Category: Non-Fiction
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FX Dynamics
Two competing forces in FX markets: Interest Rate Parity and Hot Money Interest Rate Parity states that a lower yielding currency should appreciate relative to a higher yielding currency. According to the International Fischer Relationship, higher yielding currencies have higher inflation domestically. This inflation difference causes the high yielding currency to depreciate relative to a…
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Gotta Pay the Debt Collector
This entire rally is being fueled by credit, not real gains in productivity. A tweet: Let’s investigate. See: Three body problem. Tl;dr Good companies make good stocks, and high quality, trustworthy governments issue to low yielding, safe bonds. There is correlation, but as an investment strategy the relationship seems to be working less and less. Ben…
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So let me get this straight…
US Government Treasury bonds are the safest asset in the world today. They are implicitly guaranteed to get you your principal back at the maturity of your bond. Economists and investors commonly consider yields on Treasuries to be the ‘risk-free’ rate; meaning rates on Treasuries are the smallest amount of return an investment should provide.…
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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…
fungible thoughts 
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