201501.30
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Research Charts: ECB and Commodities

From strategic research partner MRB…with Alhambra’s added commentary. QE is primarily a signaling device to demonstrate policymakers’ commitment to fostering the recovery and sustaining a cohesive monetary union. The policy is implicitly designed to reduce the equity risk premium. We expect a gradual re-rating of euro area equities. A cheaper euro, itself associated with QE,…

201501.25
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Investment Themes and Research Highlights

The cyclical rebound in global return on equity has further to run in an economic recovery scenario, despite having softened modestly in the past year. Earnings will be a tailwind for stock prices. Global equities are fairly valued relative to corporate profitability. Valuations are not an impediment to further stock price gains, and indeed have…

201501.22
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The ‘Dollar’ Enters The Real Economy

I am not fully sure as to why IBM’s reported figures haven’t been more widely digested for what they portend; likely it is just the still-hanging cloud of rationalizations about bubble behavior. Revenue at “Big Blue” dropped 12% in the fourth quarter, an alarming rate for any company let alone one that still serves as…

201501.20
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No Surprises Again About China

Unlike previous moves in China, this one in the middle of December caught very little notice. Perhaps that was because the big reduction in the eligibility of repo collateral had “markets” and economists on their heels in disarray about what it was all supposed to mean in the context of obviously (perhaps a touch dangerously)…

201501.19
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The Dangers Of Leverage

Leverage: the use of credit to enhance one’s speculative capacity Merriam-Webster Give me a lever long enough and a fulcrum on which to place it, and I shall move the world. Archimedes The Swiss National Bank – the Swiss equivalent of our Federal Reserve – didn’t exactly move the world last week but the fallout…

201501.11
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Signs Of Stress

2015 has started with a bang with the Dow trading in a roughly 700 point range through the first six trading days. The increase in volatility started in the 4th quarter and appears to have entered the new year with a new – higher – range. The source of the volatility appears to be angst…

201501.09
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Complex Interbank Math, Part 2

The complexity of balance sheet mechanics, as observed in the prior discussion, offers a greatly altered view of liquidity and the ancient concept of elasticity. These are not just theoretical assertions, as we have seen them in practice on more than one occasion. The behavior of “liquidity” starting in August 2007 was exactly along these…

201501.09
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Complex Interbank Math, Part 1

The face of economics as it currently stands is the central bank. We have been programmed to simply infer that status in almost everything (good) that happens in the economy. In many ways, there are traces of that in the first concepts of central banking, even going back to the reformation in the latter half…

201501.04
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Checking In With Mr. Market

Mr. Market is the fictional business partner Benjamin Graham invented in his classic value investing book, The Intelligent Investor. As Mr. Graham describes him, Mr. Market is the business partner of the investor, offering on a daily basis to buy your share in the business or alternatively to sell you his share. There are times…

201501.02
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Only Stocks Are Left Minding The ‘Recovery’

If I had to define the recovery period that developed after the trough in the Great Recession, it would have ended sometime in the middle of 2011. Up to that point, there was almost a uniform behavior in financial and even economic accounts (though, on the economic side, there was much left to be desired)….