learn about industry trends and SWBC news.