Category: Markets
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Discretionary Recessionary Signals
Do you feel more optimistic than a year ago? Despite more negative headlines and political turmoil, bond markets are signaling more optimism surrounding future growth than a year ago. Nominal yields around the world are much much lower than their historical averages. We actually see negative rates in some European nations. That being said,…
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Why are Markets so Calm?
Valuations are stretched and economic data is cooling, yet markets are complacent. Why? The following are rationalizations of current market values. 1.) Massive movement from active management into passive strategies. Why pay someone to under-perform the S&P 500? Passive investing implies no trading, which means less volatility. 2.) Increased regulation has permanently caused a decline…
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Trouble in Yellen-Land
Bond markets and the Fed aren’t making sense. The Fed (“Yellen”) rose the Federal Funds Rate (FFR) last Wednesday, June 12th to a range of 1.00% to 1.25%. The Fed has two mandates: (1) to keep prices stable (i.e. keep inflation around 2%) and (2) to minimize unemployment. In other words, stabilize the economy by cooling…
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In the grand scheme of things, how big is Apple?
Apple, Inc., producer of the iPhone, announces quarterly earnings on Tuesday. This WSJ article claims that the cash and cash equivalents on APPL’s balance sheet will exceed $250 billion dollars. I put this article together to give you some idea what that looks like. Relative to the World: $250 billion is about the same size…
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Relative Performance: Equal or Market Capitalization Weighted Index?
Using SCHA and SCHX as proxies for Small and Large cap equity markets, I attempt to measure cumulative relative performance over one (1), two (2), and three (3) year time periods. The S&P 500 is a market capitalization weighted index, meaning the biggest companies have the biggest weights in the index. The Dow Jones Industrial…
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Supersize Me’s Effect on MCD’s Stock Price
I’ll save you the suspense: MCD’s stock price returns were affected by the release of Morgan Spurlock’s Supersize Me on May 7, 2004. However, MCD’s stock price returns were also unaffected by the release of Morgan Spurlock’s Supersize Me when measured differently. If you just change how you measure the reaction, you can get the data to…
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Golf Options: An exersize in derivatives
In this article, I’ll try to explain derivatives using the price of a season pass to a golf course, the price of a gallon of milk, and from the perspective of a corn farmer. Red Rocks Golf Club, in Rapid City, SD, sells season golf passes for $1,450 per adult, plus an additional charge of…
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Yahoo and Google: Democratic Responsibilities of Corporations
Overview: China is renowned for keeping its citizens in the dark. They censor their television shows and ads. Now time travel, homosexuality, and luxurious lifestyle programs are banned from Chinese television (Time.com). They sensor Internet chat rooms to deter the conversations from issues like politics “towards [issues] such as which celebrities make the best role models.”…
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Who’s got the power?
When interest rates go up, and they will, the 50% increase across the board will topple markets, namely bond markets. Today’s interest rates are unprecedented. The lowest possible bound for an interest rate USED to be 0%. In finance terms, we call it the ZLB or the zero lower bound. Today bond yields in Germany…
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Bud Light sucks…
Fun fact: This is what happens when you Google, “what is American beer?” “Light beer, which was introduced on a large scale by Miller Brewing Company in the early 1970s, is a beer made with reduced alcohol and carbohydrate content, and has grown to eclipse many of the original pale lager brands in sales. Bud…
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