One of the most important determinants of stock market returns in the short/intermediate term is investor appetite for risk. When investors in the market are confident and display risk seeking behavior, we tend to see assets (like stocks) ignore bad news and rally on good news. However, the reverse occurs when investors are displaying a…
My Long Term View and How I’m Positioning Portfolios (Oct, 2015)
I’ll preface this post by saying that this is a long one (sorry about that) but it’s worth the time. To continue on the post from earlier this week where I mentioned that the best long-term investment opportunities typically come with short-term volatility, I’d like to outline my long-term view on how the world, global…
Liquidation is Spreading
Ever since Janet Yellen finally admitted last week that the global economy does matter, we’ve seen the deflationary-based selling spread to additional sectors, not just energy and metals as it was earlier this year. Anything sensitive to China and/or the global economy – like industrials, materials, transports, Emerging Markets, etc. – is being thrown out…
How the Economic Machine Works
Here’s a video made by Ray Dalio two years ago to help explain in very simple terms how the economic system actually works. It’s a half hour long but well worth the time if you’d like a better understanding of the current economic issues the world faces. Ray Dalio is head of Bridgewater Associates, a manager…
Why the Stock Market Dropped So Sharply
Two words – “The Fed.” The two primary goals of the Federal Reserve’s Quantitative Easing efforts over the past few years were to inflate asset prices (stocks, real estate, etc.) and lower interest rates. They call this the “wealth effect.” In theory, they think that higher asset prices will increase confidence, which will increase spending, business…
What China’s Currency Devaluation Means for Markets
Risk assets across the board are trading lower today after China devalued their currency, the renminbi (or “yuan” as it’s referred to in international context), overnight by 1.9%. China currently maintains a peg to the US dollar in order to keep the exchange rate in a very tight band. They do this by intervening each…
What the Stock Market seems to be Ignoring
Signs of deflation have been popping up all over global asset markets for the past year, ever since the US dollar broke-out on its tear higher. US dollar index – 2 years But this doesn’t even tell the whole story. The US dollar index represents the value of the US dollar against a basket…
The Future of Europe
I haven’t chimed in with my two cents on Greece yet but I figured you might be wondering what I think, and more importantly, how it might affect investment markets. It’s no secret that I’ve been pretty critical of the Eurozone the past few years. A monetary union without a fiscal union just cannot work…