A Dark Gray Swan?

The weekly Market Update is posted at Alpha Baskets and includes the following; Perhaps more interesting than the reaction in the stock market has been the carnage in the bond market. You likely heard that $1 trillion in bond market assets had been wiped out during the week but the selloff had been going on for several weeks. Since the start of October, the Ten Year US Treasury Note has gone from 1.60% to 2.11% at Thursday’s close (there was no trading Friday for Veterans Day). Early Monday, the ten year was trading at 2.25%.For some context to the impact on certain bond funds, a popular longer dated treasury bond ETF is down more than 10% since the start of October and an ETF tracking 25 year zero coupon bonds, probably the most volatile way to access the treasury market, is down 16%. The logic behind the huge jump in yields is that if President Trump implements all or even some of his policies it would be inflationary. There is no way to know whether this is the big one with regard to interest rates but the reaction in the bond market serves as an excellent reminder of how quickly the market can move. For a long while here we have discussed this exact issue. We can’t know when rates will normalize but it is the obvious risk to bond market participants and when it happens there will be investors caught off guard. This is unnecessary as the risk is clear and there are countless way to access yield while not taking the interest rate risk that exists in...

Are Robo Advisors Really Dying?

My latest post at Alpha Baskets looks at the evolution of Robo Advisors. It is of course a valid idea but is destined to evolve and it is possible, some say probable, that the future for this niche will look much different than what we see today. From the post; To the extent the robo concept was new and potentially useful with the promise of profitability (it is both of those things) there was always going to be larger players that would enter the market, this is the sort of thing where first movers can’t necessarily maintain their advantage. The disruptive technology in this equation is the exchange traded fund, not the robo platform. Please click through to read the entire post. Capitol Reef National Park visitor center. Also from Capitol Reef National Park. Prescott National Forest Engine...

Cubs Win! Equities Lose?

Domestic equities have declined for nine days in a row which is the longest such streak since 1980. 1980?! The streak looked to end at eight on Friday until the indexes turned down with about 30 minutes left in the trading day. For the week the Dow Jones Industrial Average fell 1.49%, the S&P 500 gave up 1.93%, the NASDAQ dropped 2.77% and the Russell 2000 was down 1.97%. The selling was not panicked but there seems to be no catalyst right now especially considering the Presidential Election is now just a day away. Without expressing a political preference, we will look forward to the election being over and only needing to hear about one of the two candidates going forward. The October jobs report contained a mix of meh and strength but nothing truly bad. There were 161,000 jobs created and the headline unemployment rate ticked down to 4.9%. The broader U6 unemployment number fell to 9.5% which is a new low going back to 2008. The workforce contracted though with the participation rate falling to 62.8%. The real strength was in wages which grew by 0.4% for a 2.8% year over year comparison and revisions added 44,000 jobs to the last two months. Although there is still one more jobs report before the December FOMC meeting, the current data appears to solidify the intention to hike rates. The Brexit saga took a new turn last week when Britain’s High Court ruled that Parliament will need to approve the commencement of Article 50 which is the starting point for actually separating from the European Union. The immediate reaction...

Calls For Poor Returns Or A Call To Action?

My latest post for Alpha Baskets looks at what to do when pundits talk of poor returns for years to come. From the post; Whether or not RAFI is correct, the next ten years will be a mix of some number of great years, a couple of flat years and a couple of terrible years. Maybe the decade will have three terrible years and the overall result will be poor but if there are only two terrible years then things could be pretty good. That one extra terrible year would be the difference maker between good and meh/terrible. Please click through to read the entire post. The first picture is from the self-guided tour through Monument Valley shortly after sunrise. The next picture was taken at Dead Horse State Park which looks out over Canyonlands National Park. As we drove from Moab down to Monument Valley we stopped in Bluff, UT and took a bunch of pictures including a quick stop at the local firehouse and we found what I believe is an 80’s era American LaFrance parked...