As we have been calling for since the end of last year, there is indeed regime change in the markets. Our point was that the framework of the interest rate deck has changed. The next several years will be different because of this. What it means obviously is yet to be determined. But what really strikes me when I look at this chart below is this: The beginning of this enviornment was when we were reeling from the crisis. Frankly, at the time most of the market participants thought we were still deeply IN it. That is when Mohammed El Erian coined the term "New Normal". It was my opinion that term was really a pejorative for "cant really grow anymore". Well, what this seems to

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Market focus has been notably on Trump’s tweets on the subject of geopolitical tensions. Investors do have some experience how Trump’s handles such a situation. Think of North Korea that looked quite threatening but has resulted in a future Summit with Kim Jong-Un. The same may happen with Russia where Trump plans to meet with Putin but uses his “punch in the face” strategy to get meaningful dialogue. The "unknown-unknown" of missile attacks causes the oil price to go up but other traditional safe havens like the Japanese Yen, Swiss Franc or Gold have seen limited impact. Markets could be more driven by other factors. For example, how China will pursue trade policy through its exchange rate, the Chinese Yuan. A sudden devaluation of

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New Federal Reserve Chairman Jerome Powell’s first congressional testimony made it clear to markets that it’s no longer business as usual. Under Powell’s predecessor, Janet Yellen, developments in the labor market drove monetary policy. And since employment is a lagging economic indicator and slack in the labor market was large, it was an easy message to convey. Monetary policy would gradually adjust as the labor market showed steady improvement. As a result, market volatility was subdued because a stable and moderately growing labor market became quite predictable. But with Powell saying that he considers the labor market to be “beyond full employment,” fiscal policy must now be considered, driving the Fed toward a message that is focused on the uncertain effects of fiscal

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Cash can be a valuable commodity when returns on financial assets turn negative. After all, cash is easy to manage, has no volatility and doesn’t result in losses. Yet, cash is not abundantly available judging from global surveys such as by Bank of America. Those surveys are conducted among a diversified base of global investors. Respondents see excessive valuations and yet, portfolio cash levels have fallen to pre-crisis (see Fig. 1). A growing wedge between the perception of valuations and cash available to invest could pose a dangerous combination. Figure 1: Stretched Valuations and Falling Cash levels Source: Bank of America/Merril Lynch. “EU” = European Union. “Global” = global investors. “FMS” = Fund Manager Survey During the most recent bout of volatility, investors with significant cash positions

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We thought that you would find this "white paper" from our long time partners at Polen Capital very interesting. At Intellectus, we need to manage risk on a daily basis. Risk can mean different things to different people. It comes in different forms and most people react to it very differently. A common perception is that diversification, is the primary and only means of reducing risk. In fact, there is an old Investor adage that says, "You make money through concentration, you keep it via diversification". That is generally true. But like most "adages" there is some truth to it but certainly not a complete understanding of risk. We are very proud to have been an early supporter of the team at Polen Capital. Our association

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As you have seen us do in the past, from time to time, we invite selected experts in areas relevant to our clients and readers to pen guest posts. We are pleased to have a close friend of the firm, Mr. Trevor Mottl, who has deep expertise in Financial Markets, Derivatives, "Alt Data" in Investment Management and Cryptocurrencies, provide his thoughts on one way to consider Bitcoin as a store of value. Trevor has held leadership roles at the top of Finance and Investment management that include the uber successful hedge fund Balyasny and the leading investment banks Goldman Sachs and Susquehanna, to name a few. Bitcoin has advantages over gold, and actual currencies as a store of value. If you believe that society will spend

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Past week’s sell off in equity markets was one of the largest in recent years. When something like that happens, market analysts like to look at indicators such as the “Relative Strength Index.” This index is a technical indicator used in the analysis of financial markets. It is intended to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period. The relative strength or weakness is known as “overbought” or “oversold” conditions. The RSI index for the S&P 500 and global equity markets reached historic overbought conditions in December before sharply reversing to oversold in a matter of days last week (see Fig.1). The change in the RSI index

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As many of you know, the team at Intellectus Partners has been working on and refining a number of Quantitative driven analytics. Today we release our proprietary economic algorithmic indicator, which we have coined the "IntelleCator". We take this opportunity to further expand upon our findings and methodology. The idea is that our economic indicator will enable the team to have a nearly real-time pulse on the health of the broader economy. This in turn, will provide us a clearer perspective on how to best position our assets, depending upon our Macro views. If we believe that we are currently in a "Growth", "Recessionary", or "middling" environment the Intellecator algo helps drive our thinking. Essentially it will allow us to make better decisions related to whether

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What is happening in the markets now. Change is sometimes uncomfortable. It’s been too long since we have had a correction, so one was due. We are off more than 5% from the recent high. A 5% correction is a must and needed event to take the speculators out. We typically get two corrections of this size per year. Interestingly, it has been over 400 days since we have had one. Good opportunities begin to present themselves upon these downlegs, but a 10% or more correction could clearly be in the cards given the extent of this previous move. That said, there is already quite a bit of consternation about this sell off and it did seem as though this was already feared. That usually

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For the all the tensions in Washington D.C. over who’s the blame for the shutdown of the government, investors are going to be quite happy. A shutdown of government sounds negative but is viewed by investors as a wrinkle rather than a big fork in the road. This is seen from bond and stock returns that have been uniformly positive during and after shut downs and debt ceilings negotiations end. U.S. political risk is seen an investment opportunity and there are several reasons why. According to a Congressional Research Service report, when a “funding gap” occurs, government agencies start the process of “shutting down” activities and furlough personnel. The debt ceiling is a limit that Congress imposes on how much debt the federal

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Bitcoin futures were launched on the Chicago Mercantile Exchange in follow on to last week’s introduction on the Cboe. The result of these formal introductions is liquidity in the market for Bitcoin may pick up quickly. Naturally that would compress the price between futures and the underlying Bitcoin which is called the “the basis.” Currently the Bitcoin basis is around $450 to $800 which suggests there remains a significant liquidity difference between Bitcoin and futures markets. But now that futures on Bitcoin are introduced, institutional investors can develop a better fundamental view on what the “price of digital money” means for the global economy. In that regard, what’s important to watch is the “convenience yield.” This yield is the premium or benefit of holding

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Financial markets once again embraced President Trump’s tax reform with euphoria. Although details lack and uncertainties remain, the impact of reform was priced in as a positive outlook for the U.S. economy. This was seen from a strong rally in small cap stocks and companies with a current high effective marginal corporate tax rate. The dollar received a boost and Treasury yields rose on the prospect of higher GDP in the coming quarters. Now the question rises whether tax reform is an “inflection point” for the economy? That greatly depends on the effect of fiscal policy. The “fiscal multiplier”, which is the ratio of change in a nation's income level affected by a change in government spending, stands at the highest level since the

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Most clients have seen press reports about current tax proposals in Congress that promise significant changes to the taxation of individuals and businesses. H.R. 1, titled the “Tax Cuts and Jobs Act,” was introduced to Congress on November 2nd and is in the early stages of its legislative journey through the House of Representatives and the Senate. Prospects for the adoption of all, some or any of its current components is unclear at this point. One of the elements of H.R. 1 in its current form is a future repeal of the Federal estate tax. Specifically, the following changes would be made to the estate and gift tax system in the U.S. as it currently stands: • Beginning January 1, 2018, the amount which

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In her sit down discussion in London, Federal Reserve Chair Yellen presented a milder version of what Alan Greenspan once dubbed 20-years earlier as “irrational exuberance” to describe the state of the stock market. Fed Chair Yellen said valuations appear to be “somewhat rich” when measured on traditional models. The model she referred to is the “Fed model” of stock valuations, introduced by Alan Greenspan at the Humprey Hawkins testimony in 1997. The model uses the 1-year forward earnings yield of the S&P 500 and compares that to the 10-year Treasury yield. When these two are equal, the stock and bond market are in “equilibrium.” In Figure 1, the historical series is shown and it shows there is a wide gap between the S&

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The latest Consumer Price Index release was the third consecutive inflation report that came out on the soft side. The economy has been moderately growing at 2 percent average with wages around 2.5 percent and unemployment around 4.3 percent. An economist who advocates the “Phillips Curve” (the relationship between unemployment rate and inflation) would argue the U.S. economy is on the brink of a burst in inflation. And yet, the actual inflation is benign and even shows ingrained deflationary trends across a variety of core goods categories. Such are new and used cars, cellular plans and retail goods. Figure 1 shows the long term trend in some of these categories. They have been in decline for some time. What is going here exactly?

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