“If you can look into the seeds of time, and say which grain will grow and which will not, speak then unto me. ” –William Shakespeare. Suppose you knew of events in advance of their occurrence. You could make money on this knowledge. Seems obviously true, but it isn’t; even perfect foresight doesn’t necessarily ensure a profitable investment- in many cases one would have lost money.
Records galore in Equities as Bloomberg reports, prices melt up, whilst volatility collapses. We are now in the second longest period without a 3% peak-to-trough draw-down, as (some) investors continue to take positives from almost all news. As we spoke about last week however, not all are feeling the love, as Professionals continue to look to sell/short markets, warning investors of crisis to come. They will be right eventually of course (as is a broken clock), so it may be time to examine risk tolerances in preparation for a correction (that may not occur, if at all, for a while). After all, forewarned is forearmed…
“Dear Optimist, Pessimist, and Realist. While you guys were busy arguing over the glass of water, I drank it. Sincerely, the Opportunist.”- Unknown
I’m forever blowing bubbles,Pretty bubbles in the air,They fly so high, nearly reach the sky,Then like my dreams, they fade and die.
The grotesque juxtaposition of the deadliest mass shooting in US history and another 150 point surge in the Dow, following on from the seeming indifference to the prospect of nuclear war in the Korean peninsula has prompted me to wonder if capitalism (or at least it’s current version) is in any way moral. It is often said that capital itself is amoral-it merely goes to where it is treated best, but participants can (or should) be. The excesses of executive pay of recent years and the Equifax stock sales by Executives prior to the disclosure of a major data leak, however, suggests otherwise. It is of course the case that without capitalism, we would all be living i…
It is becoming a bit of chore to keep up with the doom-laden predictions emanating from the twitter-sphere about the fate of markets, (though I am doing my best). The causes are variously, low volatility, passive investors, Central Bankers or market valuations or a combination thereof. The latest panic-du-jour concerns “market breadth”, which measures the number of shares advancing compared to those declining; the theory is that if too few shares are rising relative to those falling, the market is due for a tumble. On the face of it, it seems intuitive, but the problem with using market breadth to foretell market moves is that it is hugely unreliable; consider these two articles (from the same source), dated December 2015 and
Evolution consists of two simultaneous but quite separate phenomena of adaptation and diversification- Ernst Mayr (Evolutionary Biologist).
‘Please, sir, I want some more.’- Oliver Twist (Charles Dickens) That we are living in a low return world is now so widely accepted as to be bordering on a cliche- but HOW low will long term returns likely be? With the caveat that no one really knows, it is possible to come up with a reasonable set of assumptions that can provide us with a range of potential outcomes. We looked at this issue around a year ago, so now might be a good idea to revisit the prospects from a slightly different angle, as there are many ways to arrive at a conclusion, some of which will be similar.
“The fact that there’s a highway to hell and only a stairway to heaven says a lot about anticipated traffic numbers.” – Bill Murray. (re-quoted from The Price of Everything blog).
“The strength of the dollar has historically been tied to the strength of the U.S. economy and the faith that investors have in doing business in America” – Steve Mnuchin (US Secretary of the Treasury). The Dollar is currently about as popular as a rattlesnake in a lucky dip; earlier this week the US Dollar Index hit lows not seen since December 2014, and is down nearly 12% since the start of the year. Speculative positioning in the US Dollar has also reversed sharply, with Hedge funds etc. now net short for the first time since 2013 (note the confluence of short positions with major market lows!). Since the Dollar is the world’s reserve currency, it is an important indicator of risk appetite across the globe. We wrote about Dollar negativity in October last year and it seems to have returned.
