With over 25 years of solid performance in the fixed income markets, SAC staff are often called upon by the media and other institutions to offer expert opinion on a wide range of financial issues. Find some of our more recent excerpts below.
"Play Defense, Not Offense"
Risk-averse investors are moving their money away from common stocks into fixed income hoping to play it safe.
Here's a surefire way to make 60% on your money. Borrow at the federal funds rate of 0.25% and invest the money in Treasury securities yielding 3% and higher. If you're a bank like Citigroup, Wells Fargo and Bank of America, you can borrow 20 times your investment to net a profit of 60% (3% x 20) on an annualized basis. We mortals prefer the more or less sure thing without leverage. This is the way the Fed helps shaky banks replenish their coffers.
No one seems worried about inflation. There is more concern about the recovery petering out. Investors are betting big time that there will be no Federal Reserve interest rate hike until 2011. Year-on-year CPI is running at a rate of negative 0.4%.
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Robert Lenzner
Forbes.com
December 11, 2009
"Dow Closes Above 10,000 as Cisco Pleases"
Robert G. Smith, chairman at Smith Affiliated Capital in New York, said he's sticking to gold, Treasurys and other safe-haven bets for now, eschewing more aggressive bets on stocks.
"People focus so much on Dow 10,000 as a big deal, but look how often we've been back and forth across that level since 1999," when the average first broached the round-number benchmark, said Smith, alluding to the measure's disappointing long-term gains.
He added: "What we're seeing right now is a big liquidity-driven market, but there's no real underlying strength in the economy."
"The government handed the ball off to the consumer and the consumer fell on it," said Robert G. Smith, chairman of Smith Affiliated Capital in New York. "This is a function of there being no jobs and wages going lower."
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Peter Mckay
Market Watch
November 5, 2009
"Lurking Doubts Launch a Sell-Off"
While analysts had expected spending on autos to slow once the Cash for Clunkers program concluded, the slump in this sector still highlighted how anemic the consumer economy remains.
"The government handed the ball off to the consumer and the consumer fell on it," said Robert G. Smith, chairman of Smith Affiliated Capital in New York. "This is a function of there being no jobs and wages going lower."
The sell-off on the stock market also reflected a report released Friday showing a decline in consumer sentiment this month, analysts said. The Reuters/University of Michigan consumer sentiment index fell to 70.6 in October, compared with 73.5 in September. Some of the decline in stock prices could also reflect short-term profit taking after Thursday's gains, analysts said. read full article >
Renae Merle
The Washington Post
October 31, 2009
"China Still Likes Us... For Now"
Despite these fears, several bond experts said they don't think China will stop buying Treasury bonds anytime soon for two simple reasons: the U.S. government debt market is both the most liquid and safest around.
"I'm not so worried about China selling Treasurys. Where else could they go with all the cash they have? They'll continue to buy Treasurys," said Matthew Smith, president and chief investment officer with Smith Affiliated Capital, a fixed-income money management firm in New York with $2.3 billion in assets
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Paul R. La Monica
CNNMoney.com
September 16, 2009
"In Week's Gains, Rally Holds"
The rally stalled Friday as investors cashed in profits, ending a five-day streak of gains. The Dow fell 22.07 points, or 0.2 percent, to 9605.41, while the S&P 500 fell 1.41 points, or 0.1 percent, to 1042.73. The Nasdaq lost 3.12 points to close at 2080.90.
"After moving 40 percent in the last 2 1/2 months, you want to take some profits," said Matthew Smith, president and chief investment officer at Smith Affiliated Capital in New York.
Investors shrugged off some positive news Friday. FedEx raised its first-quarter earnings forecast, citing cost cuts and better-than-expected international shipments, which fueled a 6.4 percent increase in the company's stock. Also, consumer confidence rose more than forecast in September, according to the Reuters/University of Michigan preliminary index. The index, which rose to 70.2 from 65.7, is still low by historical standards but is showing improvement, analysts said.
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Renae Merle
The Washington Post
September 12, 2009
"US Stocks Continue Lower; DJIA Down 117 Points"
"There's really been a lot of paranoia about inflation lately," said Robert Smith, chairman of the New York portfolio-management firm Smith Affiliated Capital, which is continuing to favor bonds over stocks. "The outlook for the summer readings of inflation is really bearish," especially in light of weak comparisons in fuel costs to a year ago.
Oil has been on a tear lately, but it remains well off its records near $150 a barrel. In recent action, futures were off $2.40 at $67.15 a barrel.
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Peter McKay
Market Watch
June 22, 2009
"Bond Market Recovers With Issuance Over For Now"
In U.S. economic data on Thursday, new homes sales figures suggested the housing market has yet to bottom out and were broadly supportive of Treasuries' prices. New home sales rose in April, but only after downward revisions to the prior month.
"Treasury yields backing up isn't stimulative for the economy," said Matthew Smith, president and CEO of Smith Affiliated Capital. Providing some relief to Fed officials, who are trying to keep long-term rates low, the 30-year bond was up over two full points late Thursday and yielding 4.51 percent, down 14 basis points on the day.
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Reuters
May 28, 2009
"Stocks May Be Taking Technical Timeout"
The Mortgage Bankers Association said Wednesday that the market composite index, a measure of mortgage loan application volume, decreased 14.2% last week from the week prior. The refinance index fell 18.9% from the previous week, but the purchase index increased 1%.
Keep in mind, says Matt Smith, president of Smith Affiliated Capital, "applications don't necessarily mean approvals on this." Although rates are low, the terms to qualify for them
are very selective, he says.
Away from housing, financials continued to make headlines as Bank of America said it has raised almost $26 billion since the results of the stress tests were released. BofA also said it's "well on its way to reaching the $33.9 billion indicated Supervisory Capital Assessment Program (SCAP) buffer set by the Federal Reserve."
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Elizabeth Trotta
TheStreet.com
May 27, 2009
"Bond Market: Shaken and Stirred"
Matthew Smith, chief investment officer with Smith Affiliated Capital, a fixed-income money management firm in New York, agreed. He said that just because economic numbers are "less worse" does not mean that it's time to celebrate.
"There is a huge disconnect in terms of what Wall Street perceives as a rosy economy. The numbers don't translate to Main Street just yet," Smith said. "[Fed chairman Ben] Bernanke is telling us there are green shoots. They look rather yellow to me."
Smith said that because consumers still have relatively high debt loads, he's not convinced that any recovery will be as strong as people now expect it to be.
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Paul R. La Monica
CNNMoney.com
May 11, 2009
"US Stocks Higher On Hopes For US Economy"
"What's happening on Wall Street these days isn't necessarily lining up with what's going on in the domestic economy," said portfolio manager Matthew Smith, of Smith Affiliated Capital, which for now continues to favor Treasury bonds and other forms of low-risk debt over stocks.
Smith was skeptical of the stress-test results, which he believes were based upon some faulty assumptions by regulators.
"They started out assuming there are no truly toxic assets at this banks, just misunderstood assets that will gain value as the market gets back to normal," he said. "I don't see why we should believe that."
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Peter McKay
Market Watch
May 8, 2009
