No, This Time Is Not Different

My latest post for Alpha Baskets takes a look at the behavioral dynamics before and after the Presidential Election as relates to investing. From the post; Markets do the “unexpected” all the time and this might be what has occurred here. Certainly, there will be instances in the future where one outcome seems certain but then the opposite will happen. This is exactly why having a disciplined investment process that you can stick to is so important as opposed to guessing as to whether some event, like an election, will be good or bad for markets. Please click through to read the entire post. Over the weekend we were in Los Angeles and stumbled across a huge classic car and motorcycle show near Dodger Stadium. There was a toy drive involved with the coming together of the event. I took a ton of pictures. For today are some motorcycle pics, I’ll put up some car pictures in a subsequent post. Harley Davidson One of very few Indian Motorcycles at the...

2016: Not Going Out Quietly

Due to a scheduling situation I am posting the entire update here. Equity markets continued to march higher last week prolonging the so called Trump rally. This has been a wild year on many fronts (David Bowie passed away and the Cubs won the World Series) and it appears to not be ending quietly in the stock market. The Dow Jones Industrial Average gained 3.06%, the S&P 500 rallied 3.08%, the NASDAQ added 3.58% and the Russell 2000 had a so-so year for the week as it went up 5.61%. If you’re curious, that makes 16% for small caps since the election which about triples the gain for the S&P. The other big post election trend that continued last week was for interest rates to move higher. Although surging yields may have subsided for now the march to “normal” continues as the Ten Year US Treasury Note closed at 2.46% on Friday. The German bund moved up to 0.36%, the French OAT tacked on 10 basis points to 0.81%, the UK gilt now yields 1.45%, JGBs pays six basis points and the Swiss ten year is threatening to go positive for the first time since January 2015, closing out the week at -0.06%. Speaking of continuing, post election trends, Barron’s Streetwise Column weighed in on the run up in bank stocks, the idea being that higher rates and a steeper yield curve should make lending more profitable. Barron’s was skeptical; “But make no mistake: Gravity will reassert itself. Right now, financials are “held up by air.” It also noted the extent to which betas for banks have gone up...

Active AND Passive

My latest post for Alpha Baskets takes a fresh look at the false construct of active versus passive. Proper diversification is likely to include both even if not active funds, most passive portfolios include some very active ideas. From the post. An example of this can be found with managed futures which seemed to always do well but after going up in late 2008, started to decline in 2009 and has been mostly trending lower ever since. One theory that popped up is that managed futures got a lot of its return from a large cash balance (the cash collateralizing the futures exposure) paying 4% or 5% or whatever money markets paid before the zirp era. Please click through to read the entire post. We are on a short road trip to Southern California starting in Palm Springs. Neat art gallery with an odd name. Palm Springs Fire Department Station No. 1 Old sign in downtown Palm Springs....

Global Political Upheaval

The weekly Market Update is posted at Alpha Baskets and includes the following; The November jobs report printed on Friday with 178,000 new jobs coming in very close to estimates with the headline unemployment rate dropping to 4.6% which is a number that on its face tests the bounds of full employment. The decline however is being attributed to a downtick in the Labor Force Participation Rate to 62.7%. The broader U6 fell 0.2% to 9.3%. One negative factor was the 0.1% decline in wages (year over year now shows a gain of only 2.5%). A decline in the unemployment rate not playing out as inflationary is something of a contradiction of economic theory but this is unlikely to deter the FOMC from hiking rates next week. One puzzling tidbit in the report was lack of meaningful job gains in the retail sector for the holiday season. These jobs might might materialize in the December report or revisions to the November report. The other economic data point of note was the revised Q3 GDP report which came in at 3.2% versus the earlier reported 2.9%. Please click through to read the entire update. An old Dodge near Twin Rocks in Bluff, UT. Canyonlands National Park Hiking in Capitol Reef National...