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 ma
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 i
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 ev
When quantitative easing (“QE”) ended 2014, the Fed adopted “data dependent.” When market volatility rose, the Fed used “data dependent” in communications. By lowering the probability of a hike, volatility and fears moderated (see Figure 1). The result of data dependent was the Fed needs a full year worth of data to justify one hike. Now data dependency has been two years in effect, how can investors anticipate a new policy by the Fed? Figure 1: Historical Probability of a Hike by December and
Elections and financial markets always had a relationship. Best known is the “Presidential Election Cycle of Investing.” This cycle shows stocks gain the most in the third year of a Presidential term, by an average of 0.75 to 2.5 per cent. For bonds, monthly returns in the third year were mostly negative by an average 2 percent based Barclays Index history. The history of returns is shown in Figure 1. A reason for this pattern in returns is when an incumbent President announces tax cuts and or
One of the key data releases next Thursday will be the first reading for Third Quarter U.S. GDP. GDP has been a “hot” topic of debate at the recent Boston Fed Conference as well as during the third Presidential Debate. The slowness of GDP has been worrisome, especially because despite a robust labor market, wages have lagged. If GDP stays slow, a tight labor market with modest wage growth may decelerate consumer spending. With an already fragile investment, trade and fiscal spending, a drop in c
In her recent speech, Federal Reserve Chair Yellen introduced a phrase that may determine how markets, economists and the public will think about the global economy going forward. Yellen suggested the Federal Reserve should allow the U.S. economy to turn into a "high pressure economy." That means an economy where labor markets are very tight, demand is robust and capital spending runs at a high rate. For Yellen to arrive at such a conclusion, there were four critical issues she highlighted for f
http://www.bloomberg.com/news/audio/2016-10-14/there-is-a-need-for-shelter-in-the-storm-intellectus
For monetary policy to be effective, creativity and innovation seems essential. The latest is “yield targeting” recently announced by the Bank of Japan (“BoJ”). Targeting yields on Treasury bonds require a central to trade securities the private sector wishes to sell or buy. In that case there should be a “natural or fair price” the private sector is willing to pay. To understand this natural price, research by the BoJ may provide insight. BoJ research staffers discuss a yield curve where the ec
by Paul McGloin Client Considering Planning Transfers May Wish to Implement Them Prior to December 1st It is rare that a proposed Treasury Regulation gets much attention from estate planning practitioners, especially ones issued during the vacation month of August. However, on August 4th the IRS issued proposed Treasury Regulations under a little-used section of the Internal Revenue Code that may represent one of the biggest changes in estate planning law in the past thirty years. Planners aro
Not that I want to be the one spinning anything in equities at this point as positive, but, if you look at S&P valuations(courtesy bloomberg) based upon two particular metrics, you find that on a price/book AND a price/cash flow(trailing) you do NOT find overvaluation. In fact, if you consider the price/cashflow metric alone, it appears relatively inexpensive. Next, if you look at both trailing PE and estimated PE, the valuation falls into a mid range. But, this is NOT the case if you look
It's Your Brain, Man... According to research firm Dalbar, Inc. Behavior is the number one cause of investor underperformance. At Intellectus,along with key partners, we are in the midst of some very extensive work on investor behavior. According to our friend Dr. Thomas Oberlechner, former MIT and Harvard Behavioral economist and Senior psychologist to some of the worlds top hedge funds, more than 25% of an average investor return can be attributed to his or her behaviors. That is more than 2
The intellectus Partners Chief Economist Ben Emons on Bloomberg TV, discusses the global economy, the timing of the next Fed rate hike and the possibility of the global economy stalling in the coming months. He speaks to Bloomberg's Ramy Inocencio and Yvonne Man on "Daybreak Asia." (Source: Bloomberg) http://www.bloomberg.com/news/videos/2016-10-06/could-the-global-economy-stall-in-coming-months
In a great article by Steven Mufson, of the Washington Post, he profiles Orbital Insight, a company of which I am a founding board member. Our CEO, Dr. James Crawford has created a Deep Learning Convolutional Neural Network which is proving to be rather revolutionary to the world. Especially the world of Investing and finance. Based upon data analyzed in the following article, China's Strategic Petroleum Reserves are far larger than what was estimated. https://www.washingtonpost.com/business/ec
Markets faceoff a crucial week of central bank meetings with the Bank of Japan and the Federal Reserve on Wednesday. As recently doubts grew the BoJ could continue the course, Japanese interest rates rose sharply. When ECB President Draghi said a possible extension of quantitative easing not discussed, global rates experienced a “tantrum”. This phenomenon has become recurring since 2013 when the first “tantrum” appeared. Markets grapple how QE policies could formally end which explain why intere