October 2018 Newsletter

Drama Meets Composure October 10, 2018 The national drama playing out before the midterm elections contrasts sharply with a stock market that has every reason to fade but remains stuck in a pattern of composure, otherwise described as slower growth for longer.  This may be due to the construct that equity valuations remain near their historic averages.  To illustrate, on … Read More

July 2018 Newsletter

It’s time to talk about the yield curve.  As you may know, I have had a note taped to my computer for eight years now.  The note reads: Relative valuations (stocks) remain favorable (to bonds) until 10-year bond yields rise to 3.5%.           Since the 10-year U.S. Treasury bond now sports a yield of just 2.88%, as of this writing, we … Read More

June 2018 Newsletter

The United States is now in the second longest economic recovery on record.  This recovery is currently six percentage points less than the average historic magnitude of recoveries.  Based upon factors reviewed below, one could conclude a recession is unlikely until the third quarter of 2020. Typically, recessions are preceded by: Yield curve inversions: Normally precede a recession by an … Read More

April 2018 Newsletter

More Market Volatility April 6, 2018 Regarding the stock market; the market correction we are now experiencing is pressuring investor confidence.  Given the observation that the current correction has been in place for some nine weeks now and given that the average correction lasts approximately 18 weeks, we should remain in a corrective phase for another nine to eleven (the … Read More

February 2018 Newsletter

A Long-Awaited Correction February 13, 2018   Well, we waited 18 months for a correction in the S&P 500 and finally got one.  Fortunately, we generally raised our cash position in portfolios to roughly 30% prior to the larger spike down, which mitigated downside risk and gave us capital to employ at lower valuations.  Now however, the challenge is to … Read More

July 2017 Newsletter

Standard Deviation, Price Momentum, Birds, Bonds and Oil   Standard deviation is one of many terms often used to describe the pendulum swing of volatility in the stock market.  This measurement-term can give an indication of how close the market is to being overbought or oversold.  Standard deviation can aggregate any number of intelligence behaviors.  Birds, for example, tweet at … Read More

September 2017 Newsletter

Tax Policy, Class Struggle, Politics and Economics   The broad layout of the new Republican tax plan is out. Don’t spend your time drilling down or getting excited about implications for 2017.  John McCain lives.  So too do far healthier Republican senators: Susan Collins, Rand Paul, and Lisa Murkowski.  And no matter your political ilk, don’t bite on the painful … Read More

November 2017 Newsletter

Heads up. There is a relationship between the value of stocks and interest rates.  And, this relationship is probably different than you think.  When yields on treasury bonds are extremely low, rising interest rates have a strong positive influence on stocks.  As these yields move up toward 5% this relationship weakens.  The chart below (Figure 6: Equity Sensitivity to Treasury … Read More

October 2017 Newsletter

Be less anxious. While global growth has been tepid, during this period corporations have remained focused on lowering expenses and thereby enhancing returns to shareholders.   Due to worldwide Quantitative Easing (QE), all G7 countries (U.S., U.K., France, Canada, Italy, Japan, and Germany) and BRIC countries (Brazil, Russia, India, and China) are experiencing economic expansions.  This synchronous expansion may support growth … Read More

Changing Investment Styles and the Economic Cycle

Changing Investment Styles and the Economic Cycle   Monitoring the rate of change in the business cycle (ups and downs) is an important part of enhancing or reducing the risk of owning stocks. It’s what we spend hours doing daily in order to advance your account balances and preserve your capital. In the mature stage of an economic cycle, growth … Read More