Credit risk premiums recently narrowed to their tightest levels since late 2007. There are a few risks emerging at the horizon that may alter valuation of corporate bonds. These risks can be put into three categories: 1) macro risks, 2) cross border holdings and 3) non-repatriated earnings and corporate tax reform. In the Minutes of the Federal Reserve released this week, there was a discussion how to respond when the economy with an already tight labor market could face additional fiscal stimulus. Many FOMC members saw a quicker tightening as the appropriate response. This tightening would be through 2 to 3 rate hikes in 2017, possibly followed by a reduction of the size of the Fed's balance sheet. These tightening measures may come at a time

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We are big fans of using all tools available to derive insights for our investment views. In particular, alternative datasets are increasingly valuable, available and differentiated. The advent of Artificial Intelligence on the Investment court has changed how things are done quite a bit. The various A.I. techniques are finding their way into the top trading and research desks of investment managers and advisors. From Natural Language Processing(NLP), to Machine Vision, Deep Learning and others, we are processing mass quantities of complex data via algorithms to better understand (and hopefully predict) our world. In light of our view of the immense value of these alternative data sets and the high growth companies that are creating this market, We thought that we would share an

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The Entrepreneurial Lifecycle: As the New Year turns. I wanted to touch base on the lifecycle that we all go through and how to optimize the benefits of working with an Advisory firm like Intellectus Partners. There is a difference between investment management and Wealth Management. There is an even bigger difference in advising Entrepreneurs and execs in high growth companies and non-entrepreneurs regarding their finances. Most often clients come to Intellectus Partners at or near an exit and expect the firm to just step in and work it’s “magic”. We can certainly help and add value at that point but wealth management for those in an entrepreneurial world ideally should line up temporally with their business lifecycle. When someone comes to us near their

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The leading behavioral investment mistake By Thomas Oberlechner, Chief Science Officer, TheHintBox!,Inc, a related company Biography: Thomas Oberlechner, Ph.D. Dr. Oberlechner is Chief Scientist at TheHintBox!,Inc, a related company to Intellectus Partners. He is also founder and partner of FinPsy LLC, a San Francisco based behavioral consultancy. He helps decision-makers in finance and investment integrate state-of-the art behavioral expertise into their decisions, products, and organizations. Dr. Oberlechner is a leading expert on behavioral and psychological aspects of financial decisionmaking. While previously Chief Science Officer at iMatchative, he developed decision support systems for investors and hedge fund managers that add novel behavioral dimensions to the financial hedge fund data traditionally available. These systems provide investors and fund managers with deep insight into behavioral preferences,

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The slope of the yield curve informs about the future state of the economy. Post the great recession, the yield curve hasn’t tracked always the “normal” cycle shown in Figure 1. There are two reasons why this is the case and what it means for core fixed income investing. Figure 1: U.S. Treasury and Japanese Yield Curve Compared Source: Bloomberg, monthly data. T-= years before the cycle peak of economic growth, T+ = years post peak and into recession. The first reason is to compare the slope of the U.S. yield curve to Japan. The Japanese curve followed the normal cycle but deviated when deflation took hold (T+2 to T+4, Figure 1). Notably, the U.S. yield curve (orange line) follows the

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One possible effect stemming from the Brexit and U.S. elections outcome could have significant consequences: central banks relinquish their independence. There are academic proposals that call for central banks to maintain “operational independence” but give up political independence. There has been rhetoric during and post campaigns that argue for a change of central bank influence, different board and Chairman appointments and even a call to return to the gold standard. Politically motivated changes of a central bank have been associated with periods of high inflation. However, removal of central bank independence could also play out differently, for example by way of market forces. There are three ways how that may happen: 1.Loss of control over long maturity interest rates 2.Loss of control over

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What are the possible outcomes from the expected and stated tax policies of the new Trump administration? Pragmatism v. Idealogy: What are the likely economic impacts? Two years without gridlock? Given that the deck is now stacked for conservatives in that they control the White House, House of representatives and the Senate ...and likely soon the Supreme Court, expect a whirlwind first two years. Here are some of our thoughts with assists from a few of our sell side coverage friends at some of the big banks. The simple logic as to what has changed: In the past Obama regime, we've had sub par growth but the FED was still raising rates. The consensus was that there was indeed some room for Chair Yellen to raise

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Since the U.S. elections, the dollar has surged by 5 percent while emerging market currencies fell by double. When the value of the dollar spikes, global GDP on average has contracted by 2 percentage points in the past, and eventually dip into recession territory (see Figure 1). Currently, markets are in the “first inning” of a periods of rising rates, surging dollar and contracting global GDP. This combination could have two profound effects: dollar shortage and Fed balance sheet contraction. Figure 1: Dollar and Global GDP Source: Bloomberg, quarterly data, 1980-2016 Since the middle of 1990s, global debt denominated in dollars has expanded by an average of $1.5 trillion a year, to a cumulative of $50 trillion today according the Bank of International Settlements.

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As Q3 Earnings season winds down, we provide a quick update on how the various sectors fared on Sales and EPS results. 91% of S&P 500 companies have already reported, so at this point we have a pretty good indication of how things are going to settle out. Overall, the quarter was pretty impressive with 55% of companies beating Sales estimates and 76% of companies beating Earnings estimates. The standouts on both Sales and Earnings were Technology and Financials, with 91% of Tech companies beating Earnings estimates and 84% of Financials beating Earnings estimates. The laggards were Telecom Services and Materials on both Sales and Earnings. See below a table which ranks the sectors from best to worst on both Sales (left) and Earnings

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As has been his unique habit, Warren Buffet's Berkshire Hathaway has taken an aggressive stake in an industry. Berkshire has filed their Q3 2016 13F filing today and among them was a particularly outstanding item. He has acquired large stakes in an airline, no make that "ALL" four major airline companies, or, the entire industry. Warren Buffet has acquired stakes ranging from $300mm to $1bb in value in each of the legacy carriers, American Air, Delta and United Continental. He also took a stake in Southwest. As we have been stating for quite awhile, the relatively rapid consolidation in the Airline industry, (Continental, Virgin are the latest two) has created a dynamic similar to what the railroad industry went through a decade ago. The

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Youth unemployment, debt burdens, current account imbalances and deflation remain at the heart of a struggling Eurozone economy. These factors may again play a role as Europe enters 2017 with elections in the Netherlands (March), France (April) and Germany (September) stacked up like a domino. The European political system, where decisions are made by unelected officials, may spark confidence votes in national parliaments or referendums in individual countries. The linkage between sovereign risk and banks has increased through the European Central Bank’s QE program. And a rise in populism may cause snap elections and minority coalitions. These factors in the wake of Trump’s win are widening European sovereign spreads and resemble the early period before the European debt crisis erupted (see Figure 1, red

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The stunning victory by President elect Donald Trump may be out of the playbook of the “democratic domino theory.” Empirical research (Leeson/Dean) found across 130 countries between 1850 and 2000 that “democratic dominoes” catch around 11 percent of their average geographic neighbors’ changes in democracy. In the context of the outcome of Brexit and the Trump win, political movements in rural areas most prone to global trade, emulate each other’s victories by a substantial voter turnout. Currency markets respond with significant dislocations (see Figure 1) in response to a political regime shift. This happened to the Pound during EMS crisis in 1992 and the Mexican Peso crisis in 1994. In reaction to those crises, the CNY devalued and U.S. interest rates saw a

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Now that the American electorate has spoken,it is time to sharpen our focus on how tho think through this political earthquake: A "Republican" mandate? Not like you think...It's more like an Independant and a Republican Congress. Who is DJT? Is he really a Republican in a traditional sense? It depends upon how you define "traditional" I thought I would touch on some helpful historical analogies: 1.Today vs 1968-1980 2. DJT ~ Eisenhower and Teddy Roosevelt Now vs 1968: An argument could be made that we have been in one of the most tumultuous periods in American History over the past decade or so. It is evidenced in the stock market behavior of the last 15 years. We have had two

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Let's start by just looking at market action. After nearly a decade of underperformance US financials are showing relative strength. They are indeed cheap on a book basis. But can there be any visibility into earnings growth? Could the end of the Obama years lead to better banking futures? The bank index is now testing multi year highs and happened to be up big in yesterdays massive rally. Here you have the Dow Jones Transportation index.As you can imagine, this is a very cyclical index and is a forward leaning indicator. As goods and people are transported, ecomomic growth moves along with it. Here is a reinforcing datapoint. This shows US Air traffic. Clearly lots of strength here. As both a consumer discretionary item and

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Just as the Brexit outcome in the United Kingdom had very significant affects on global markets, I view real risk of a similar type of event happening in the United States with our Presidential election on Tuesday, November 8. Going into the vote in the UK, the world was sanguine about the chances of the British Citizenry actually voting for a "Leave". The punditry that nary has an independent thought and so often just writes what they are told, assured the world that the vote would be a non event. Even global betting markets had the odds skewed as if it were a sure thing that the British citizens would never be so dumb as to vote to leave. The scare mongering and independence

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