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What do we know?

What do we know?

Evidence Based Investing   |  

“As we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones” -Donald Rumsfeld 12/2/2002. “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so”- Mark Twain

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Firing up the Choppers

Firing up the Choppers

Evidence Based Investing   |  

In theory there is no difference between theory and practice. In practice there is. – Yogi Berra There has been increasing talk recently about the advent of “Helicopter Money” (HM). Even mainstream academics and economists are now starting to advocate it’s use to arrest the continued slump in demand, most recently noted here. But what is it, what does it do and does it work? …

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Sell in May?

Sell in May?

Evidence Based Investing   |  

“I would rather have questions that can’t be answered than answers that can’t be questioned” -Richard Feynman, Physicist. The markets currently present somewhat of a paradox – since the low point in February, the MSCI World Index has risen 13% (as has the S&P 500), becoming on one metric the most overbought since 2009, whilst at the same time seeing NYSE Short Interestreaching the same levels as 2008 (see charts below). This is a Schrödinger market – both bullish and bearish at the same time.

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Extinction Event or Process?

Extinction Event or Process?

Evidence Based Investing   |  

“Capitalism requires a structure and value system that people believe in and can depend upon.” – John C. Bogle It is commonly supposed that the Dinosaurs were wiped out by the Chiucxlub asteroid that landed in Mexico around 65 million years ago, but it is possible that the die had already been cast- they had been declining in numbers and diversity over several million years, and the Asteroid may well have been akin to the knock-out punch that floored an already wobbly boxer. So may it be with Hedge Funds- there have been a number of high profile “blow-ups’ recently, which has caused even the mainstream media to wonder aloud why Investors still use them.

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Mind the GAAP

Mind the GAAP

Evidence Based Investing   |  

[Up-date: This morning,(18/4) Pepsi announced results: by the magic of Accounting, it managed to convert an $0.64 EPS number into a non-GAAP EPS of $0.89 on a non-GAAP basis. Voila, a $0.25 improvement, with only a little effort required !! ] “Never attempt to win by force what can be won by deception.” ― Niccolò Machiavelli, The Prince…

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Running a Deficit

Running a Deficit

Market Commentary   |  

“Truly, the real black swan problem of stock market busts is not about a remote event that is considered unforeseeable; rather it is about a foreseeable event that is considered remote. The vast majority of market participants fail to expect what should be, in reality, perfectly expected events.” Mark Spitnagel, The Dao of Capital.This applies equally well to ALL assets, not just stocks. Some of the most malign consequences of QE, ZIRP, NIRPand so on have fallen on savers. It is now practically impossible to live off the interest from savings (unless you are Donald Trump, in which case you’re a bit busy at the moment), which forces Investors to “Reach For Yield”, with potentially dangerous implications. However, they are not the only victims- Pension Funds are under assault on two fronts, one more technical, one very practical.

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It's a Game of Two Halves

It’s a Game of Two Halves, Brian…

Market Commentary   |  

A new phenomenon of the 2000s and beyond has been the rise of Financial Television. As the markets have soared, so has interest in them, to the point where even Channel 4 news (not an outlet known for its pro-capitalist views), now feel compelled to announce how stock markets have done that day. Meanwhile, at Bloomberg TV, CNBC, Fox Business News etc, they maintain a hectic pace, often spending as long as 3 minutes covering in depth the latest news stories of the day (hour?), and discussing economic issues with all the gravitas they can muster. One of the first casualties in all this is thought, which they replace with cliches of varying vacuity. Below are some of the best (or worst, depending on your view). 1): “China will have a Hard/Soft landing”. It is by no means clear how a country can get airborne in the first place.

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Bringing Down the House (of Saud)?

Bringing Down the House (of Saud)?

Market Commentary   |  

“If you want to know what God thinks about money, just look at the people He gives it to.” – Dorothy Parker [This post was prompted by a discussion with an Oil- industry employed client, who was speculating on the motivations behind the Saudi policy on production etc. and what it meant for the future price of oil. We thought it worth weighing in on the subject, as the oil market is still one of the most important cost inputs into economic decision-making, and thus growth] The oil market continues to confound expectations. Since the low point in mid-February, it has risen nearly 40%, leading some to call the oil bear market over. This may prove to be premature however.

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Losing Momentum?

Losing Momentum?

Evidence Based Investing, Factor Based Investing   |  

There is nothing permanent except change – Heraclitus In the early 1990’s Fama and French demonstrated that Company Size and Price-to-Book (Value) explained the majority of investment returns, in what was dubbed the Three Factor model. This was the addition of two factors to the market risk (Beta), that the CAPM stated was the cause of stock returns. These have since expanded to 5 (operating profitability and investment policy), and more recently to 6, as investors have judged Momentum to be a “factor”. It is the last of these that has had the most influence on market behaviour over the past few years, in both directions.…

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