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Latest Observations, November 2018






Do stocks outperform Treasury bills?

"All of the wealth creation can be attributed to the thousand top-performing stocks, while the remaining 96 percent of stocks collectively matched one-month T-bills."

Prof. Hendrik Bessembinder, Francis J. and Mary B. Labriola, Arizona State University, W. P. Carey School of Business, May 2018

The ECB’s QE End Is Bullish
Closing the chapter on QE is bullish—not bearish—for investors, in our view.
Fisher Investments MarketMinder, November 8, 2018


Why French Investors are Truly les Misérables
"Over a 100-year period, French investors would have lost over 90% of their money after inflation no matter how they invested their money."
Dr. Brian Taylor, Global Financial Data, 17 April 2017


Can banks individually create money out of nothing? — The theories and the empirical evidence
This study establishes for the first time empirically that banks individually create money out of nothing. The money supply is created as ‘fairy dust’ produced by the banks individually, "out of thin air".
Richard A. Werner, International Review of Financial Analysis, December 2014


What do rising rates mean for international investments?
Brian Levitt, OFI Global Asset Management, October 11, 2018 

Do we still believe interest rates will remain low for long? 
Brian Levitt, OFI Global Asset Management, October 11, 2018


Notes on The Bitcoin Standard
"Bitcoin, as designed, is deflationary."
Michael Kendall, Man on the Margin, July 16, 2018


American Default

The Untold Story of FDR, the Supreme Court, and the Battle over Gold.
Sebastian Edwards, Princeton University Press, May 2018


The Coffee Chronicles

“In the depth of your ignorance, what is it that you want?"


Orson Welles getting frustrated with some studio personnel as he attempts to narrate some badly written commercials that he clearly finds quite annoying. Obscure Audio 2: Orson Welles Outtakes - Frozen Peas, 1970


Asian currencies vs. Yuan, rebased at 100 on 31.12.2013

Charles Gave, Guerre Commerciale Chine/ Etats-Unis, Institut des Libertés, October 7 2018


Why Financial Institutions Struggle to Modernize…and Why They Have to
Prattle is pleased to publish this interview with Zac Sheffer, CEO and Founder of Elsen, focusing on the modernization of financial institutions and the future of data in finance.

Prattle, February 7, 2018 

Quote on
the Fly

Shadow Risk in Passive Investing
"The shift from active to passive investing is a significant amplifier of future volatility."


Christopher Cole, Founder and CIO of Artemis Capital, Volatility and the Alchemy of Risk, Reflexivity in the Shadows of Black Monday 1987, October 2017





Pension Funds Switzerland 2018
For institutional investors only


Public Pension Funds


Corporate Pension Funds


Industry-Wide Pension Funds


Multi-Employer Pension Funds



Seismic waves
Seismic waves are waves of energy that travel through the Earth's layers. What would be the equivalent in today's markets?
Investment Office, September 2018


Bloomberg: Prattle Analysis Shows Men Speak 92% of Time on Earnings Calls
Prattle, September 18, 2018




A Tangled Tree: A Radical New History of Life

"My favorite part of the book is the section, starting on p.244, on bacteria that are resistant to antibiotics that have not yet been invented."
Greg Van Kipnis, Daily Speculations, September 16, 2018


Pension asset allocation
Aggregate P7 asset allocation from 1998 to 2017


Willis Towers Watson, Global Pension Assets Study 2018, February 2018



The Count of Monte Cristo
The Count of Monte Cristo has numerous financial data and speculations in it that shows that during the Napoleonic years there was active speculations.
Victor Niederhoffer, Daily Speculations, September 16, 2018



The Callan Periodic Table of Investment Returns
Annual Returns for Key Indices Ranked in Order of Performance (1998–2017)

Callan Associates Inc., 2018



The Coffee Chronicles

“But it was really difficult to explain our needs and for them to get their head around what we are doing, or even have an interest in doing something in low volume. So that meant we had to develop it ourselves.”

Christian Van Koenigsegg, The Drive, November 2016



Asset Class Returns in Swiss Francs (2008 - 2017)

Dr. Alex Hinder, Hinder Asset Management, 2018




The Oxymoron of World Trade
Oxymorons are powerful combinations of contradictory meanings. We encounter oxymorons in every human form of expression attempting a description of reality, whether it be in works of tragedy (“fearful bravery” in Shakespeare’s Julius Caesar), in our daily lives (work that is “almost done”), or even in the projected future of human societies (“artificial intelligence”).
Didier Darcet, Gavekal Intelligence Software, The Quant Corner, September 2018


Information in the Yield Curve about Future Recessions
"Furthermore, when interpreting the yield curve evidence, one should keep in mind the adage “correlation is not causation.”
Michael D. Bauer and Thomas M. Mertens, Federal Reserve Bank of San Francisco, Economic Letter, August 27, 2018



Chart of the Month: Gold in Turkish Lira (TRY)

1875 CIO Office, Current Views, 1875 Finance, August 2018


General Electric: The Fallen Giant
"General Electric’s decline has been steady during the 21st century. In 2000, GE’s market cap was over $500 billion and as recently as 2005, General Electric was the largest company in the world. Since then, GE has lost over $400 billion in market cap, and today, GE doesn’t even make the top 50 in the world."
Dr. Brian Taylor, Global Financial Data, 22 June 2018


Consumers Response More to negative News than Positive Info
"The laboratory provides insight into how cognitively taxing it can become for people exposed to changes in the economic landscape to acquire and process information."
Antonella Tutino, Federal Reserve Bank of Dallas, Economic Letter, Volume 13, Number 7, May 2018



on the Fly


“It is better for the Bank of Japan not to attract attention and remain as quiet as the forest for a rural shrine.”
Hisato Ichimada, Governor of the Bank of Japan, 1946-1954



The Coffee Chronicles

"An era does not just create technology. Technology creates the era."

W. Brian Arthur, The Nature of Technology, 2009


Neurosis Is Killing Your Returns!
Short-term volatility is the psychological price investors pay to achieve stocks’ high historical long-term returns.
Michael Hanson, Fisher Investments MarketMinder, 14/06/2018


Memory Sticks!
Didier Darcet, Gavekal Intelligence Software, The Quant Corner, June 2018





on the Fly


“In a dataset of 10 developed countries for the period 1890-2000, we show that diversification benefits decline as financial markets open up to international capital flows. Diversification benefits disappear as investors chase them." Dennis Quinn and Hans-joachim Voth, The Diversification Fata Morgana: Capital Account Openness and the Fall and Rise of Stock Market Correlations, 1890-2000 , 2015



The Coffee Chronicles

"Villager: How can we find a samurai we can pay with only rice?

Gisaku: Find hungry samurai."

Akira Kurosawa, The Seven Samurai, 1954


A monopoly on liquidity
"The board game Monopoly® was originally invented by Elizabeth Magie, under the name “The Landlord’s Game”, as a means of demonstrating the evils of rentier capitalism. Originally, there were two sets of rules — essentially, socialism (where the rewards for development were shared by all) and capitalism (where the rewards accrue to the monopolist, who crushes all opponents) — the purpose being to show the moral superiority of the first set."
Erik Britton, Fathom Consulting, 16 March 2018


The Russian Stock Market Before the Revolution
"Russian stocks advanced more in price than American stocks between 1864 and 1914, but American companies paid larger dividends. Price and dividends offset each other and during that 45-year period, the two stock markets provided approximately equal returns."

Dr. Brian Taylor, Global Financial Data, 21 March 2018



Understanding inflation and its impact on your portfolio
Thanks to globalization, technological advances, monetary policy and demographic trends, inflation in most developed economies has been moderate in recent decades. However, a continuation of this benign inflationary environment is by no means certain, as evidenced by a recent White Paper released by Mercer Investments Research highlighting the growing inflationary pressure.

By Gil Platteau, Country Head Switzerland, Mercer Investments.  More...



Lonely Bytes – Cryptocurrencies & The Future of Money:
A New Technology Solution Desperately Seeking A Problem?
Michael Howell, CrossBorder Capital, March 13, 2018



The Coffee Chronicles

"And the real problem is, in my opinion, that as we move, from the local community to the State, from the State to the Federal Government, it becomes increasingly difficult for us to control the mechanism we have established, and that mechanism tends to control us." Milton Friedman, in 1978, Free To Choose Network, May 22, 2012


The Questions for the Coming Year
"As Charles has shown over the years, this is the best combination for equity markets, as tight fiscal policy and loose money almost invariably leads to far higher P/E ratios. Alas, the opposite is true for the reverse: loose fiscal policy and tight money typically trigger a de-rating of equity markets. And this is the policy mix we seem to be heading towards."
Louis-Vincent Gave, Gavekal Research, December 15, 2017




The Coffee Chronicles

"A couple of geeks who sketched out some software could destroy Sears Roebuck?"
"60 Minutes" episode from 1999, "Jeff Bezos & Amazon - An Inside Look". The late reporter Bob Simon asked (sneering) an analyst about Amazon highflying stock.


Market Capitalization Amazon vs. Sears
1999 vs. 2017

Scott Galloway, L2 Inc. December 2017





on the Fly



“What we said for years, going back to the beginning of so called Quantitative Easing in America was that it was not Quantitative Easing, it was Quantitative Diseasing (...) and that Quantitative Easing as it is called is always contractionary and deflationary, and that we’re having a bull market and economic expansion DESPITE it, not BECAUSE of it."

Ken Fisher, Fisher Investment Capital Markets Update: Summer 2017



Passive-aggressive Bureaucracies

"Means become ends and ends become means. Consequently, the original goals of such organizations are now considered to be nothing more than obstacles on the way to realizing new aims (...) the collective perpetuates its existence, regardless of whether it has any role left and how well it functions."
Sam Vaknin, Lidija Rangelovska, Malignant Self-love: Narcissism Revisited, 10th edition, 2015


Bad Things That Didn't Happen in 2017
A look at the false fears that weren’t
Fisher Investments MarketMinder, December 28, 2017


Retail's Anti-Christ
Market Value Today vs. 2006

Scott Galloway, NYU, December 2017


Changes at the Top

The Five Largest Companies: Now vs. 2006

Scott Galloway, NYU, December 2017


The economics of aesthetics and record prices for art since 1701
Christophe Spaenjers, William N. Goetzmann, Elena Mamonova, Explorations in Economic History, July 2015


Devil’s in the Details: Robo Analysts, Financial Footnotes, and Buried Insights
"In all honesty, real fundamental analysis hasn’t mattered since before the tech bubble, but the industry is running out of ways to avoid doing this research. Consequently, what we’re seeing now is a return to fundamental research."
Prattle, December 14, 2017


Baseball Thoughts
"Baseball is about losing most of the/your time; for all the audience cheering and TV noise its natural pace is laconic."
Anonymous and Stefan Jovanovich, Daily Speculations, October 23, 2017


How Japan remained on the Gold Standard despite unsustainable external debt
Giovanni B. Pittaluga, Elena Seghezza, Explorations in Economic History, January 2016


The Rise of the Yuan and The End of the Oil Exchange Standard
"Global currencies don’t so much fail as they are eclipsed by a stronger competitor."
Michael Howell, CrossBorder Capital, November 29, 2017



Returns are almost never average

Donald Bennyhoff, Vanguard Blog, What’s your benchmark for investment success? November 16, 2017






ESG Country Report


In this report, SRI team analysed and scored 123 countries in terms of how sustainably they manage their Human, Natural, Social and Economic Capital.

74 countries were categorised as investible and 49 were categorised as non investible.












on the Fly

“But underneath that shift, which is undoubtedly real, perhaps there’s another shift, away from the consumption of material things in general, and towards the consumption of experiences. Away from the tangible towards the intangible." Read more...

Fathom Consulting, Thank Fathom it’s Friday – Are we living in a material world? October 27th, 2017


The First Billion-Dollar Company
It was only back in 1970 that the capitalization of the entire United States stock market hit $1 trillion and soon a single company may be worth that much. This raises the question, what was the first company to be worth $1 billion?
Dr. Brian Taylor, Global Financial Data, 15 November 2017




The Coffee Chronicles

"It’s amazing how quickly I have already sort of become accustomed to it and how quickly I feel confident in what I can do when I am in it. It’s sort of like "I HAVE BECOME THE CAR"!".
Doug DeMuro, Here's Why the Lamborghini Huracan Is Worth $250,000, December 20, 2016





Europe two tier equity market: free sectors vs regulated sectors in France
Charles Gave, Institut des Libertés, 13 November 2017



The Wisdom of Trees:
Walt Whitman on What Our Silent Friends Teach Us About Being Rather Than Seeming.
Maria Popova, Brain Pickings, November 2017


Volatility (or Lack Thereof) Isn’t Predictive
"While it’s tempting to think danger lurks under still waters—and financial media provide prompts aplenty—calm periods don’t portend big price movements ahead. Nor do they herald further tranquility. Volatility—low or high; up or down—is incapable of foretelling the future."
Fisher Investments Editorial Staff, Fisher Investments MarketMinder, November 16, 2017

Money Machines: Understanding AI-Powered Investment Research
Prattle is pleased to publish this interview with Erez Katz, CEO and co-founder of Lucena Research, focusing on how machine… Read More
Prattle, November 16, 2017


Data Brand Dependence
If it is a day ending in “y” you can be sure there is somewhere in the financial press a story or “news report” of the looming bond selloff – even if it is due to some future event or made up phenomenon.
Jeffrey P. Snider, Alhambra Investment Partners, November 9, 2017


$106,000 for coffee? Let’s talk compounding
Most of my five children enjoy drinking coffee. Not just any old cup of joe, mind you, but a premium cup of java from one of the popular coffee chains. When they place their orders, it sounds like they’re speaking in a foreign language.
Fran Kinniry, Vanguard Blog, May 25, 2017


Hoshinoya Tokyo: a ryokan in the city
in Tokyo
Aiste Miseviciute,, 8 November 2017




Pension Funds Switzerland 2017
For institutional investors only



Public Pension Funds


Corporate Pension Funds


Industry-Wide Pension Funds


Multi-Employer Pension Funds




The Coffee Chronicles

"You know, good things seem to happen when I leave. No matter where I am, wonderful things take place, after I’m gone."

Larry David on Late Night with Seth Meyers, September 27, 2017



Pension asset allocation, P7 in 2016

Global Pension Assets Study 2017, Willis Towers Watson and secondary sources





on the Fly


“The Bank will continue with "Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control,” aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining the target in a stable manner."

Bank of Japan, Statement on Monetary Policy, September 21, 2017



Global pension assets
Evolution 2006-2016 - USD billion

Global Pension Assets Study 2017, Willis Towers Watson and secondary sources



Japanese Monetary Policy In A Chinese-Dominated World.
Or Why The Yen Has Changed Regime And How Japan Should Behave More-and-More Like An Emerging Market?
Michael Howell, CrossBorder Capital, September 2017


“We’ll Live To 100 – How Can We Afford It” New World Economic Forum white paper, in collaboration with Mercer

How well prepared are we to support ourselves and future generations in old age? A new report from the World Economic Forum (WEF), in collaboration with Mercer, We’ll Live To 100 - How Can We Afford It?  provides a disconcerting view. More...





on the Fly



“So it's not so much that banks are gonna gain or loose, they'll just become unnecessary.”

NYU Stern finance professor David Yermack, The Innovation Is the Blockchain, L2inc, Sep 21, 2017


This Is Not the Financial Crisis’s 10-Year Anniversary
10 years ago today, France’s largest bank froze three hedge funds as subprime-panicked investors fled. Headlines globally are calling this the beginning of the Global Financial Crisis, and at first blush, it certainly has all the trappings. Packaged subprime mortgages, a run on a bank, a liquidity crunch and hard-to-value assets.
Elisabeth Dellinger, Fisher Investments MarketMinder, August 9, 2017


Some Global Odd & Ends
When it comes to central bank experimentation, Japan is always at the forefront. If something new is being done, Bank of Japan is where it happens. In May for the first time in human history, that central bank’s balance sheet passed the half quadrillion mark. It should be unsettling where a trillion is a rounding error.
Jeffrey P. Snider, Alhambra Investment Partners, July 3, 2017


The Bank Bubble of 1929
"In reality, the bull market of the 1920s had more of an impact upon utility stocks and bank stocks than it did on industrial and railroad stocks."

Dr. Brian Taylor, Global Financial Data, June 3, 2017


The Basis For The Changing Basis
It is simply the nature of modern Economics to get most things backward. Positive Economics particularly in the form of econometrics has been like a declaration of ignorance, where Economists have formally decided to try and understand as little as possible.
Jeffrey P. Snider, Alhambra Investment Partners, 28.03.2017


Global Demographic Trends Shape Policy Environment
"Demographics are key determinants of what is economically feasible at both the global and national levels. Demographics also have important implications for monetary policy. Slower population and labor force growth in the coming decades will have a depressing effect on real interest rates." 
Mark A. Wynne, Economic Letter, Federal Reserve Bank of Dallas, July 2016

An Interesting Forecast for Interest Rates
"While inflation expectations do influence long rates, as lenders demand a higher return to compensate for the loss of purchasing power, we don’t think the logic supporting the outlook for rising rates holds. From a high level, markets often go against the consensus and do what few anticipate."
Fisher Investments Editorial Staff , Fisher Investments MarketMinder, March 17, 2017


Reality May Soon Overtake Post-Election Equity Rally
The reality of politics collides with the optimism of the campaign
Krishna Memani, Oppenheimer Funds, February 28, 2017


Positive Feedback Loop
"Good luck being bearish on humans for any extended period of time."
Jared Dillian, Mauldin Economics, The 10th Man, March 16, 2017





on the Fly

“Many of the jobs that AI will destroy – like credit scoring, language translation, or managing a stock portfolio – are regarded as skilled, have limited human competition and are well-paid. Conversely, many of the jobs that AI cannot (yet) destroy – like cleaning, gardening, or cooking – are relatively unskilled and are low-paid.”

Dhaval Joshi, The Inflation Paradox, BCA Research, Feb 23, 2017


The Coffee Chronicles

"What production would you absolutely not like to participate in? Oh, accounting, or anything with numbers, anything where you can't know what I mean, you can't lie, the figures don't lie!"
Inside the Actors Studio with Jay Leno, March 19, 2015


Stock Market Provides Imperfect View of Real U.S. Economy
"The stock market—through measures such as the Standard & Poor’s 500—is often thought to be an economic bellwether. However, market volatility compromises the reliability of such indexes."
Julieta Yung, Economic Letter, Federal Reserve Bank of Dallas, May 2016





on the Fly

“It turns out 2007 may in time be understood as the single greatest technological inflection point since Gutenberg invented the printing press. And we completely missed it, because of 2008."

Thank you for being late: Remarks by Thomas L. Friedman on December 15 2016, the Brookings Metropolitan Policy Program


Fake News: Yellow Ain't Mellow
Fake news isn’t new. It was around over 100 years ago. Back then, they called it “Yellow Journalism.”
Michael Hanson, Fisher Investments MarketMinder, March 2, 2017


The Coffee Chronicles

"What does space smell like?

Astronaut Chris Hadfield answers your questions"

PBS NewsHour, 13.11.2013


A Possible Leadership Rotation in 2017?
"While investor sentiment has been slow to warm in America in this bull market, Europe (and, specifically, the eurozone) is even further behind."
Fisher Investments Editorial Staff, Fisher Investments MarketMinder, March 1, 2017



The History of Zero: How Ancient Mesopotamia Invented the Mathematical Concept of Nought and Ancient India Gave It Symbolic Form

“If you look at zero you see nothing; but look through it and you will see the world.”
Maria Popova, Brain Pickings, February 2017




on the Fly

“The fact that models can deliver only an approximation of the truth means that conducting monetary policy is not a mechanical exercise. It is a complex blend of art and science—in effect, it is an exercise in risk management." Building the next generation of economic models is a priority for the Bank of  Canada, Governor Poloz says, 31 January 2017


They say nothing beats a home-cooked meal
Comparing price inflation of food at home and away from home
Christian Zimmermann, The FRED® Blog, February 2, 2017


Benjamin Harrison and the Terrible Tariff
"The Smoot-Hawley Act of 1930 is blamed for intensifying the Great Depression, and the lesser-known McKinley Tariff of 1890 provides an instructive lesson on how protectionist policies can impact the stock market and politics."
Dr. Brian Taylor, Global Financial Data, January 25th 2017



The Master and his Knives

You can probably tell me what brand coat you have on, but can you tell me what brand of knife you used to prepare dinner last night? According to Jay Patel, owner of London-based Japanese Knife Company, the knife is humankind’s most valuable and underrated tool.

Aiste Miseviciute, 31 January 2017



The FOMC policy rate projections versus reality



James Bullard, FRB-St. Louis, Jan. 12, 2017


The Future of Energy Prices: Lessons from 750 Years of History
"... for most of history, commodity prices stayed the same for periods of several centuries. It was mainly in the 1500s and the 1900s that the world experienced irreversible increases in commodity prices."
Dr. Brian Taylor, Global Financial Data, January 5th 2017