August 6, 2014

Big ModernIR News

Some would argue I should’ve hit him.

Only kidding! But let me tell you a story.  I was driving yesterday and saw approaching from the left at a good clip on a skateboard some lout on the sidewalk in backward cap and shorts, head down over his phone and ear buds in. There was a stop sign on his side not on mine but he never looked up and didn’t see me until he clattered into the street, where I’d stopped despite an opposite urge.  He didn’t say thanks or whew or anything, just skittered off, nose in phone. He wasn’t a kid either, probably in his 20s.

This to me is a metaphor for the markets. It’s easy to get discouraged about the future.  More on that in a bit. And that’s not the big news.  This is:

New website.  We’ve been testing our contemporary new internet home, gathering feedback, and have gotten high marks in the soft rollout. So voila! Visit modernir.com, mobile-ready and refreshed by our good advertising friends at Brand Iron here in Denver, who handle lots of things for us. Tell us what you think.

Updated logo. Brand Iron also persuaded us to touch up our image. We think it’s good work, though one observer said, “I hope the market doesn’t move inversely with your squiggle.”

New offices. Third is our new headquarters location on fashionable South Pearl Street in Denver, across from our town’s world-renowned Sushi Den and adjacent to diverse dining opportunities in both directions. Perfect for your next visit!  Stop in and see us at 1490 South Pearl Street, Ste 100, here in Denver.

New Director, Client Services. Finally, we’re proud to announce that Greg Yates has joined our client services team. Greg started with us in June and we haven’t driven him away, thankfully.  A University of Arizona graduate with a CFA, Greg began his capital markets career as a trader in fixed income for PIMCO in 1997, and moved on to trading equities at Banc of America, then to the buyside as an asset manager for a variety of firms including Mellon. Clients, you’ll find Greg a knowledgeable and apt supporter in your efforts to run the coolest and most effective IR programs in our profession. He’ll work under our Vice President of Client Services, Brian Leite.

All these are fruits of 100% growth the past two years. Thanks for your vital support.

Speaking of growth, the S&P 500 is up 74% since the last meaningful correction in August 2011. Is the next one at hand?  I’m reminded of an obscure eschatological phrase from biblical theology: “About that day or hour no one knows, not even the angels.”

We can only share what the data show, and what they don’t say is most telling. Ahead of the sharp drop July 31, Sentiment in our 10-pt index of market behaviors was at 5.4, slightly positive. That means the move didn’t reflect equities but something else. Interest rates gyrated that week, with the yield on 7-year US Treasuries shooting up 5%. Currencies fluctuated sharply.

Since 2008, the global financial system has balanced on the twin pillars of low interest rates and accommodative currency policy from the Federal Reserve and other central banks.  When the Fed announced plans in December to remove support, the data we track departed from the patterns we’d observed for most of the past two years and have not reverted. Money gains no momentum and Sentiment has stagnated around that 5.0 level.

For perspective, the Fed tried to withdraw some support in 2011. By July of that year, it had reduced mortgage-backed securities (MBS) on its balance sheet by about $200 billion, though it was continuing to buy US Treasuries under “QE2.” The Euro nearly imploded in autumn 2011.

Coincidence? Could be. But the Fed stopped selling MBS and resumed buying them. Now the Fed is again reducing support for risk assets by slowing its purchase of government debt and MBS, aiming to end it altogether in October. Once more, the pillars are swaying. The Euro is down, the dollar way up.

Whatever lies ahead, it’s essential for IR pros to offer data-supported perspectives on how the behavior of money is changing behind price and volume, so you can distinguish for management what’s within your control from what’s beyond it.

Stay tuned for the next exciting episode of As the Fed Stretches!

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