Research & News
Weekly Geopolitical Report – China’s Foreign Reserves: Part II (June 11, 2018)
by Bill O’Grady In the first part of this report, we discussed the evolution of foreign reserves from gold to the dollar, with a historical focus. This week, we will use the macroeconomic saving identity to analyze the economic relationship between China and the U.S. Next week, using this analysis, we will discuss the likelihood that… Read More »
Asset Allocation Weekly (June 8, 2018)
by Asset Allocation Committee This week, we examine commodities in our fourth installment on secular trends. Commodity prices challenge the notion of “secular.” This chart shows a trend model for real (inflation-adjusted) commodity prices, represented by the Commodity Research Bureau (CRB) commodity index, deflated by CPI. We prefer this commodity index for its long history (over… Read More »
Weekly Geopolitical Report – China’s Foreign Reserves: Part I (June 4, 2018)
by Bill O’Grady We often get questions about China’s foreign reserves. The fear is that China’s massive “pile” of foreign exchange reserves is a risk factor for U.S. markets. In the first part of this report, we will discuss the evolution of foreign reserves from gold to the dollar, with a historical focus. In Part II,… Read More »
Asset Allocation Weekly (June 1, 2018)
by Asset Allocation Committee Last week, we discussed secular cycles in the Treasury market. This week we will discuss equities. The rule for secular cycles in equities is rather simple: the price/earnings (P/E) is the critical factor. In general, profits tend to rise over time. Driving the secular trend in equity markets is what investors are… Read More »
Asset Allocation Weekly (May 25, 2018)
by Asset Allocation Committee Last week we discussed the general idea of secular versus cyclical trends. This week we will look at these concepts with regard to longer duration fixed income. The goal of theory is always to simplify. Theorizing is all about taking complex phenomena and reducing it to basic elements that can guide us… Read More »
Weekly Geopolitical Report – Reflections on Cyberwar (May 21, 2018)
by Bill O’Grady (Due to the Memorial Day holiday, our next report will be published on June 4.) On Saturday, May 11, the New York Times ran an article on the threat of Iranian cyberattacks.[1] Although the report didn’t necessarily break any new ground, cyberwar does pose some interesting issues for American hegemony. In this report,… Read More »
Asset Allocation Weekly (May 18, 2018)
by Asset Allocation Committee In our asset allocation process, we focus on cyclical trends; that doesn’t mean we pay no attention to secular trends but it isn’t our primary emphasis. The lack of clarity around what these terms mean can lead to confusion. And so, over the next few weeks, we will examine the difference between… Read More »
Weekly Geopolitical Report – The Marshall Plan: A Review (May 14, 2018)
by Bill O’Grady We occasionally run across a book that we deem important enough in the arena of geopolitics to warrant a full report dedicated to its review. Recently, we happened upon a book that fits this requirement, The Marshall Plan: Dawn of the Cold War by Benn Steil.[1] This book details the history of the… Read More »
Asset Allocation Weekly (May 11, 2018)
by Asset Allocation Committee Recently, U.S. equities have outperformed emerging market equities. The chart above shows the relative performance of emerging market equities against U.S. equities. A rising line indicates that foreign equities are outperforming. Questions are being raised as to whether this recent decline is the end of what has been a strong relative uptrend… Read More »
Asset Allocation Weekly (May 4, 2018)
by Asset Allocation Committee The continued rise in long-term interest rates, with the 10-year T-note breaking above a 3.00% yield, is becoming the focus of financial markets. Here is our updated 10-year T-note model. The model’s core variables are fed funds and the 15-year moving average of inflation, which we use as a proxy for inflation… Read More »