Thinking
How Should We Invest When Forecasting Becomes Tough? A Case For Protected U.S. Dollar Assets
When we look back at 2016, some very strange and counter-intuitive things happened in sequence. We believe this phenomenon will repeat in the years to come, and market participants just have to get used to investing with decreasing certainty in the background. First, both with Brexit and the U.S. elections […]
Is Inflation Really Back? What to Do Now in the Bond Market?
The BIG event in markets that has occurred this year is the massive selloff in global bonds, accelerating since the stunning victory of Donald Trump in the US elections. The common and widely held view, which now seems to be reflected in the bond markets, is this: (1) Fiscal stimulus […]
Why Having a Monetization Framework is So Important for Tail Risk Management
If you had left on the day of the US election at the market close and come back the next morning, you would look at your market screens and see that the equity markets, at least, had done barely anything. This would have completely hidden the amazing turn of events […]
How to Beat the Machines Before They Beat You
Algorithms and trading “machines” are everywhere. Indeed, I have to confess that I have created and managed several investment programs that are almost purely algorithmic, so I feel like I am betraying the confidence of the cult of systematic traders when I write a column on how to tackle the […]
A is for Apple…
It’s the day before the September FED and BOJ meetings. While all eyes are on Central Bank actions and speeches that will be out in the open tomorrow, the lull today should provide a few moments to go back to first principles of investing in stocks, bonds, cash, and on […]
Today’s Bond Market Is Insurance, Not Investment
A few days ago over five billion dollars worth of Zero Coupon German government bonds (“Bunds”) were auctioned at a yield of minus five basis points. For me, as for many others, bonds with negative nominal yields hold a fascination – they are no longer unicorns, but nonetheless a rather […]
Unexpect The Expected To Uncover Opportunities
Since the financial crisis, the two major asset classes — stocks and government bonds — have shown a wonderful diversification effect. When stocks fell, yields on bonds generally fell (i.e. bond prices rose); as stocks rose, yields on bond rose (i.e. bond prices fell). We expect this inverse correlation relationship […]
Positioning For The Coming Capitulation
When I scan the market for “distortions”, nowhere is the situation more odd from a historical context than in the level of global yields. Indeed much has happened that was unforeseen, even unimaginable a few years ago. Many sovereign yield curves (and even corporate bonds in many countries) are negative, […]
The Yin And Yang Of Investment Approaches
(With Frank Jones, San Jose State University) Summer seems to have arrived early in California, and with it warm temperatures and, given our El Nino year this year, lots of tall grass, and….rattlesnakes! As a long-time trail runner, I am prepared for the occasional hazard of the trail (I have […]
Why the Quants Might be Winning on Wall Street
Many of us have seen the question in the accompanying graphic (the technical name of which is the “Müller-Lyer illusion”): Which of the lines is longer? When we look at them, we see that the lines in the middle (“arrow tails”) of each set are longer than the other lines […]
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