AQS Performance and Perspective - December, 2017


AQS| Asset Management for Insurers




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Corporate Issuance 12 months


Corporate Issues Last 30 Days 

The Tax Plan and "un"Reinvestment - Catalysts

We've been pointing out that as reinvestment of the Fed balance sheet or SOMA cash flows is gradually withdrawn - about $250 billion in 2018 - the market must absorb a rather large amount of treasury, agency and MBS debt.  Add projected deficits if the tax plan passes and it amounts to $1.3 trillion in net issuance, the most since 2010.


All it needed was a catalyst.  Maybe that happened today.


Bitcoin, Stocks and Other High Flyers

Back in the day, there were bubbles.  Always.  One of the first involved tulip bulbs.  Introduced from Turkey, the market came tumbling down in 1637.  Other notables including the South Sea bubble, Wall Street 1929 and dot com to name just a few.  The greed that drives them only looks silly after the fact.


The Case for Bitcoin?

Short answer:  Because it goes up!  And up!  And up!

Slightly more intellectual answer:  Central banks are devaluing currency to buy debt, keep rates low and recover from the financial crisis.  Gold is difficult to move and heavy.  Bitcoin is weightless, electronic and untraceable.  Hackers however, change the game - see Youbit.


Crypto or FinTech?  It Doesn't Matter

Below we itemize some of the insanity around this bubblicious investment market.  Just say 'no'.


AQS vs. Select Barclay's Total Return Data



Wages versus Capital Expenditure - the Case for Sushi Robots, sushi provides us with a fine example of wage stagnation as a result of technology. 

A sushi machine is about the size of a printer.  It can crank out about 200 pieces an hour.  A human can produce about 50.  The machine costs about $14,000.  Humans are rented.  It's called a wage.  Lately wages have been creating the justification for capital expenditures which in turn, creates wage stagnation.

This topic is probably best left right here but we've got to credit Bloomberg for pointing it out.  In turn, they've got to bring in the economists.  This will overly complicate the entire thing.  Wish they could speak to the Fed economists.  Seems easy enough to understand why wages aren't growing.



Kashkari Dissents.....Again. Kashkari is the President of the Minneapolis Federal Reserve Bank.  He's a voting member of the FOMC and has consistently dissented with the rate hikes of 2017.


Speaking to the Wall Street Journal after the December 13 vote he said, "It's possible we could end the expansion by our own actions."  He clarified that "rate increases are not justified by inflation and yield curve concerns.".


Afterward, on December 19 just before the tax plan was voted on he offered, "I'm against rate hikes due to low inflation, but the GOP tax bill could change that."  Markets seem to agree.



Give Me All Your Cash, not a prospective felon.  The fellow on the right is a Trump nominee to the Federal Reserve Board and he doesn't like all the cash in circulation.


Goodfriend is concerned that the existence of cash makes it harder for the Fed to lower interest rates below zero. In the next crisis, he says, the Fed might want to push interest rates into negative territory to prod people to invest.  But today sub-zero rates would cause people to withdraw cash. The European Central Bank and Swiss National Bank have managed to push rates only slightly negative.


His solutions will make for an interesting confirmation hearing.  



Stupid Investment Stuffstupid
Put "Crypto" or "FinTech" in your name and sit back.

Until May of this year, SkyPeople Juice International Holding did what it always does:  packaged food products, fruit juice concentrates, beverages and stuff.  Change the name to Future Fintech Group, get a little PR and woosh !

LongFin debuted last Wednesday.  It surged 2600% after a press release saying it bought, a blockchain-empowered global micro-lending solutions provider that transacts only in cryptocurrencies. is launching a $250 million ICO (initial coin offering) to reshape its business.  Overstock wants to focus on the 10 blockchain companies they already own.




NAIC 2 Yields Still Low and Tight

10 year NAIC 2 Yields and Spreads

 Killing my eyes - make it bigger!

Mutual Fund and ETF Flows

Flows slow = Rates Up.

Killing my eyes - make it bigger!




Client results shown are calculated using SIA standard investment formulae for portfolios AQS has managed in excess of one year.  Each portfolio complies with governing investment statues, regulatory testing standards and metrics.  Results vary based on the client's specified investment policy, risk tolerance, profit objective and product mix.  AQS works with each client to develop a global understanding of objectives for income and surplus growth as well as product opportunities that represent synergies in terms of growth and diversification.