201506.28
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The Market Waits For No One

Our lens suggests that the very low interest rates that have prevailed for so long may not be “equilibrium” ones, which would be conducive to sustainable and balanced global expansion. Rather than just reflecting the current weakness, low rates may in part have contributed to it by fuelling costly financial booms and busts. The result…

201506.28
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On the Doorstep of a Fed Rate Hike Cycle

The Fed has weighed in with their opinion of the economy. Given their economic assessment, they have presented their opinion of the appropriate level for interest rates. Interestingly, investors don’t seem to be of the same opinion as the committee on the appropriate level for rates or the timing of upcoming interest rate moves. Perhaps…

201506.21
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Greek Scenario Analysis

Here is a simple conditional probability table one might use to gauge the potential risks and rewards stemming from the Greek credit negotiations. The table considers 3 paths which may arise from ongoing talks. It assigns a probability for each and what an investor might expect for market returns under each scenario. Given recent events, the…

201506.14
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One More Time: The Economy Is Not The Market

The title is a shorthand way of saying that the most recent performance of the economy isn’t predictive of the future performance of the stock market. The bottom line is that GDP growth today doesn’t necessarily mean stock price growth today – GDP growth and stock returns are not highly correlated. In fact, some analysis…

201506.12
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Discount Bubble Check

Yesterday was the quarterly release of the Financial Accounts of the United States (Z1), formerly titled as the Flow of Funds, which means we get updates on the asset bubbles through Q1. That starts with equity valuations, with the components to Tobin’s Q being revised all over the place. The Q ratio is made up of…

201506.07
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No Place To Hide

It was a nasty week for investors with almost no place – or at least no logical place – to hide. Of the 16 broad market ETFs I monitor on a daily basis, only one, was higher on the week – IWM, the Russell 2000 small cap ETF. That’s what I mean by no logical…

201505.31
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Going Nowhere Fast

It wasn’t a pretty week for stocks globally. Almost every major market was down – one prominent exception was Japan – and the minor ones were down more. China experienced a 6.5% hiccup mid-week that everyone seemed to want to see as, at least, the beginning of the end of that bull market so it…

201505.28 0

Not My Euphoria

In its 84th Annual Report released last June, the Bank for International Settlements departed from usual central bankish conventions and decried the growing departure from market discipline and even reality. The BIS even used the loaded term “euphoric” to describe what it saw as risk market prices no longer affected by fundamental economic conditions. As…

201505.25
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The Pretense Of Knowledge

If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible. He will…

201505.25
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Japanese Banks

Japanese bank stocks surged over 50% from December 2012 through the first half of 2013. Since, they have been in what one might call a consolidation phase. The initial surge coincided with expectations of the effects of Abenomics. The consolidation was a 1.5 – 2 year wait and see period, somewhat of a battle between believers…