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Thursday, January 30, 2020

The Fed’s Key Yield Curve Inverted Again. Watch Out. - Yahoo Finance

(Bloomberg Opinion) -- I’m not an alarmist when it comes to the yield curve.

However, it can’t go unremarked that the spread between three-month and 10-year U.S. Treasuries inverted on Thursday for the first time since October. The curve has flattened toward zero all month: Short-term rates have stayed steady with Federal Reserve policy, while longer-term yields have tumbled amid mounting evidence that the deadly coronavirus is harming the outlook for global economic growth. 

Just in case you missed the yield-curve mania over the past few years, the significance of this spread dropping below zero is that the same thing has happened in the lead-up to each of the past seven recessions. It’s such a reliable indicator, in fact, that both the New York Fed and the Cleveland Fed calculate the probability of a downturn in the coming 12 months based on the slope of the yield curve. The odds dipped toward the end of last year, but BMO Capital Markets estimates that the models now imply a 30% to 35% chance of a formal contraction by this time in 2021.

As always, if you look hard enough, you can find reasons to convince yourself that this is the beginning of the end of the economic cycle. Just on Thursday, Commerce Department data showed consumer spending slowed to a 1.8% pace, below estimates and the weakest since the first quarter; the Fed’s key inflation gauge rose less than expected; and nonresidential business investment fell for the longest stretch since the last recession. 

Or you can fall in the camp of those like Brian Rose at UBS AG, who wrote recently that “some of the risks that we have been worried about have diminished recently” and that “it is possible that the U.S. can avoid a recession for several more years.” Citigroup Inc.’s U.S. economic surprise index is still positive, after all, in contrast to its persistently negative reading from February through August last year.

Regardless, this crucial yield curve first inverted in March, and now 10 months later the U.S. is nowhere near meeting the formal definition of a recession (gross domestic product expanded at a 2.1% annualized rate in the fourth quarter). Instead, for bond traders, the most important thing to consider is how the Fed reacted to the inversion throughout last year. 

March: The curve continued flattening. Policy makers quickly shifted their “dot plot” to forecast no interest-rate increases in 2019, down from two in their previous forecast. As I wrote at the time, the move managed to clear traders’ already high dovish hurdle. May: The curve inverted in earnest. By June, Fed Chair Jerome Powell was indicating that the central bank was prepared to cut interest rates at its July meeting. August: The curve lurched deeper into inversion as recession fears reached a peak. Powell and the Fed showed no hesitation in dropping the fed funds rate in September and didn’t push back on an October rate cut either, even though he characterized the July move as a “mid-cycle adjustment.” October: After three quarter-point interest-rate cuts, the yield curve was no longer inverted.

Simply put, the Fed has obviously felt compelled to act when the yield curve inverts. Policy makers came into 2019 expecting to raise interest rates twice and ended up dropping them three times instead. This year, officials have reiterated that the U.S. economy and monetary policy are both in a “good place” and that the central bank will probably keep interest rates steady throughout the year. That certainly seemed reasonable at the end of the year, when the slope of the curve was 35 basis points. But now?

My hunch is that it’s probably still too soon to extrapolate the coronavirus-driven rally in Treasuries into another Fed rate cut, even if the futures market indicates it’s likely sometime in 2020 and the 10-year yield is approaching 1.5%. As BMO pointed out, a big drop in the “term premium” is the main reason longer-term yields have plunged this year, not necessarily a shift in monetary policy expectations. Then again, the term premium plunged in August, too.

Bond traders ought to stay vigilant. There are times when market moves start to nudge the Fed toward action, even if their public comments suggest otherwise. This might just be one of them. 

To contact the author of this story: Brian Chappatta at bchappatta1@bloomberg.net

To contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.net

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.

For more articles like this, please visit us at bloomberg.com/opinion

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The Fed’s Key Yield Curve Inverted Again. Watch Out. - Yahoo Finance
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Google’s OpenSK project lets you build your own security key, hopes to drive innovation - 9to5Google

Google in recent years has been all-in on security keys from making its own Titan line to introducing ones integrated with your existing Android and iOS phones. To spur innovation, Google today launched OpenSK — an open-source project that lets developers build their own security keys.

OpenSK is an open-source implementation for security keys that supports FIDO U2F and FIDO2 standards. This two-factor authentication method is highly resistant to phishing attacks. When signing in to an online account, the key-shaped dongle or fob must be physically present to confirm that it’s really you.

By opening up OpenSK as a research platform, our hope is that it will be used by researchers, security key manufacturers, and enthusiasts to help develop innovative features and accelerate security key adoption.

The goal of this project is to “help advance and improve access to FIDO authenticator implementations,” including innovating on “usability and human factors” that might pose barriers to wider adoption.

Google is letting developers build their own security key by flashing the OpenSK firmware on an off-the-shelf Nordic chip dongle that costs $10. The hardware features NFC, Bluetooth Low Energy, and USB-A with a dedicated hardware crypto core. Google is also providing a custom, 3D-printable case to protect and carry the key.

Google notes how you can build a “fully functional FIDO authenticator” with OpenSK, but emphasizes that the experimental project is for “testing and research.”

Under the hood, OpenSK is written in Rust and runs on TockOS to provide better isolation and cleaner OS abstractions in support of security. Rust’s strong memory safety and zero-cost abstractions makes the code less vulnerable to logical attacks. TockOS, with its sandboxed architecture, offers the isolation between the security key applet, the drivers, and kernel that is needed to build defense-in-depth. Our TockOS contributions, including our flash-friendly storage system and patches, have all been upstreamed to the TockOS repository.

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Fantasy Football: XFL team previews, with key players, odds, coaching tendencies, and more - CBS Sports

The inaugural season of the XFL kicks off Saturday, February 8, and features eight teams playing 10 games each, before a four-team playoff that will conclude with a championship game on April 26. 

Those who remember the AAF folding last spring might be hesitant to invest much time in the XFL experience, but consider that DraftKings has publicly announced they will be hosting XFL DFS contests, and FanDuel is also exploring the possibility. Neither site hosted AAF contests last year, and if you're reading this I probably don't need to explain how integral Fantasy can be to the popularity of sports leagues, particularly an upstart like this. 

It remains to be seen whether that theory will be proven correct and the XFL can succeed in a way the AAF didn't, but in the meantime I'll be dipping my toes in the DFS and even seasonal Fantasy waters, and invite you to join. There are far more unknowns than knowns about the eight teams in the XFL at this stage — we have rosters but not depth charts, we're not clear on how the new rules will impact stats, etc. — but there are still things we can consider. 

Here are some initial thoughts on each team, ranked in order of the first available over/under lines as a proxy for team strength. I've also included FanDuel's championship odds, although I've found several sets of championship odds and they do vary, so if you want to make picks, it's worth seeking value. 

At this stage, I'm largely concerned with offensive coaching tendencies, and specifically run/pass splits. The XFL rules include shorter play clocks and a running clock, so the effect of pace should be muted. The key players I reference are largely those with NFL or AAF experience, but it won't be clear in many cases whether that means they'll have a leg up in playing time until we see official depth charts. 

Tampa Bay Vipers

Season win over/under: 7.5
FanDuel championship odds: +500

Key offensive coach: Head coach Marc Trestman

Tampa Bay has some of the most recent significant offensive NFL coaching experience in Trestman. Trestman was something of a controversial figure in the NFL as a pass-happy head coach of the Bears and offensive coordinator of the Ravens for two seasons each from 2013-2016, and his offenses in many ways embodied the shift to a modern NFL era of more passing. Both offenses threw to the running back position far more than league average, a trait that followed Trestman from his time in the CFL. Expect his Tampa offense to be among the most Fantasy-friendly in the XFL.  

Key offensive players

QB Aaron Murray (Georgia)
QB/RB Quinton Flowers (USF)
RB De'Veon Smith (Michigan)
WR Antonio Callaway (Florida)
WR Seantavius Jones (Valdosta State)
WR Reece Horn (Indianapolis)
WR Stacy Coley (Miami FL)
WR Donteea Dye (Heidelberg)
WR Tanner McEvoy (Wisconsin)
TE Nick Truesdell (Grand Rapids Jr. Co.)

Murray is the first-team quarterback, and I was reasonably impressed with his accuracy in the AAF last year after taking over from Matt Simms as Atlanta's starter midseason. Trestman has said Flowers will play in the first game, and based on Flowers' history I'm expecting something of a Taysom Hill role. 

De'Veon Smith is another AAF alum who ran well for Orlando but caught just five passes, so it will be interesting to see who handles the passing downs work for Tampa, which figures to be lucrative in Trestman's scheme. Jacques Patrick and Mack Brown are the other two running backs on their active roster. 

Tampa is loaded with pass-catchers, including several with NFL experience and others who will be recognizable to those who followed the AAF. Callaway is the uber-talented but troubled former Brown, but he was hurt in practice this week, so his status is up in the air. Jones played with Murray for Atlanta in the AAF, and led them in receiving, but struggled with drops at times. Truesdell led the AAF in receiving yardage among tight ends. We'll have to await official depth charts to get a better idea of who might get the first crack at extensive playing time at wide receiver, but it's likely to be a crowded passing game. 

Dallas Renegades

Season win over/under: 6
FanDuel championship odds: +300  

Key offensive coach: Offensive coordinator Hal Mumme

Head coach Bob Stoops is well-known as the long-time head coach of the Oklahoma Sooners, while Mumme is a lesser-known long-time collegiate head coach, mostly at smaller schools with a short stint at Kentucky mixed in. Stoops had a variety of offensive coordinators while at Oklahoma, including Mike Leach and Lincoln Riley, two coaches known for pass-heavy offenses. Mumme has been described as an air raid guru, and all signs point to Dallas featuring a pass-heavy offense. 

Key offensive players

QB Landry Jones (Oklahoma)
QB Philip Nelson (East Carolina)
RB Cameron Artis-Payne (Auburn)
RB Lance Dunbar (North Texas)
WR Jazz Ferguson (Northwestern St.)
WR Freddie Martino (North Greenville)
WR Jeff Badet (Oklahoma)

Jones played for Stoops at Oklahoma before settling in as Ben Roethlisberger's backup at the NFL level. He made five starts across three seasons with reasonable results. He suffered a knee injury in early January that was given a 4-6 week timeline, with Stoops saying "We are sorry to see Landry sidelined for the next four to six weeks and are hopeful he will heal quickly and be back on the field at our opener, if not just shortly after." Nelson, an AAF alum, would figure to draw the start if Jones misses time. 

Artis-Payne was the long-time reserve back for the Carolina Panthers, and while he only had 118 career carries at the NFL level, one would figure he has a shot to be an important piece in Dallas's backfield. Ferguson is a big and fast receiver, running a 4.45 at 6 feet, 5 inches tall. An undrafted free agent in 2019, he led the Seahawks in preseason receiving yards but failed to make the team. 

Houston Roughnecks

Season win over/under: 6  
FanDuel championship odds: +900  

Key offensive coach: Head coach June Jones

Jones was the Falcons offensive coordinator and head coach in the 1990s, before long stints as the head coach at Hawaii and SMU. Jones is another XFL coach with a background as a vertical passing specialist, and he gained some notoriety and was hired away from Hawaii after quarterback Colt Brennan's record-breaking career as a passer. 

Key offensive players

QB Connor Cook (Michigan St.)
RB De'Angelo Henderson (Coastal Carolina)
RB Andre Williams (Boston College)
WR Sammie Coates (Auburn)

Connor Cook looks like Houston's starter. The former fourth-round pick posted subpar preseason numbers with the Raiders three years in a row, but the offensive philosophy should mean plenty of volume. 

Houston has an unheralded pass-catching corps, most of whom are from smaller schools, but former Steelers third-round pick Sammie Coates should figure into their passing game. Still just 26, Coates was a 99th percentile SPARQ athlete coming out of college, and in a potentially high-powered but thin passing game could be one of the league's better bets for receiving production unless Cook struggles. 

DC Defenders

Season win over/under: 5.5
FanDuel championship odds: +700  

Key offensive coach: Head coach Pep Hamilton

Hamilton has a variety of experience, largely as a quarterbacks coach at both the college and pro level. He's most famous for taking over for Bruce Arians as the offensive coordinator of the Colts after Andrew Luck's rookie season. Hamilton had previously coached Luck at Stanford under Jim Harbaugh, and was back with Harbaugh as Michigan's passing game coordinator in 2017 and 2018. Hamilton's history suggests another offense that will be willing to throw the ball around.  

Key offensive players

QB Cardale Jones (Ohio State)
RB Jhurell Pressley (New Mexico)
RB Donnel Pumphrey (San Diego St.)
RB Nick Brossette (LSU)
WR Rashad Ross (Arizona St.)
WR Eli Rogers (Louisville)
WR Malachi Dupre (LSU)
WR Simmie Cobbs (Indiana)
TE Khari Lee (Bowie St.)

Former National Championship winning quarterback Cardale Jones is one of the league's headliners, and DC has amassed a strong set of skill position players around him. 

Pressley led the AAF in rushing yardage last year as a do-everything back; Pumphrey is a receiving back who long looked like the heir apparent to Darren Sproles for the Eagles but never figured into their plan; and Brossette is more of a plodder but led the NFL in preseason rushing yards in 2019 with New England. 

Ross is a downfield weapon who caught seven touchdowns to lead the AAF last year and was second in receiving yardage to Charles Johnson. Rogers spent three years as a depth player with the Steelers, catching 78 balls in a mostly slot role that should complement Ross' vertical ability. Dupre, Cobbs and others could also factor into the Defenders' passing game. 

New York Guardians

Season win over/under: 4   
FanDuel championship odds: +375  

Key offensive coach: Head coach Kevin Gilbride

A long-time NFL coach, Gilbride was the offensive coordinator for the Giants from 2007 to 2013, after working as a coordinator or head coach (two seasons with the Chargers) for five other teams starting with the Houston Oilers in the early 1990s. While the time with the Warren Moon Oilers is promising from a passing perspective and Eli Manning had some good seasons under Gilbride, Gilbride coached under Tom Coughlin both with the Jaguars in the 1990s and the Giants. Expect a balanced offense but with a potential run lean.  

Key offensive players

QB Matt McGloin (Penn State)
QB Marquise Williams (UNC)
QB Luis Perez (Texas A&M Commerce)
RB Tim Cook (Oregon St.)
RB Justin Stockton (Texas Tech)
WR Mekale McKay (Cincinnati)

The Guardians have quarterback depth, and while McGloin looks like the starter, Williams and Perez both have AAF experience and could factor in if McGloin struggles. McGloin made seven starts for the Raiders over four seasons as their backup, but hasn't played since 2016. Williams is a dual threat option while Perez lacks mobility, so the Guardians have two backups who play very different styles. 

Cook and Stockton were both productive backups with the Arizona Hotshots of the AAF last season. Cook is a bigger back, listed at 247 pounds, while Stockton checks in just under 200 at 197 (and three inches shorter than Cook). Gilbride's time with the Giants featured a backfield committee with bigger back Brandon Jacobs and Ahmad Bradshaw (among others) as the other option, and I'm expecting something similar here.

The Guardians have plenty of pass-catching options, but McKay stands out. The big-bodied McKay was seventh in the AAF in receiving yardage and third in receiving touchdowns, and if we continue the Gilbride-Giants discussion, he would figure to be the Plaxico Burress of the Guardians. 

Los Angeles Wildcats

Season win over/under: 4 
FanDuel championship odds: +500 

Key offensive coach: Offensive coordinator Norm Chow

Chow is most well-known as the offensive coordinator at USC under Pete Carroll in early-2000s, coaching Carson Palmer and Matt Leinart to Heisman trophies. Prior to that, he spent 27 years as an assistant on BYU's staff during a run of success that featured quarterbacks Jim McMahon, Steve Young and Ty Detmer. But Chow's later stint as the Titans offensive coordinator from 2005-2007 leaned toward the run, as those teams were mostly quarterbacked by mobile signal-callers Steve McNair and Vince Young. If ex-NFLer Josh Johnson starts for the Wildcats, I'm expecting an offense similar to Chow's time with the Titans.

Key offensive players

QB Josh Johnson (San Diego)
RB DuJuan Harris (Troy)
RB Elijah Hood (UNC)
WR Nelson Spruce (Colorado)
WR Tre McBride (William & Mary)
WR Adonis Jennings (Temple)

Now 33, Johnson's NFL career started with three seasons with the Bucs starting in 2009, then he bounced around the league a bit until 2014. Out of the league for three years after that, Johnson started three games and played in a fourth in late-2018 with Washington, where he failed to throw for 200 yards in any game but showed off his mobility, rushing for 120 yards. Dual threats frequently limit receiving production, but it's not clear yet whether Johnson will start, though a recent release suggests he will. 

I'm not sure what to make of the running back room. Harris is another older ex-NFLer, and the 31-year-old totaled 145 carries and caught 21 balls in the NFL, mostly for the Packers and 49ers. Hood has seen limited preseason work the past three seasons but never regular season action at the NFL level. Martez Carter and Larry Rose fill out the depth chart. 

Spruce and Jennings are familiar names to those who followed the AAF. Spruce earned the third-most targets in the league and finished with the fifth-most receiving yards with San Diego, while Jennings was more of a rotational player with Salt Lake City. McBride is a former seventh-round pick of the Titans who was something of a sleeper in Dynasty circles for a few years, but that never materialized at the NFL level. A plus athlete who had dominant production at a small school, he's someone I'll have my eye on as a potential XFL breakout if the Wildcats pass enough. 

St. Louis BattleHawks

Season win over/under: 3.5 
FanDuel championship odds: +1000 

Key offensive coaches: Head coach Jonathan Hayes, offensive coordinator Chuck Long

There are clear ties between head coach and offensive coordinator for the BattleHawks, as the two played together in college under Hayden Fry at Iowa. Fry was an innovative coach in the college ranks who advanced passing games, and Long was his quarterback in the mid-1980s who threw to Hayes, a tight end. Long and Hayes also coached together under Bob Stoops — head coach of the Renegades who also played at Iowa under Fry — in the early-2000s at Oklahoma. Hayes went on to be the long-time tight ends coach for the Bengals from 2003-2018. Long was a successful offensive coordinator at Oklahoma but an unsuccessful head coach for three seasons at San Diego State. He was the coordinator for Kansas in 2010 and 2011, which was the last time either Hayes or Long were in a coordinator or head coaching position at the major college or professional level.

Key offensive players

QB Jordan Ta'amu (Ole Miss)
RB Christine Michael (Texas A&M)
RB Matt Jones (Florida)
RB Keith Ford (Texas A&M)
WR L'Damian Washington (Missouri)
WR De'Mornay Pierson-El (Nebraska)
WR Keith Mumphery (Michigan State)
WR Carlton Agudosi (Rutgers)

Ta'amu is an interesting player, because he threw to A.J. Brown, D.K. Metcalf and Dawson Knox at Ole Miss, and there's a case the Ole Miss passing game should have been much more explosive. Metcalf in particular wasn't a very productive college player when healthy, at least as far as future NFL producers go. But the biggest thing the various betting markets agree on is the BattleHawks and Dragons are the two bigger longshots in the XFL, and while that probably should be taken with a grain of salt, it could mean more passing volume for Ta'amu. 

The BattleHawks have a pair of backs in Michael and Jones that have combined for over 500 NFL carries. I've seen they "want to be a downhill running team," and they certainly have the experience at running back to accomplish that. That said, we know experience isn't necessarily a good thing at running back, as bodies can break down and youth can often rule the day. Whether Michael or Jones have enough left in the tank remains to be seen.

Pierson-El is a smaller slot receiver who finished sixth in the AAF in receiving yardage for Salt Lake, while Mumphery is a former Texan who caught 24 passes at the NFL level over two seasons and profiles similarly. Washington and Agudosi are bigger outside receivers, listed at 6-4 and 6-6. It's not clear who the top receiving options might be. 

Seattle Dragons

Season win over/under: 3.5
FanDuel championship odds: +1000 

Key offensive coaches: Head coach Jim Zorn, offensive coordinator Mike Riley

Zorn was an NFL quarterbacks coach for 14 years across four teams, and was Washington's head coach for two seasons. Riley was the head coach of the Chargers from 1999-2001, then went on to be the long-time Oregon State head coach before a brief stint at Nebraska. Riley was also the head coach of the AAF's San Antonio Commanders in 2019, who were third in the league in rushing yards and last in passing yards when the league folded after eight games. Zorn's Washington teams seemed to lean toward the run, but they featured Jason Campbell and Clinton Portis as the quarterback and running back. 

Key offensive players

QB Brandon Silvers (Troy)
RB Kenneth Farrow (Houston)
RB Ja'Quan Gardner (Humboldt State)
RB Trey Williams (Texas A&M)
WR Kasen Williams (Washington)
WR Dontez Byrd (Tennessee Tech)
WR Keenan Reynolds (Navy)
WR Alonzo Moore (Nebraska)

Seattle targeted AAF players perhaps more than any other team, and that may be due to having the AAF's Director of Scouting on staff. Farrow, Gardner and Williams were each among the 14 backs in the AAF who rushed for at least 200 yards, and any of the three could be expected to be important pieces in the backfield, but Farrow and Gardner would seem likely to lead. Farrow logged 60 carries with the Chargers in 2016 and was second in the AAF in rush attempts and rush yards — he's likely the biggest workhorse, while Gardner and Williams showed big-play burst at times. 

Silvers is one of the biggest unknowns among the league's starting quarterbacks. A four-year starter at Troy from 2014-2017, he never latched on with an NFL team but did play briefly late in the AAF season after starting the year as a third-stringer. Among his receiving corps, Byrd and Moore were AAF role-players, while Williams and Reynolds both spent time with the Seahawks in recent preseasons. The Dragons are also easily the most TE-heavy team in the league, with five on their current roster, four of whom played in the AAF. 

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