Research & News
Asset Allocation Weekly (June 7, 2019)
by Asset Allocation Committee Monetary policymakers are facing divergent trends that complicate future policy actions. Financial markets are signaling that the policy rate needs to be cut immediately. The chart on the left shows the implied three-month LIBOR rate, two-years deferred, from the Eurodollar futures market. Last October, the implied rate was around 3.30%; it has… Read More »
Weekly Geopolitical Report – Rare Earths (June 3, 2019)
by Bill O’Grady (NB: To improve readability, we are now linking references to media reports and articles directly in the text via hyperlinks. Footnoting will be reserved for documents to which we can’t link or to provide additional clarity on a topic.) Since early May, the trade tensions with China have morphed into a broader conflict. … Read More »
Asset Allocation Weekly (May 31, 2019)
by Asset Allocation Committee There are three factors that tend to cause recessions—inventory misadjustments, policy errors and geopolitical events. The first in the series has become less of a factor over time. Inventory management has improved dramatically since the end of WWII, and excess inventory leading to falling output has become less of an issue. Therefore,… Read More »
Asset Allocation Weekly (May 24, 2019)
by Asset Allocation Committee How important have mergers, buybacks, etc. been to equity market performance? Several analysts have attempted to answer this question by focusing on buybacks alone. However, there is a more straightforward method of looking at this question and including all the factors that affect the number of shares available—the index divisor. This chart… Read More »
Weekly Geopolitical Report – Venezuela: An Update, Part II (May 20, 2019)
by Bill O’Grady (N.B. Due to the Memorial Day holiday, the next issue will be published June 3.) In Part I of this report, we provided readers with a short history of Venezuela to bring some context to the current situation. This week, Part II, will examine the attempts by the opposition to oust Maduro, the… Read More »
Asset Allocation Weekly (May 17, 2019)
by Asset Allocation Committee Foreign exchange economics has become something of a backwater in economic theory. There are four predominant valuation methodologies; if one were any good, the others wouldn’t exist! The four are purchasing power parity, real equilibrium theory, interest rate differentials and productivity equalization (unit labor cost equalization). The general idea is that under… Read More »
Weekly Geopolitical Report – Venezuela: An Update, Part I (May 13, 2019)
by Bill O’Grady On May 10, 2018, Nicolas Maduro was reelected as president of Venezuela. However, there were numerous irregularities during the vote and, as such, the U.S. and the Organization of American States (OAS) refused to view the election as legitimate. Shortly after Maduro was officially inaugurated on January 10, 2019, the National Assembly, which… Read More »
Asset Allocation Weekly (May 10, 2019)
by Asset Allocation Committee While the financial industry is rife with performance comparisons to selected benchmarks, the most important investing goal for the majority of clients is a return above inflation that avoids catastrophic losses. Although beating the S&P 500 is a nice goal, solely focusing on that outcome may lead an investor to accept more… Read More »
Weekly Geopolitical Report – Reflections on Domestic Policy and American Hegemony: Part III (May 6, 2019)
by Bill O’Grady Part I of this report was a review of the reserve currency and the savings identity. In Part II, we showed how the Nixon and Reagan administrations used America’s hegemonic power to force some of the economic adjustment of U.S. policy onto foreign governments. This week, in the final segment of this report,… Read More »