Investment Office

Selecting relevant market observations

Investment Thoughts
Macro Observations
Capital Markets
Markets in History
Beyond Finance
Quotes on the Fly
Chart Gallery
Coffee Chronicles
Asset Management
Pension Funds
Family Offices
Wealth Managers
Asset Managers
Privacy Policy
Cookie Policy

   Investment Thoughts - Archives



2012 Observations





How People Earn and Use Money: Vibrant Vintage Illustrations from 1968

The illustrations capture both the era’s characteristic biases and the naiveté of an overly simplistic view of the market economy.


Brain Pickings, Maria Popova, December 2012



The Control Engineers And The Notion Of Risk
"Volatility no longer measures the risks involved in holding certain assets but instead measures the amount of the manipulation that the poor prices are enduring."
GaveKal Research, Ideas, December 14, 2012 , Charles Gave


Shadow Interest Rates and the Stance of U.S. Monetary Policy

"…current U.S. monetary policy may be considerably easier than commonly understood."
James Bullard, Federal Reserve Board - St. Louis, November 2012 


The Murky Economics of Green Technology
The boom and bust pattern is a familiar one with emerging industries and technologies.

Investments Office, January 2013


Merry Capitalism!
Henry Ford once famously quipped if he’d asked his customers what they wanted, they’d have said, “A faster horse.”
Market Minder, Emily Whitney, December 2012

No territory, no profit: The pirate organization and capitalism in the making
Our goal in this short essay is to envisage a broader picture that takes seriously other types of organization that gravitate at the periphery of capitalism’s territories.
M@n@gement, 2012/3 - Vol. 15, Rodolphe Durand, Jean-Philippe Vergne




Empire of Silver


By the end of the nineteenth century, thirty-two banks (or "piaohao") with 475 branches were in business covering most of China. They were organised as single proprietaries or partnerships, where the owners carried unlimited liability. "Empire of Silver" is a 2009 film of the rise and fall of the largest piaohao, "Tien chen Yuan", in the Shanxi province during the prosperous days of the Ching dynasty.

Investments Office, December 2012


US Birth Rate Hits New Low – A Nation of Singles
"The US birth rate fell to a record low in 2011. The marriage rate is tumbling as well. And the number of single Americans is now at a record high. The implications of these developments are troubling, not only for the economy, but also for the investment markets and the continual expansion of the federal government."
Mauldin Economics, December 21, 2012 , John Mauldin, Gary D. Halbert, Outside the Box


The IMF's linear views on Greece
If you ever were sceptical on the credibility of the IMF's forecasting skills, this chart will help underpin your doubts!
Investments Office, December 2012



Rome's Terms
The friends of Rome were to be made strong, but not too strong...

Republican Rome, by H. L. Havell, 1914


The Ghost Towns of China 
Fiscal policy to nowhere, and capital (credit) miss-allocation on a gargantuan scale
Investments Office, December 2012




on the Fly

"The advances to Greece might well come to be known as the Buzz Lightyear loans from a maturity standpoint: “To infinity…and beyond!”"
Gary Jenkins, Swordfish Research, following another Greek debt deal, November 28th 2012


Rare Earth Prices and the Baltic Dry Index post-Bubble
Anyone remembers the rare earth media hysteria 18 months ago, and how China was supposed to corner the market for these metals? Well, we haven't heard much on the topic lately...
Investments Office, November 2012



The Roman Denarius and Euro: A Precedent for Monetary Union?

For most of the 500 years of its existence, the currency of the Roman empire was diverse.

Gresham College, Lecture, 3 April 2012 , Dr Andrew Burnet


Do Hedge Funds Really Generate No Alpha?
The first finding of the analysis is that correlation between the HFRI index and the S&P 500 index passed 90%. The second finding is that HFRI's alpha is now zero.
Insider Monkey, November 22nd 2011, Meena Krishnametty


Keynes is an unwelcome guest in Switzerland !
Government debt reduction ("Schuldenbremse") policy since 2002
Investments Office, Novembre 2012


Popular Delusions

Memo to Central Banks: You're debasing more than our currency

"History is replete with Great Disorders in which social cohesion has been undermined by
currency debasements."

Société Générale, Cross Asset Research, October 2012, Dylan Grice

Swiss Exchange Rate Policy in the 1930s. Was the Delay in Devaluation Too High a Price to Pay for Conservatism?
In this paper we examine the experience of Switzerland’s devaluation in 1936.

Working Paper, August 2006 , Michael Bordo, Thomas Helbling and Harold James


The Latin Monetary Union: Some Evidence on Europe’s Failed Common Currency
The Latin Monetary Union was initiated in 1865 by France, Belgium, Italy, and Switzerland.

Korea University and Cornell University, July 2003, Kee-Hong Bae and Warren Bailey

What Is That Performance Costing Me?
Lobnek Wealth Management, November 2012 , Altug Ulkumen, CFA, Independent Contributor


Volatility of an Impossible Object: Risk, Fear, and Safety in Games of Perception

"The market is no longer an expression of the economy… it is the economy."

Artemis Capital Management

Christopher Cole, October 4th, 2012


British witch trials and inflation in the medieval period
The following chart shows the UK price index over the period with the incidence of witchcraft trials. Note the peak in trials coinciding with the peak of the price revolution.
Popular Delusions , Société Générale, Cross Asset Research, Dylan Grice, 2 October 2012



"Vertigo" and the Swiss National Bank

In September we borrowed a quote from the 1949 classic, "The Third Man", to introduce the wizardly tricks of the Swiss National Bank. One month later, the analogy with "Vertigo", the 1958 psychological thriller film directed by Alfred Hitchcock, seems more appropriate to illustrate their latest currency intervention numbers.

Investments Office, November 2012




Buy the Fiscal Cliff
Many investors fear the US "fiscal cliff" - that automatic spending cuts and tax hikes starting in January will cause a big recession. No. The fiscal cliff simply won't happen. And fear of a false factor is always bullish.

Interactive Investor, 19 October 2012, By Ken Fisher


The United States Is Not Europe and Texas Ain't France: America as the Thoroughbred Economy
Remarks before the Cato Institute, Washington, D.C., October 10, 2012 , Richard W. Fisher, president and CEO of the Federal Reserve Bank of Dallas



on the Fly

"Today 49% of hedge fund assets are controlled by the top 3% of the largest institutions. If everyone is chasing the same investments a lot of that “alpha” begins to look like “beta” with leverage or liquidity premium." Artemis Capital Management, Christopher Cole, October 4th, 2012


The Unintended Consequences of Quantitative Easing on Emerging Markets
While central banks have focused on the unique circumstances of their own nations, the collective magnitude of QE has had unintended consequences beyond the borders of their constituencies.
Pyramis Global Advisors, June 2012 , Rubén Calderón, Portfolio Manager


The role of the media in a bubble
Explorations in Economic History, October 2012, Gareth Campbell, John D. Turner, Clive B. Walker


The Various Roles of Fixed Income in Pension Plans

A defining characteristic of a liability driven fixed income mandate is the alignment of a portfolio’s objectives with the specific role it is designed to play in an overall investment plan.

by the Loomis Sayles LDI Solutions Team, June 2012


Bull Market in Fear and Tail Risk

Artemis Capital Management, Christopher Cole, October 4th, 2012



Bull market 30 years old today
What does it really mean? Simply, the market and the economy transitioned from funding fixed assets (oil, gold, land) to funding ideas. August 2012 , Andy Kessler


Murder on the Orient Express: The Mystery of Underperformance
Financial Analysts Journal, July/August 2012, Charles D. Ellis


Markets during the second World War

"Then in May 1942, just before the United States’ military fortunes in the Pacific improved, in the midst of the gloom and the bargains and at the point of maximum bearishness, the U.S. stock market made a bottom for the ages."
Wealth, War & Wisdom, 2008 , Barton Biggs






Small cap growth investing with a low volatility approach
Loomis Sayles, August 2012


Why QE Won't Create Inflation Quite as Expected
"Money that is created but which has zero velocity cannot spark inflation."
Of two minds, September 27, 2012

The Food Crises and Political Instability
New England Complex Systems Institute, August 2011

What Happened to Virtue?
Ludwig von Mises Institute of Canada, James E. Miller, September 26, 2012


Dividends: a timeless component of equity return

Dividends have a long history as a significant component of total return.

Loomis Sayles, April 2012


The Myth of Benjamin Graham and Value Investing

“Graham always believed that a Dow over 100 was too high, and when it got there, he never again felt comfortable with the market. As the Dow never fell below 100 after 1942, Graham was always leaning toward being too defensive.
Practical Speculation, Victor Niederhoffer, Laurel Kenner, Wiley, 2005


The SNB running amok !

60 years after Orson Welles' famous quote on Switzerland and the cuckoo clock, the Swiss National Bank might just be re-writing history with a creation of its very own: the "all you can eat" EUR pegg !
Investments Office, September 2012

Ubiquity, Complexity Theory, and Sandpiles

When things are unstable, it isn’t the last grain of sand that causes the pile to collapse.
How Change Happens, John Mauldin, August 17, 2012



Although deflationary winds are a risk in the developed world, they have yet to become embedded in expectations.
PIMCO, Viewpoints, August 2012 , Scott A. Mathe


Modelling Risks to the Financial System

" Procyclicality makes the financial system and the economy more vulnerable to shocks, and increases the likelihood of financial distress."
Bank of Canada, 21 August 2012


The North Dakota and Montana Oil Boom
With 15 million barrels per month, the Bakken oil boom dwarfs previous oil production expansions in the region.
The Federal Reserve Bank of Minneapolis, June 2012
The Golden Dilemma
“Gold’s prospects are less dependent on inflation than on demand from emerging markets.”
TCW, Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER), June 2012 , Claude B. Erb, Campbell R. Harvey
In light of the current Euro crisis, we introduce two academic studies on the topic of currency unions and dissolutions in recent history.
Andrew Rose, Volker Nitsch, Working Papers, 2007 and 2004


on the Fly

"Now, in the best tradition of central bankers, I will do my best to avoid answering any questions you might have."

Richard W. Fisher, Federal Reserve Bank of Dallas, February 2012

Behind the Great Firewall of China
Smart Censorship and Air Quality Data in Beijing., July 2012 , Michatel Anti



on the Fly

"What you are seeing is a delay in all the kinds of decisions that require a long-term financially stable future," (...) "That's home purchases, that's marriage and that's having kids."

Bloomberg, Augut 8, 2012


War and Peace: a tale of two economies

In these times of widespread gloom and doom, it makes sense to take a step back in history and see how equity and bonds did perform under extreme conditions.

Investments Office, Ronald Weber, August 2012

What happens when a central bank becomes insolvent
We might get an answer to that question quicker than we expected. At current exchange rates, it will be one of the most expensive lessons in history.
Mao Money, Mao Problems, August 2012 , Matt Dale


Aging population and low yields

Ever wondererd who is buying these long-maturity bonds and why yields have gone that low in developed countries?

Investments Office, Tower Watson, August 2012

Destroyed in Seconds
To my knowledge, there has NEVER before been a case (except in war or natural disaster) when a legitimate business has been destroyed so quickly — as what Knight Capital Group (KCG) experienced.
Daily Speculations, August 3, 2012 , Rocky Humbert
How Good An Indicator Was "The Death of Equities" Cover
In his monthly outlook for August, famous bond investor Bill Gross declared that "The cult of equity is dying." Naturally, Bill Gross' comments brought up memories of the famous "The Death of Equities" BusinessWeek cover from 1979, and what a good buying opportunity that was for US equities.
Bespoke Investment Group, August 1, 2012


on the Fly

When a state in the U.S. has a debt problem, one never hears that there is a 'dollar crisis.' (...) Contrary to what is claimed daily in the media by politicians and many economists, there is no "euro crisis." The single currency doesn't have to be "saved" or else explode. WSJ, Pascal Salin, July 18

Can It Really Be That Easy?
"If the pattern continues, the S&P 500 could be set up for a nice rally to end the Summer. Will it hold? Only time will tell, but if the historical pattern has worked so far, what's to stop it from continuing?"
Bespoke Investment Group, July 29, 2012
The Incredible Jobs Machine
Did Mitt Romney and Bain Capital help office-supply retailer Staples create 88,000 jobs? 43,000? 252? Actually, Staples probably destroyed 100,000 jobs while creating millions of new ones.
WSJ, July 16, 2012 , Andy Kessler
Could You Survive
The current issue of Outside magazine has an article called "Could You Survive" with 27 tips on how to survive a shark attack, a cougar attack, an avalanche, falling through ice, and a forest fire. The tips seem very relevant to how to survive in markets.
Daily Speculations, July 16, 2012 , Victor Niederhoffer


on the Fly

"Unfortunately, unlike U.S. banks that can seize property from borrowers who default, Germany cannot foreclose on Greece and take back the Parthenon, which interestingly was once used by the Greeks as their Treasury." FPA Capital Fund, Inc., Quarterly Commentary, 2nd Quarter, June 30,2012

Financing the Global Transition
Interesting remarks on the current financial situation by the Governor of the Bank of Canada
Mark Carney, Governor of the Bank of Canada , 21 June 2012
How heavenly is the German haven?
Angela Merkel stated last week: “Germany is strong. Germany is the economic engine and the anchor of stability in Europe. (...) But Germany’s strength is not infinite”. We could not agree more with the latter part.
Lombard Odier, June 21, 2012 , Investment Strategy Group

Tails of the unexpected
"The interactions which generate non-normalities in children’s games repeat themselves in real world systems – natural, social, economic, financial. Where there is interaction, there is non-normality."
Bank of England, 8 June 2012 , Paper by Andrew G Haldane and Benjamin Nelson
The Gold Standard of the 1930s and the Euro today
The longer the country remained on the Gold Standard the longer it took for the economy to restore their pre-1929 levels of activity.
Deutsche Bank, Investments Office , June 2012







Archives 2017



Archives 2016



Archives 2015



Archives 2014



Archives 2013



Archives 2012