Cooper Capital

05/04/2020

But boring is safe! Watching a bond steadily accumulate interest and principal payments doesn't have nearly the thrill of the roller coaster stock market. What a bond does have is a set maturity, a steady income, and an issuer guarantee. Find out what bonds can add to your retirement on our website.

04/09/2020

Who could have imagined a scenario where weekly unemployment applications exceeded 6 million and the stock market yawned? We are now in the second week in a row of these numbers. For reference, the week of March 15 had 282,000 initial jobless claims (versus, again, this week’s 6,606,000).

These kinds of extremes have become commonplace over the last several weeks. Record stock market losses, record gains, huge congressional relief packages… they are all old news now. It seems very little can startle financial markets anymore.

This is likely a false sense of calm, though. Read more on our blog

Who could have imagined a scenario where weekly unemployment applications exceeded 6 million and the stock market yawned? We are now in the second week in a row of these numbers. For reference, the week of March 15 had 282,000 initial jobless claims (versus, again, this week’s 6,606,000). These ki...

11/19/2019

Have you contributed to your retirement account this year? Now is the time to plan for your contribution. Most retirement accounts grow tax advantaged, making a HUGE difference in how much you get in retirement.

If you don't have an IRA, Roth IRA, or 401(k), now is the time to start one! The single most useful thing you can do to save enough for retirement is to start early. Message me with any questions!

08/30/2019

Business cycles are a normal part of the economic machine. A period of expansion is followed by a period of stagnation or contraction. The current expansion of 121 months far surpasses most other expansion periods, besides that of the 1990s (120 months). The average length of an economic expansion between 1945 and 2009 was just 58.4 months.[1] At this point, we’ve more than doubled that number and, while the expansion is slowing, it hasn’t yet stopped.

The Federal Reserve’s decision to cut its benchmark interest rate this week was an attempt to prop up the expansion amid global slowdowns and trade uncertainty. It’s an admirable effort, but at some point the expansion party needs to come to an end. In 2015, the Fed ended the longest period of low interest rates in memory, but still only managed to get their rate to 2.5% before having to reverse course. You can see below how far away from “normal” the last decade has been in terms of interest rates.

Historically, interest rates have gone up and back down in, if not equal, at least balanced measures. The long and deep trough following the Great Recession has thrown the business cycle for a loop. Our expansion has been long, but not necessarily booming.

With the Fed Funds rate peaking at only 2.5%, there is not much room for rate cuts to bolster the economy. The main hope, then, is to act preemptively to prevent another long period of stagnation in an ultra-low rate environment.

As bond investors, we often see our best opportunities at the edges of the business cycle. At the last interest rate peak, we were able to purchase highly discounted bonds that then appreciated in value and increased interest payments. The much more muted peak of this cycle has meant fewer buying opportunities than we’ve seen in the past, but still has afforded us the ability to get higher yielding bonds into accounts, compared to the last ten years when interest rates were on the floor.

The Fed’s rate cut this week may help keep the economy expanding. More likely, though, it will just ease the pain of the end of the expansion, and hopefully set the economy up for a return to a more normal and balanced business cycle. Following the 120 month expansion of the 1990s came an eight month contraction. Such a short stint into the trough of the business cycle is preferable to the 18 months we spent in the last recession. We cannot live forever in an expanding economy, but if the Fed can stay ahead of the game, we may see a return to expansion, and economic normalcy, sooner rather than later.



[1] National Bureau of Economic Research (NEBR) https://www.nber.org/cycles/cyclesmain.html

***This information is not intended to be used as the only basis for investment decisions, nor should it be construed as advice designed to meet your particular needs. You are advised to seek the advice of your financial adviser, legal or tax professional, prior to making any investment decision based on any specific information contained herein.

05/09/2019

Thirteen has always been an evocative number. To this day, an estimated 85% of tall buildings don’t label the 13th floor as such, to prevent problems with superstitions or luck. And now we find ourselves, thirteen years out from the last time the Treasury yield curve inverted, back in the same position.

Prior to the last recession, the yield curve inverted in December 2005. It also inverted in December 2018. Throughout 2006, the inversion worsened, as it is doing now in 2019. An inverted yield curve occurs when investors are willing to accept a lower return on long term debt than they are on short term debt. This inverted curve has preceded every recession in the past sixty years.

Many people are saying that this time is different, and perhaps a recession is not imminent. They are at least partially correct – this time is different. The Federal Reserve, which sets monetary policy and the short term Fed Funds rate, has signaled there will be no more rate hikes in 2019. Comparatively, in 2005 when the curve initially inverted, the Fed continued to raise its benchmark rate, eventually adding another 100 basis points to top out at 5.25%. The current Fed seems much more cautious about the potential for a coming recession.

On the other hand, today’s yield curve is hovering around 2.5%, whereas the 2005-2006 curve straddled the 5% mark. This leaves much less space for the Fed to cut rates if an economic slow down does occur. The hope, of course, would be that the more accommodative monetary policy we have been and, really, still are, in, would help to dampen the effect of a downturn, making the space the Fed does have enough to effectively manage monetary policy.

Markets are anticipating the next move the Fed makes will be a cut to interest rates, rather than a hike. Whether or not an actual recession is looming, an economic slowdown is expected. This would mean lower mortgage rates, which helps increase prepayment speeds, and a boost to inverse floating rate bond coupons. Because interest rates have remained relatively low, historically speaking, in this cycle, we have not seen the record-breaking deals on bonds we saw thirteen years ago. Still, the best way to position ourselves for gains in the coming downturn is to hunt out discounted bonds whose current coupon rates may be low, but that are well-leveraged for interest rate cuts. We continue to invest with a buy-and-hold strategy that mitigates price risk, and use monthly cash flows to reinvest.

This information is not intended to be used as the only basis for investment decisions, nor should it be construed as advice designed to meet your particular needs. You are advised to seek the advice of your financial adviser, legal or tax professional, prior to making any investment decision based on any specific information contained herein.

08/01/2017

We are sorry to say that on Friday, July 28, our founder and chairman, as well as mother and wife, Kitty Cooper, passed away. She had had some health problems in recent years, but the sudden downturn was unexpected and very fast.

Kitty started Cooper Capital in order to help close friends with financial decisions after difficult life events such as divorce and death. While she had stepped down from involvement, she had previously dedicated her time to building Cooper Capital from a small hobby into a successful advisory business. Her generous nature pervaded both her business and personal relationships. Kitty will be dearly missed by her family and friends.

03/23/2017

Long term investing reduces risk as well as cost. Learn more about our strategy at coopercapital.com

03/02/2017

Economic conditions are improving globally, but is it enough to make a March rate hike a sure thing?

Read more:

With good economic news prevailing and comments from several Federal Reserve governors, bets for a rate hike at the next Federal Reserve Open Market Committee meeting have nearly tripled since Tuesday morning. Currently, the market is close to 90% sure that there will be a 0.25 percent rate increas...

02/01/2017

Despite several strengthening economic indicators, the Fed is unlikely to raise short term interest rates Wednesday, as the impact of possible tax cuts and deregulation is still uncertain.

Read more:

The Federal Reserve Open Market Committee (FOMC) is unlikely to change short term interest rates as they wrap up their first meeting of 2017 on Wednesday. While many economic indicators continue to strengthen, markets have already reacted, or over-reacted, to the idea of an improving economy. The s...