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   Investment Thoughts - Archives



2016 Observations





US Households Net Worth: 1950 - 2015

Thomson Reuters Datastream, Investment Office, June 2015



The Coffee Chronicles

"Did you have to audition for those guys? Did you come with your bass and started playing for them, is that how it works?

No, I started the band. If you can't play it's the only way to do it, trust me!"
Roger Waters from Pink Floyd, reply to Howard Stern, Howard Stern Show, July 2015


The S&P 500, Dow and Nasdaq Since Their 2000 Highs
"So far the 21st Century has not been especially kind to equity investors. Yes, markets do bounce back, but often in time frames that defy optimistic expectations."


Doug Short, Advisor Perspectives, April 1, 2016



Four False Financials Fears
Financials stocks took it on the chin during 2016’s first six weeks, as investors freaked out over banks’ Energy exposure, eurozone banks’ capital ratios and bad loans, and negative interest rates. While these issues have impacted sentiment, in our view, they are overstated or misperceived.
Christo Barker, Fisher Investments MarketMinder, March 28th 2016


Are negative policy rates less than nothing?
"The temptation for negative rates is that many central banks’ traditional tools have been exhausted and so there is a grasp for alternatives. But reality is not always symmetric and just because negative rates are possible does not mean they are a valid policy option."

Ron Leven, FX Market Voice, Thomson Reuters, February 2016


NYSE Margin Debt Falls Again: More Confirmation of a Major Market Turning Point Last Year?
The New York Stock Exchange publishes end-of-month data for margin debt on the NYX data website, where we can also find historical data back to 1959. Let's examine the numbers and study the relationship between margin debt and the market, using the S&P 500 as the surrogate for the latter.

Doug Short, Advisor Perspectives, March 31, 2016
Inflation Alive and Well in the US
We have focused on the theme of the misplaced fear of deflation at Variant Perception frequently over the past 18 months.
Variant Perception, March 2, 2016


Market Cap/GDP and GDP/Capita
"Governments should encourage the growth of equity markets, because they tend to be associated with economic development. Whether or not they actually cause economic development — or whether the causality works the other way around — is the subject of some debate. What is undeniable, however, is that countries with larger equity markets tend have a higher standard of living."
Andrew Howell, Citi GPS, The Public Wealth of Nations, June 2015





on the Fly



"And now, having built a firm foundation, Freddie Mac is positioned like very few other companies to benefit from the inevitable recovery of housing in this country." Richard F. Syron, Chairman and CEO of Freddie Mac, Annual Report 2007, February 28, 2008.

Fannie Mae and Freddie Mac were placed into conservatorship of government-sponsored enterprises by the U.S. Treasury in September 2008.



Curse of the Benchmarks
Dimitri Vayanos, Paul Woolley, London School of Economics, March 2016


Shanghai’d at Shanghai G20?: The Big Threats to Global Bonds
"there is a strong whiff of gun-smoke from the last G20 meeting in Shanghai (26th-27th February 2016), which may have culminated in this week’s mild FOMC Statement by the US Fed. Is this a new Plaza 2?"



Michael Howell, CrossBorder Capital, March 18th 2016



The Coffee Chronicles

"If Donald Trump is the world’s most colourful politician, Angela Merkel is probably the least. She is resolutely tedious even by the standards of German politics. (…) She never talks about a “German dream”, and you will not see her campaign under the slogan, “Make Germany great again”."
Simon Kuper,Why Merkel dreams in black and white, FT Magazine, March 18th 2016


The Dillian Loop 
"Interventionism is always praised after the fact. Nobody ever says doing nothing did something."
Jared Dillian, Mauldin Economics, The 10th Man, March 10th 2016


A cascade of change?
Investors continue to weigh whether the most recent stock market rally signals the end of a correction or whether it simply represents a temporary respite from an unfolding bear market? However, forthcoming changes in the financial markets are likely much more dramatic than simply a stock market in search of a bottom.
James W. Paulsen, Wells Capital Management, March 9th 2016


The Collapse In Global Trade Has Been Greatly Exaggerated
The value of world trade fell in 2015 for the first time since the crisis. However, this reversal was not in trade, but in the dollar price of goods sold for export abroad.



Thomson Reuters Datastream / Fathom Consulting, February 29, 2016


Volatility Managed Portfolios

Alan Moreira, Tyler Muir, Yale University, February 2016


Low-volatility evidence dating back to 1873
As new historical databases are opening up, there are great opportunities for out-of-sample tests of market anomalies. Research shows that the volatility effect also existed in the 19th century.
David Blitz, PhD, Pim van Vliet, PhD, Robeco, February 15th 2016


When Stocks Crash and Easy Money Doesn't Help
"Though central bankers and talking heads on television speak about monetary policy as if it has a large and predictable impact on the real economy, decades of evidence underscore a weak and unreliable cause-and-effect relationship between the policy tools of the Fed and the targets (inflation, unemployment) that the Fed hopes to affect."
John P. Hussman, Hussmann Funds, February 8, 2016


UK policy rate expectations


Thomson Reuters Datastream / Fathom Consulting, February 12, 2016


Capital Immobility and the Reach for Yield
Alan Moreira, Yale University, November 2015



The Coffee Chronicles

"…we live in a world of happy endings, with audiences which make every show, no matter how doomed it is, and ready to be canceled, sound like a smash hit. If it doesn’t have a smash hit (...) they have a little black box, full of laughter, and they add that to the jokes...and you know that most of the people laughing on that box died long ago!" Orson Welles on performers working an audience (1979)


About Those European Banks
"The sector’s fundamental outlook hasn’t vastly worsened this year, and there are some key differences between now and 2008."
Elisabeth Dellinger, Fisher Investments MarketMinder,  February 12th 2016


Whip Deflation Now
"The funny thing is, it is possible that deflation has already been whipped. We are starting to see signs of inflation in the pipeline."
Jared Dillian, Mauldin Economics, The 10th Man, February 11th 2016


Bank Shares Selloff: Canaries Dying in the Coal Mine?
"The questions in the current context of weakness in both bank stocks and credit spreads then become: Are the canaries dying? Is that telling us something about the state of the global economy in coming quarters? And is it time for the miners, i.e., investors, to get out of the mineshaft?"
Krishna Memani, CIO, Oppenheimer Funds, February 09, 2016


Biddle’s Bank
Between 1816 and 1828 the Second Bank grew in stature and importance, so much so that it was considered an essential agency of the government. Biddle, as the head of the Second Bank, developed the concept of central banking.
Joshua Silverman, Global Financial Data, February 2016


Economists are calm, even if equities are not
The start of 2016 has been a turbulent time in the world’s equity markets. The world’s economies have been far less volatile. Once again, economics and markets seem to be moving in different directions.
Paul Donovan,  Global Economist, UBS, January 2016



The Coffee Chronicles

"…so now, here I am, I’m hosting, and it’s all very well and good, but, honestly, I can’t wait to leave! In fact, I would say that one of the great pleasure in my life is leaving anywhere I am. Wherever I am, I want to get the hell out of there!"


Larry David Monologue, SNL, February 2016


Volatility Managed Portfolios
Alan Moreira, Tyler Muir, Yale University, February 1, 2016


Bristlecone Pines and Markets

Bristlecone Pines are long-lived and highly resilient to harsh weather and bad soils.

They generally compete poorly in less-than-harsh environments, making them hard to cultivate. They do very well, however, where most other plants cannot even grow.

What would be their equivalent in today's markets?

InvestmentOffice, February 2016





on the Fly

"The wealth effect from equities is limited. Most people do not own equities. More Americans own a cat than own equity directly, and less than half of the US population own equities even when indirect holdings like pension funds are included." Paul Donovan, "Economists are calm, even if equities are not", UBS, January 2016



January Barometer

A scatter plot for the S&P 500 January barometer with data ranging from 1951 to 2016.

Macroquant AG

Dr. Adrian Trapletti

January 2016




Careful, Mr. Market Has a Bad Temper
"If the Fed tries to keep rates at or near the levels they are currently, it will signal that after so many years of policy accommodation, the U.S. economy is still too fragile to absorb even marginal rate hikes. Such a response would be tantamount to what we – and many others – have been saying for a long time: that the interest rate emperor has no clothes."
Tad Rivelle , TCW, January 15, 2016



on the Fly

"Even the historic global epicenter of inflationary hypochondria, Germany, is now fighting deflation." James W. Paulsen, Some Thoughts on 2016, Economic and Market Perspective, Wells Capital Management, Inc. January 4, 2016


The Coffee Chronicles

"We always hired for intensity. Because our products were bizarre-enough, different enough, that we could train almost everything else."


Nolan Bushnell (Atari and Chuck E. Cheese's) on hiring Steve Jobs at Atari in 1974, Startup Grind, Jun 29, 2013


Taking the lord's name in vain: The impact of connected directors on 19th century British banks 
Explorations in Economic History,  Richard S. Grossman, Masami Imai, Volume 59, January 2016




on the Fly

"Such a “narrowing” of the market is a classic symptom of a lengthy rally — this one has lasted almost uninterrupted since 2009 — that is coming to an end." John Authers, "Equties: And then there were nine", Financial Times, January 3, 2016









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