Global macro investing, market structure, and decision-making in speculative markets.
The convenience yield associated with Treasury securities is dynamic, meaning the price of safety associated with this safe asset is constantly changing with the macro environment. This important paper, "Inflation and Treasury Convenience,” on the macro dynami…
What causes momentum, or what is associated with momentum? A new paper suggests that there is a strong link between liquidity and momentum, and that changes in liquidity precede momentum gains. The paper, titled “Momentum Returns and the Role of Liquidity Impr…
A paper that has not received much attention focuses on measures of systemic risk in "Systemic Risk Measures: From the Panics of 1907 to the Banking Stress of 2023". Much of the data from this paper is available from V-lab. The work suggests that there have be…
There is concern about the risk in the current markets given the high valuations. In a perfect world, investors would like early warnings of market stress as an indicator that it is time to rebalance portfolios. Identifying different stress indicators will all…
The private equity markets have been a darling for many pensions and endowments because of their strong long-term returns. Of course, investors should expect a premium over public markets because money is locked up for a long period of time. The problem is tha…
One of the key signs of a stock bubble is the issuance of new stock. Simply put, when the stock market is overvalued, smart firms will issue new stock to take advantage of these high values. The increase in supply will flood the market and generate downward pr…
The SEC proposed that firms would only have to provide information on a semiannual basis. Yes, it is a burden on companies to provide quarterly reports, but what makes US markets so liquid and effective for all investors is that corporate information is readil…
Chairman Warsh has announced the members of his task forces for review of Fed policies. I am impressed by the choices and the seriousness with which you are trying to provide fresh perspectives on some key problems. This is not an internal review but includes…
What is clear from the first Warsh press conference is that he will not provide forward guidance on the Fed’s actions. Chairman Warsh is not going to tell the market anything about what the Fed may be doing in the immediate future. Governor Waller, on the othe…
The markets were in an uproar over the dissents at the last FOMC meeting, and they may be expecting further dissent at the July meeting. Yes, dissent announces and measures dissent, but there are other ways to measure dissent that may be more useful. Researche…
Jevons’ paradox was developed in the 1800’s to explain dynamics in the coal market. Jevons found that technological improvements can increase resource efficiency, but that will often lead to an increase in total resource consumption. The increase in efficiency…
Ben Bernanke and Rick Mishkin called the use of data dependence in monetary policy "constrained discretion". We are in another of those periods of constrained discretion regarding inflation and monetary policy. Robert Hetzel, a former Fed economist, said that…
Good investors focus on risk. Risk is the downside. Bernard Baruch said it well when he said nobody ever went broke taking a profit. - Sam Zell This is a classic rule in trading, yet it has little meaning. Anytime you have a positive profit, you can take it, y…
From the newsletter, Owenomics, we see that stock dispersion is at levels not achieved since 2008 and 2000. Now, this may not be an indicator of a market top, but it does tell us something about market behavior. Dispersion is not the same as volatility. Volati…
There is an interesting index on token expenditures called the Silicon Data LLM Expenditure Index that measures the price of tokenization for AI. It is showing a decline as users move to cheaper models. If the price of tokens increases, demand will respond. Co…
One of the most dramatic changes in the US over the last 35 years has been the distribution of wealth between the middle class and the top 1%. From a gap clearly in favor of the middle class, the number now puts the top 1% at more than 25% of total wealth. The…
Should we be surprised by the rise of socialism in the US? No, if you look at the numbers. This is important because changes in the regulatory or tax environment will affect the return on capital, which will, in turn, impact the valuations of all companies. In…
There has been a change in society since 2000. Drug deaths, suicides, and alcohol deaths are up significantly. Society is different, and this is being reflected in consumer confidence numbers and views on economic optimism. This has been documented in the book…
The housing market has stalled, with sellers not finding buyers at current prices. There is a logjam, with sellers unwilling to lower prices after the steep run-up during the COVID pandemic. Buyers are being selective because not only do they have to pay a hig…
Even with the Iran War, the equity markets are generally up double digits for the year, with the only laggard being the S&P top 50 firms. June seems to be seeing a notable rotation out of information technology and communication services and into other sectors…
HedgeWeek with Arcesium published a survey titled "Age of AI II: Understanding Hedge Funds' AI Capability versus Usage." It is a short piece, but what stood out for me was the interesting fact that smaller firms are embracing AI use more than large firms. The…
We are facing a major debt crisis in the US, yet the alarm bells don’t seem to matter. The argument is that we run the economy hot, and stronger growth will get the debt issue under control, or at least allow us to see a decline in the debt-to-GDP ratio. The a…
Chantrill's four laws on the ineffectiveness of socialism. Socialism cannot work because of prices for multiple goods (Mises) Administrative government cannot work because of the Knowledge Problem (Hayek) Regulation does not work because of “regulatory capture…
Nothing lasts forever. Many believe that trends are sustainable over the long term, but that is not the case, so today’s trend or growth rate may not tell us what will happen tomorrow. Too often, analysis compares two variables with the same timeframe when it…
Daniel Kahnemena came up with the idea that people either use system 1 or system 2 decision-making. In system 1, the brain makes impulsive decisions with little analytical thought, leading to behavioral mistakes. In the case of system 2 thinking, the brain slo…
With all of the talk about the AI revolution and the Mag 7 over the last year, many investors have missed a really strong investment story - the rise of small-cap stocks. There has been a strong move in 2026, but more importantly, there is strong outperformanc…
Finished reading Unforgiving Places: The Unexpected Origins of America's Gun Violence by Jes Ludwig of the University of Chicago and I am once again awed by the power of good economic research. I may have had some biases before starting the book, but I had an…
Recent comments from Fed Chairman Warsh suggest that he is not in favor of the current forms of forward guidance. No dot plots, or perhaps not in the current form. The Fed has proven to be a poor forecaster, so the guidance may not be helping the market. It do…
From work done by the ECB, gold has now overtaken US Treasuries as the largest reserve asset for central banks. This is driven by the strong price appreciation of gold over the last year, even with the recent declines. US Treasuries have seen yields rise, redu…
This book, Thinking in Time: The Uses of History for Decision Makers is now 40 years old, yet it provides some good, simple insights on how to make better decisions. You may not be interested in the political stories provided, but they provide context on how b…