Commentary

Now Comes the Hard Part

Surveying the current condition of the financial markets, we presently observe a combination of still historically-extreme valuations, rising yet still only normalizing interest rates, measurably inadequate risk-premiums in both equities and bonds, and ragged, unfavorable market internals, suggesting continued risk-aversion among investors.

Commentary

The Structural Drivers of Investment Returns

After more than 40 years of work in the financial markets, studying all the data I could get my hands on, I’ve found it to be universally true that those who argue “history doesn’t matter” have never actually studied history.

Commentary

The Structural Drivers of Investment Returns

After more than 40 years of work in the financial markets, studying all the data I could get my hands on, I’ve found it to be universally true that those who argue “history doesn’t matter” have never actually studied history.

Commentary

Are We There Yet?

Lao Tzu wrote, “A journey of a thousand miles begins with a single step.”

Commentary

Making Friends with Bears Through Math

A fascinating aspect of the financial markets is that long-term returns are driven almost entirely by math, while short-term returns are driven almost entirely by psychology.

Commentary

Repricing a Market Priced for Zero

The most challenging financial event for investors in the coming decade will be the repricing of securities to valuations that imply adequate long-term returns, following more than a decade of reckless and intentional Fed-induced yield-seeking speculation.

Commentary

Quit While You’re Ahead

The expected return from a roulette spin is negative: -5.26%.

Commentary

Top Dollar For Top Dollar

Why is it so hard to accept that speculative bubbles can burst?

Commentary

Return-Free Risk

In an economy where the Fed has lost every systematic tether to common sense, empirical evidence, and concern for financial stability, it’s worth beginning this first market comment of 2022 by recalling the ways we’ve adapted in order to navigate that environment.

Commentary

Collision Course: Monetary Tightening Meets an Easy Money Bubble

Whether investors are ready or not, global monetary tightening cycles are fast approaching.

Commentary

Motherlode

There are certain features of valuation, investor psychology, and price behavior that emerge, to one degree or another, when the fear of missing out becomes particularly extreme and the focus of speculation becomes particularly narrow. We’ve suddenly hit a motherlode of those conditions. Emphatically, this is not a forecast. It's a statement about current, observable conditions.

Commentary

When Bubble Meets Trouble

Speculative psychology is the only thing standing between an hypervalued market that continues to advance and a hypervalued market that drops like a rock. Our best gauge of that psychology - the uniformity of market internals - remains divergent enough to keep market conditions in a trap-door situation.

Commentary

The Wealth Is In The Denominator

Among the illusions encouraged by every speculative bubble is the idea that wealth is embodied in the prices of securities – that higher prices inherently represent greater “wealth.” The fact is that every security is, at base, a claim to some future stream of cash flows that will be delivered into the hands of investors over time.

Commentary

Maladaptive Beliefs

Among the most persistent questions I hear is why we don’t just adapt to the reality that the Federal Reserve will never again “allow” the market to experience a serious decline. The problem with this view is that it rests on the premise that Federal Reserve policy supports the market in a clear-cut and mechanical way, when its effectiveness actually relies on the speculative psychology of investors.

Commentary

The Folly of Ruling Out a Collapse

A remarkable feature of extended bull markets is that investors come to believe – even in the face of extreme valuations – that the world has changed in ways that make steep market losses and extended periods of poor returns impossible.