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   Investment Thoughts - Archives



2016 Observations





The Coffee Chronicles

"In the past quarter-century liberalism has had it too easy. Its dominance following Soviet communism's collapse decayed into laziness and complacency.  (...) The experts recruited to help run large parts of the economy marveled at their own brilliance."
The Economist, December 24th 2016


The Priceless Parable of Price Discovery
“Gentlemen prefer bonds.” So quipped Andrew Mellon in 1929 as stocks fell and investors rushed into bonds, pushing their yields down and prices up. Historians recount that the flight to safety had anything but a smooth landing.
Danielle DiMartino Booth Money Strong, December 21, 2016


Donald Trump on Wall Street
There are so many different aspects of Donald Trump’s life that we could talk about, but the focus here is on Trump’s two publicly traded companies, Trump Hotels & Casino Resorts Inc. and Trump Entertainment Resorts, Inc.

Dr. Brian Taylor, Global Financial Data, October 12th 2016



Pension Funds Switzerland 2016

For institutional investors only



Public Pension Funds


Corporate Pension Funds


Industry-Wide Pension Funds


Multi-Employer Pension Funds



Asset Class Returns in Swiss Francs since 1950

Dr. Alex Hinder, Hinder Asset Management, September 2016



Teacher Retirement System of Texas Diversification Framework

TRS is the largest public retirement system in Texas in both membership and assets.

Teacher Retirement System of Texas TRS, 2015


Illustrative breakdown of ATP assets into risk factors

The ATP Group is Denmark's largest pension and social security provider.

ATP, 2016


The Coffee Chronicles

NASA’s interest in documenting its missions was not always so strong; Mercury astronaut John Glenn, for example, was forced to buy a cheap 35mm camera at a Cocoa Beach drugstore in 1962 because he alone felt that America’s first orbital spaceflight merited some historical snapshots.
Jonathan Cape, Full Moon, 1999


"The Bond Rally Of A Lifetime"
The Cause of Inflation, Lock Up For Infinity? Treasury Haters, Media Bias, Lonely Bulls, Maturity Matters, Three Sterling Qualities, Sovereign Shortages, "The Bond Rally of a Lifetime", and Finally Facing Reality.
Gary Shilling, Gary Shilling's INSIGHT newsletter, August 2016


Balanced Portfolio Strategies since 1986
December 1986 to June 2016

Lipper, July 2016



The Coffee Chronicles

""Being wrapped up in breakfast, lunch, dinner came from an agricultural society and the industrial revolution. We don't work on farms, we don't work on assembly lines and I don't think we should eat like we do. I think people will switch to eating when hungry rather than eating on schedule.""
Lunch with the FT: Rob Rhinehart, July 2016


Salt in Their Veins
"The social structure of the inland Maine community is unlike anything you might meet with anywhere else. The kids never move out of the town they were raised in, there is no theft, the center of town is the fish store, or the post office."
Victor Niederhoffer, Daily Speculations, July 19, 2016


Are You Ready for the Bubble of the 2020s?
"If you look back at the stock market over the past 350 years, you’ll find that in each Century, the Twenties have always enjoyed bull markets in equities; this rings true for the 1720s, the 1820s and the 1920s."
Dr. Brian Taylor, Global Financial Data, July 14th 2016




on the Fly

"The British have achieved, accidently, what every central bank is trying to achieve, a fall in one’s domestic currency. What wouldn’t Bank of Japan governor Kuroda sacrifice to achieve the same thing?"

Michael Howell, CrossBorder Capital, July 2016



Total Pages in the Code of Federal Regulations (1950 - 2014)



Columbian College of Arts & Sciences, Regulatory Studies Center


Dividends Tell a Better Story than Corporate Earnings
"Given the confusion that can be created from the two different ways to calculate earnings, we think an old saying among investors perfectly applies: “profit is an opinion, cash is a fact.” "
Oppenheimer Funds, July 5th 2016


Germany versus ECB: How Dangerous is the Dispute?
Careful what you wish for. For decades, Germans strongly believed in price stability and an independent central bank. Fate and the European Central Bank (ECB) have granted them both wishes.
Holger Schmieding, Berenberg, 20.04.2016



The Coffee Chronicles

"You know what, it’s rare when you get to see somebody get stupider before your eyes, but he’s really working at it. So you’ve got to give him credit, it’s not an easy thing to do, but he’s accomplished it!"
Mark Cuban on Donald Trump, Extra TV, June 21st 2016


La vraie signification du débat sur le BREXIT
"Les Anglais n’ont aucun problème avec les réalités. Ils ont de grosses difficultés avec les idées". Winston Churchill
Charles Gave, Institut des Libertés, 20 juin, 2016



on the Fly

"As noted, when investors buy bonds for capital gains and equities for yield, something looks wrong!"

Michael Howell, CrossBorder Capital, June 2016



German 10-year Benchmark Bond: 1807 - 2016

Source: Global Financial Data

Low rates now the problem, not the solution
"Although in relative terms the US has had a good recovery, in absolute terms it has not. (...) Whether we look over the past five years, or whether we look over the past ten years, US productivity growth is close to as weak as it has ever been."



Fathom Consulting, June 10th 2016



The Demise of the Zero Yield Bound
"The asymmetry of bond markets was often used to differentiate the performance potential of fixed income and equity investments. Bonds, we were told, had significant downside potential, while their upside was limited by a purported zero yield bound."
Tim Haywood, GAM, June 10th 2016


The Death of Equities
"Could the 21st century be reverting back to the condition of stock markets in the 18th and 19th centuries when the capital gains on stocks were minimal or non-existent? Unfortunately, the answer to this question could very well be yes."
Dr. Brian Taylor, Global Financial Data, June 2nd 2016


A Third Major Bubble That Looks Set to Finally Burst
"As noted, when investors buy bonds for capital gains and equities for yield, something looks wrong!" 
Michael Howell, CrossBorder Capital, June 2016


By this metric, bonds have never been more valuable
"Return is the most salient feature of any asset class, and it’s hard to get happy about 0%. In an asset allocation framework, however, return has different dimensions."
Joe Davis, Vanguard, May 26th 2016




Alice in Quantumland: A Charming Illustrated Allegory of Quantum Mechanics by a CERN Physicist

This book is an allegory of quantum physics, in the dictionary sense of “a narrative describing one subject under the guise of another.”
Maria papova, Brain Pickings, January 2014



Japan: in search of a virtuous cycle
"But perhaps the usefulness of Abenomics will have been to provide a workable game plan for a managed economic decline, in which bond investors pay the Japanese government to borrow."
Lombard Odier, Investment Strategy, 2nd quarter 2016


All that fun for nothing!
"With surprising regularity, financial markets provide the opportunity to drop that phrase as a deadpanned summary of recent events."
Jeffrey Knight, Columbia Threadneedle Investments, April 25, 2016


Cyprus versus Greece: a lesson in Eurozone reform
Holger Schmieding, Kallum Pickering, Berenberg, April 1st, 2016


The Coffee Chronicles

Did you ever notice how sometimes all day Wednesday, you keep thinking it's Thursday? And it happens over and over all day long. And then the next day, you're all right again..

Do you ever find yourself standing in one of the room in your house, and you can’t remember why you went in there?
George Carlin, Little Moments



Health Care Stock Returns Outpacing Rise In Health Care Expenses
Bob Carey, First Trust Advisors L. P., April 21, 2016


Traffic jam of executive aviation

Phoenix Sky Harbor airport in Arizona Super Bowl 2015


China’s monthly investment data provide first concrete evidence of ‘doubling down’
"Official data published last week confirmed that investment by state-owned enterprises surged during the first three months of this year, with the scale of the turnaround strongly reminiscent of the early 2009 period. "
Fathom Consulting, News in Charts, April 21, 2016


A Snapshot of Growth vs. Value Investing

Bob Carey, First Trust Advisors L. P., April 19, 2016


The People in Your Neighborhood: Social Interactions and Mutual Fund Portfolios
Veronika K. Pool, Noah Stoffman, Scott E. Yonker, The Journal of Finance, December 2015


The Global Liquidity Trap Turns More Treacherous
The adoption of negative interest rates will do little to stimulate growth. 
Scott Minerd, Chairman of Investments and Global CIO, Guggenheim Partners, April 07, 2016


United States 10-year Bond Constant Maturity Yield

1790 to 2010

Global Financial Data


Who you think the best candidate for the economy would be?

“Bernie Sanders”

"Without a doubt? Why is that?"
“No question.”

Asher Edelman, on whom the Gordon Gekko corporate raider character was based in the 1987 movie, Wall Street , interview on CNBC’s Fast Money, March 12, 2016




Cheats and Deceits

How Animals and Plants Exploit and Mislead.


"Many early naturalists, including Charles Darwin and his contemporaries, were all too aware that the natural world is not a harmonious place. While we often see instances of apparent cooperation, selfishness and exploitation rule the day." Read more

Martin Stevens, Oxford University Press, February 2016




on the Fly

"A severe depression such as 1920-21 is outside the range of probability. We are not facing a protracted liquidation"

Harvard Economic Society, a few days after the 1929 crash, the society closed its doors in 1932.



The Panic of 1792

The first attempt at a stock corner in the United States came at the birth of the American stock market, occurring even before the New York Stock Exchange had been established.

Dr. Brian Taylor, Global Financial Data, February 28th 2016


The Global Economy Didn’t Change Last Year, Views of QE Did
The stock market is still viewed as if it were a discounting mechanism, a system where information is processed and priced to deliver insight about the fundamental state of liquidity, markets, and the economy. That view has always been debatable, but never more so than the whole of this century so far. Read more
Jeffrey P. Snider, Alhambra Investment Partners, April 11th 2016



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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