Hybrid Vigor: Vol 4 Issue 7 "When The Levee Breaks"

As we go to press information is coming out, via Donald Trump Jr., about emails from Russia. Will the market care for more than a few minutes?  In other words, is the possibility of malfeasance in the President’s immediate family enough to make corporate executives uneasy about decision making—or at least is it enough to make investors nervous about such decisions?

As Chairman Mao might have said, it is too soon to say.

The market’s resilience amidst slings and arrows such as these has been remarkable.  The main logic is, noise is noise, but where is the money going to go? With the Fed in a gradual tightening pattern, the question is, whom or what do you choose not to fight, the Fed or the tape?  Last week’s employment report seemed both strong and benign—lots of jobs, no wage pressures—giving the Fed plenty of latitude for its current program.  But how much of this good news is already priced in?

Whenever situations like this arise, as in all the time, the benefits of convertibles become more evident.  New issuance has slowed this year but is still at least somewhat encouraging.  If it keeps on rainin’, as the song goes, levee’s goin’ to break. Best to have a defensive place to stay when the lead balloon crashes. We don’t count CWB, an equity fund in drag. Neither should anyone else.

(This is the cover letter for the subscription-based weekly Hillside's Hybrid Vigor newsletter. For a complete copy, please contact John Anderson at + 1 (646) 712-9289 x 107).