Thomas Kertsos is a portfolio manager and senior research analyst at First Eagle Investment Management. He is the manager of the First Eagle Gold Fund (SGGSX), which, as of June 30, has returned 5.37% since its inception, on 8/31/93. That is 645 basis points better than its benchmark, the FTSE Gold Mines Index (-1.08%).
I’m in the process of writing another book, going into great depth regarding one of the most important things discussed in my book The Most Important Thing: cycles, their causes, and what to do about them. It will be out next year, but this memo will give you a preview regarding one of the most important cyclical phenomena.
I continue to believe that the two most important issues receiving inadequate investor attention are productivity and the role of central bank liquidity in the performance of financial markets. Productivity is critical to both earnings improvement and a rising standard of living.
After a strong first half to 2017 for equities, the message for the remainder of the year is to look for returns more carefully in the second half says Neil Dwane, global strategist for Allianz Global Investors. The “country factor” will be key: We believe investors can no longer rely on a rising tide of cyclical data to lift all boats.
Keith Gumbinger, Vice President at HSH.com, features a periodic update entitled "The Salary You Must Earn to Buy a Home in 27 Metros". The key question is: "How much salary do you need to earn in order to afford the principal and interest payments on a median-priced home in your metro area?"
Asia’s integration into world financial markets may be accelerating.
Overall, we believe small-cap stocks in emerging markets offer attractive prospects for active managers. A multitude of mispriced securities, market inefficiencies and a paucity of research provide considerable investment opportunities, in our view.
It is stinking hot and steamy on the East Coast these days, as the proverbial “dog days of summer” set in. Historically, this was a time of year when things slowed down, people went on vacation, and it was generally too hot to move fast, but not this year.
In 2012 we published a whitepaper entitled “Adaptive Asset Allocation: A Primer” in which we built upon the simple, robust momentum framework proposed by Mebane Faber in his 2009 study “Relative Strength Strategies for Investing.”
Supply and demand seems to have been placed on the backburner in today’s world of prognosticating inflation, employment, and GDP. The first point is the supply of publicly traded stock in the US. The second point is the supply of money.
This morning's release of the June New Home Sales from the Census Bureau came in at 610K, up 0.8% month-over-month from a revised 605K in May. Seasonally adjusted estimates for back to March were also revised. The Investing.com forecast was for 615K.
Despite a risk-friendly market environment and high levels of business sentiment, U.S. gross domestic product continues to struggle to grow about 2%. Pacific Funds portfolio managers discuss the current market environment, fiscal and regulatory policy, and their broad positioning for the second half of 2017.
With today's release of the May S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.1% month over month. The seasonally adjusted national index year-over-year change has hovered between 4.2% and 5.8% for the last twenty-seven months. Today's S&P/Case-Shiller National Home Price Index (nominal) reached another new high.
Reports from Fifth District manufacturers improved some in July, according to the latest survey by the Federal Reserve Bank of Richmond. The composite index rose from 11 in June to 14 in July—the result of a slight increase in the measures of new orders and employment. Investing.com had forecast 7. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at 9.3, indicates expansion. Seasonal adjustment factors were recalculated to better reflect current economic trends and the entire series was revised.
The latest Conference Board Consumer Confidence Index was released this morning based on data collected through July 14. The headline number of 121.1 was an increase from the final reading of 117.3 for June, a downward revision from 118.9. Today's number was above the Investing.com consensus of 116.5.
The Federal Housing Finance Agency (FHFA) has released its U.S. House Price Index (HPI) for May. U.S. house prices were up 0.4 percent on a seasonally adjusted nominal basis from the previous month. Year-over-year the index is up 6.9% (nonseasonally adjusted). Seasonally adjusted, the index is up 5.65% year-over-year.
Global equities have risen 7% in the past 3 months and 16% in the past year, yet fund managers continue to hold significant amounts of cash, suggesting lingering doubts and fears.
Samuel Blodget was an early American merchant, amateur architect, and economist. He wrote Economica: A Statistical Manual for the United States, considered to be the first American book on economics.
Russ explains why investors should pay more attention to the stock-bond correlation coefficient and understand its impact on investment portfolios.
When PIMCO professionals gather for our annual Secular Forum to discuss the long-term global economic outlook, views on Europe invariably gravitate on two themes: anemic GDP growth and political risk.
It's time again for our weekly gasoline update based on data from the Energy Information Administration (EIA). The price of Regular and Premium are up three cents each from last week. According to GasBuddy.com, Hawaii has the highest average price for Regular at $3.01 and San Francisco, CA is the most expensive city, averaging $3.04. South Carolina has the cheapest at $1.97. The WTIC end of day spot price closed at 46.34, a 0.7% increase from this time last week.
Since the start of the economic recovery in mid-2009, real GDP has grown at an average annual rate of 2.1%. The second quarter of this year doesn't look much different. Our calculations suggest real GDP grew at a 2.5% annual rate in Q2, exactly the same as the consensus forecast.
The Department of Energy's Energy Information Administration (EIA) monthly data on volume sales is several weeks old when it released. The latest numbers, through mid-May, are now available. However, despite the lag, this report offers an interesting perspective on fascinating aspects of the US economy. Gasoline prices and increases in fuel efficiency are important factors, but there are also some significant demographic and cultural dynamics in this data series.
Here are some of my takeaways from this year’s weekend in Omaha.
Last week, the S&P 500 price/revenue ratio reached the highest level in history, outside of the single week of March 24, 2000 that represented the peak of the tech bubble.
Matt is a $1.5 million producer. He has a new Porsche 911, Maserati and a 5,000 square foot house overlooking a valley. He has two beautiful kids, a gorgeous wife and no debt. He has it made. Except for the happiness part.
This morning's release of the June Existing-Home Sales decreased from the previous month to a seasonally adjusted annual rate of 5.52 million units. The Investing.com consensus was for 5.58 million. The latest number represents a 1.8% decrease from the previous month and a 0.7% increase year-over-year.
We have created an adaptive regime-based investment framework that generates multi-asset and equity-sector-rotation model portfolios. The investment objective of these model portfolios is to combine downside protection with upside participation. Many firms say they do this – but our process integrates macroeconomic and financial cycle risk.
Investors who want to reduce risk and maintain a steady income might consider a barbell strategy that pairs interest rate–sensitive bonds with high-yielding credit assets. But first, it’s important to strike the right balance.
The financial sector has been getting a lot of attention recently with earnings announcements so we thought we’d weigh in on one aspect of financial stock relative performance that is making it difficult for financials to truly lead this market higher: the flattening yield curve.
At a conference in Chicago this week, following up on last week’s letter, Keep Dancing but with a Sharp Eye on the Tea Leaves, an advisor client asked me what my favorite “tea leaf” might be. When one of the greatest investors of our time, Ray Dalio, tells us to keep an eye on the exit door we should take note. But how? And when?
I am concerned that another major crisis will ensue by the end of 2018 – though it is possible that a salutary combination of events, aided by complacency, could let us muddle through for another few years. But there is another recession in our future (there is always another recession), and it’s going to be at least as bad as the last one was, in terms of the global pain it causes.
In this month’s Global Economic Perspective, Franklin Templeton Fixed Income Group dives into diverging central bank policy and weighs in on whether the European Central Bank is likely to be less accommodative—and what its timing might look like.
Today I want to discuss reports that global debt levels are at all-time highs, and what this means for your investment decisions going forward.
Let's take a closer look at recent activity in US Treasuries. The yield on the 10-year note ended the day at 2.24% and the 30-year bond closed at 2.81%. The 2-10 yield spread is now at 0.88%.
Are risks growing or will the bull market continue? We believe the answer to both is yes. Political bumbling, monetary policy shifts, and geopolitical tensions have all escalated, but the bull continues to power ahead, largely unscathed by the tumult that surrounds it.
Today's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 144.8, up from the previous week. Year-over-year the four-week moving average of the indicator is now at 4.99%, down from 5.12% last week. The WLI Growth indicator is now at 2.6, up from the previous week.
If you’re like many working Americans, you may be concerned about the state of Social Security and whether it will be there for you when you retire. Gail Buckner, CFP, our personal retirement and financial planning strategist, explores some myths about Social Security and eases some concerns about its future.
This quarter, we look at two important structural changes that appear to be underway: a normalization in US and European monetary policy and a normalization in crude oil inventories.
The S&P opened near its daily high and oscillated around a 9 point range, closing in the middle just below yesterday's all-time high. The index saw a fractional daily loss of 0.02% and a YTD gain of 10.48%.
The Chinese economy delivered many surprises in the first half of the year, disappointing (yet again) the pundits who predicted a hard landing. Macroeconomic data published over the weekend is consistent with a healthy economy, driven by impressive wage growth and consumer spending, and supported by strong earnings growth.
The Latest Conference Board Leading Economic Index (LEI) for June increased to 127.8 from 127.0 in May and is currently at an all-time high. The 0.6 percent month-over-month gain was better than the 0.4% increase forecast by Briefing.com.
Typically, U.S. Presidents are wary of claiming stock market performance as a referendum on their success. Most have seemed to understand that taking credit also means accepting blame, and no one would want to make the tortured argument that the positive moves reflect well on their presidency but that the negative moves do not.
Fed Chair Janet Yellen covered no new ground in her monetary policy testimony to Congress, but that didn’t stop financial market participants from trying. While the CPI report drew a closer focus, past inflation figures don’t tell us a lot about future inflation.
The Economic Insights Channel
The Case for Owning Gold
Thomas Kertsos is a portfolio manager and senior research analyst at First Eagle Investment Management. He is the manager of the First Eagle Gold Fund (SGGSX), which, as of June 30, has returned 5.37% since its inception, on 8/31/93. That is 645 basis points better than its benchmark, the FTSE Gold Mines Index (-1.08%).
There They Go Again...Again
I’m in the process of writing another book, going into great depth regarding one of the most important things discussed in my book The Most Important Thing: cycles, their causes, and what to do about them. It will be out next year, but this memo will give you a preview regarding one of the most important cyclical phenomena.
Some Speed Bumps Slowing the Bull
I continue to believe that the two most important issues receiving inadequate investor attention are productivity and the role of central bank liquidity in the performance of financial markets. Productivity is critical to both earnings improvement and a rising standard of living.
Mid-Year Outlook: Be More Selective in the Second Half
After a strong first half to 2017 for equities, the message for the remainder of the year is to look for returns more carefully in the second half says Neil Dwane, global strategist for Allianz Global Investors. The “country factor” will be key: We believe investors can no longer rely on a rising tide of cyclical data to lift all boats.
2017 Update: Median Home Price and Salary Required in 27 Major Cities
Keith Gumbinger, Vice President at HSH.com, features a periodic update entitled "The Salary You Must Earn to Buy a Home in 27 Metros". The key question is:
"How much salary do you need to earn in order to afford the principal and interest payments on a median-priced home in your metro area?"
China and Emerging Asia: A New Dawn for the Capital Markets
Asia’s integration into world financial markets may be accelerating.
An Active Look at Small-Cap Investing
Overall, we believe small-cap stocks in emerging markets offer attractive prospects for active managers. A multitude of mispriced securities, market inefficiencies and a paucity of research provide considerable investment opportunities, in our view.
July 2017 Market Commentary
It is stinking hot and steamy on the East Coast these days, as the proverbial “dog days of summer” set in. Historically, this was a time of year when things slowed down, people went on vacation, and it was generally too hot to move fast, but not this year.
Dynamic Asset Allocation for Practitioners Part 1: Universe Selection
In 2012 we published a whitepaper entitled “Adaptive Asset Allocation: A Primer” in which we built upon the simple, robust momentum framework proposed by Mebane Faber in his 2009 study “Relative Strength Strategies for Investing.”
Bronfman Rothschild 2017 Q2 Review
Supply and demand seems to have been placed on the backburner in today’s world of prognosticating inflation, employment, and GDP. The first point is the supply of publicly traded stock in the US. The second point is the supply of money.
June New Home Sales Inches Up
This morning's release of the June New Home Sales from the Census Bureau came in at 610K, up 0.8% month-over-month from a revised 605K in May. Seasonally adjusted estimates for back to March were also revised. The Investing.com forecast was for 615K.
Fiscal Policy to the Forefront
Despite a risk-friendly market environment and high levels of business sentiment, U.S. gross domestic product continues to struggle to grow about 2%. Pacific Funds portfolio managers discuss the current market environment, fiscal and regulatory policy, and their broad positioning for the second half of 2017.
Home Prices Rose 5.6% Year-over-Year NSA in May
With today's release of the May S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.1% month over month. The seasonally adjusted national index year-over-year change has hovered between 4.2% and 5.8% for the last twenty-seven months. Today's S&P/Case-Shiller National Home Price Index (nominal) reached another new high.
Richmond Fed Manufacturing: July Composite Index Remains Upbeat
Reports from Fifth District manufacturers improved some in July, according to the latest survey by the Federal Reserve Bank of Richmond. The composite index rose from 11 in June to 14 in July—the result of a slight increase in the measures of new orders and employment. Investing.com had forecast 7. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at 9.3, indicates expansion. Seasonal adjustment factors were recalculated to better reflect current economic trends and the entire series was revised.
Consumer Confidence Improved in July
The latest Conference Board Consumer Confidence Index was released this morning based on data collected through July 14. The headline number of 121.1 was an increase from the final reading of 117.3 for June, a downward revision from 118.9. Today's number was above the Investing.com consensus of 116.5.
FHFA House Price Index: Real Index Level Last Seen in August 2007
The Federal Housing Finance Agency (FHFA) has released its U.S. House Price Index (HPI) for May. U.S. house prices were up 0.4 percent on a seasonally adjusted nominal basis from the previous month. Year-over-year the index is up 6.9% (nonseasonally adjusted). Seasonally adjusted, the index is up 5.65% year-over-year.
Fund Manager Allocations
Global equities have risen 7% in the past 3 months and 16% in the past year, yet fund managers continue to hold significant amounts of cash, suggesting lingering doubts and fears.
Gross Domestic Product
Samuel Blodget was an early American merchant, amateur architect, and economist. He wrote Economica: A Statistical Manual for the United States, considered to be the first American book on economics.
The Geekiest (and Most Important) Number Nobody Is Discussing
Russ explains why investors should pay more attention to the stock-bond correlation coefficient and understand its impact on investment portfolios.
Europe’s Long‑Term Economic Outlook: Better Now, Challenges Ahead
When PIMCO professionals gather for our annual Secular Forum to discuss the long-term global economic outlook, views on Europe invariably gravitate on two themes: anemic GDP growth and political risk.
Weekly Gasoline Price Update: Regular and Premium Up Three Cents
It's time again for our weekly gasoline update based on data from the Energy Information Administration (EIA). The price of Regular and Premium are up three cents each from last week. According to GasBuddy.com, Hawaii has the highest average price for Regular at $3.01 and San Francisco, CA is the most expensive city, averaging $3.04. South Carolina has the cheapest at $1.97. The WTIC end of day spot price closed at 46.34, a 0.7% increase from this time last week.
Moderate Growth for Q2
Since the start of the economic recovery in mid-2009, real GDP has grown at an average annual rate of 2.1%. The second quarter of this year doesn't look much different. Our calculations suggest real GDP grew at a 2.5% annual rate in Q2, exactly the same as the consensus forecast.
Gasoline Volume Sales and our Changing Culture
The Department of Energy's Energy Information Administration (EIA) monthly data on volume sales is several weeks old when it released. The latest numbers, through mid-May, are now available. However, despite the lag, this report offers an interesting perspective on fascinating aspects of the US economy. Gasoline prices and increases in fuel efficiency are important factors, but there are also some significant demographic and cultural dynamics in this data series.
The Warren Buffett and Charlie Munger Show
Here are some of my takeaways from this year’s weekend in Omaha.
Salient Features of Bull Market Peaks
Last week, the S&P 500 price/revenue ratio reached the highest level in history, outside of the single week of March 24, 2000 that represented the peak of the tech bubble.
The Maladaptive, Irrational Super Sales Producer
Matt is a $1.5 million producer. He has a new Porsche 911, Maserati and a 5,000 square foot house overlooking a valley. He has two beautiful kids, a gorgeous wife and no debt. He has it made. Except for the happiness part.
Existing-Home Sales: June Sales Slip
This morning's release of the June Existing-Home Sales decreased from the previous month to a seasonally adjusted annual rate of 5.52 million units. The Investing.com consensus was for 5.58 million. The latest number represents a 1.8% decrease from the previous month and a 0.7% increase year-over-year.
How Conservative Should Investors Be Given Economic and Market Conditions?
We have created an adaptive regime-based investment framework that generates multi-asset and equity-sector-rotation model portfolios. The investment objective of these model portfolios is to combine downside protection with upside participation. Many firms say they do this – but our process integrates macroeconomic and financial cycle risk.
Building the Perfect Barbell
Investors who want to reduce risk and maintain a steady income might consider a barbell strategy that pairs interest rate–sensitive bonds with high-yielding credit assets. But first, it’s important to strike the right balance.
Can Financials be Leadership with a Flattening Yield Curve?
The financial sector has been getting a lot of attention recently with earnings announcements so we thought we’d weigh in on one aspect of financial stock relative performance that is making it difficult for financials to truly lead this market higher: the flattening yield curve.
On My Radar: The HY Market… A Leading Indicator
At a conference in Chicago this week, following up on last week’s letter, Keep Dancing but with a Sharp Eye on the Tea Leaves, an advisor client asked me what my favorite “tea leaf” might be. When one of the greatest investors of our time, Ray Dalio, tells us to keep an eye on the exit door we should take note. But how? And when?
Three Black Swans
I am concerned that another major crisis will ensue by the end of 2018 – though it is possible that a salutary combination of events, aided by complacency, could let us muddle through for another few years. But there is another recession in our future (there is always another recession), and it’s going to be at least as bad as the last one was, in terms of the global pain it causes.
Global Economic Perspective: July
In this month’s Global Economic Perspective, Franklin Templeton Fixed Income Group dives into diverging central bank policy and weighs in on whether the European Central Bank is likely to be less accommodative—and what its timing might look like.
Automation and Anxiety
“Mother of All Bubbles” Keeps Gold in Focus
Today I want to discuss reports that global debt levels are at all-time highs, and what this means for your investment decisions going forward.
Treasury Snapshot: 10-Year Yield Down to 2.24%
Let's take a closer look at recent activity in US Treasuries. The yield on the 10-year note ended the day at 2.24% and the 30-year bond closed at 2.81%. The 2-10 yield spread is now at 0.88%.
Schwab Market Perspective: Are Danger Signs Rising…or Will the Bull Run Continue?
Are risks growing or will the bull market continue? We believe the answer to both is yes. Political bumbling, monetary policy shifts, and geopolitical tensions have all escalated, but the bull continues to power ahead, largely unscathed by the tumult that surrounds it.
ECRI Weekly Leading Index: "All Signs Point to a Cyclical Slowdown in Inflation"
Today's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 144.8, up from the previous week. Year-over-year the four-week moving average of the indicator is now at 4.99%, down from 5.12% last week. The WLI Growth indicator is now at 2.6, up from the previous week.
Don’t Believe Everything You Hear about Social Security!
If you’re like many working Americans, you may be concerned about the state of Social Security and whether it will be there for you when you retire. Gail Buckner, CFP, our personal retirement and financial planning strategist, explores some myths about Social Security and eases some concerns about its future.
Quarterly Strategy Update: Structural Rotation
This quarter, we look at two important structural changes that appear to be underway: a normalization in US and European monetary policy and a normalization in crude oil inventories.
S&P 500 Snapshot: Index Continues to Climb
The S&P opened near its daily high and oscillated around a 9 point range, closing in the middle just below yesterday's all-time high. The index saw a fractional daily loss of 0.02% and a YTD gain of 10.48%.
China Surprises
The Chinese economy delivered many surprises in the first half of the year, disappointing (yet again) the pundits who predicted a hard landing. Macroeconomic data published over the weekend is consistent with a healthy economy, driven by impressive wage growth and consumer spending, and supported by strong earnings growth.
Conference Board Leading Economic Index: Continued Growth in June, All-Time High
The Latest Conference Board Leading Economic Index (LEI) for June increased to 127.8 from 127.0 in May and is currently at an all-time high. The 0.6 percent month-over-month gain was better than the 0.4% increase forecast by Briefing.com.
The Fed May Show Trump No Love
Typically, U.S. Presidents are wary of claiming stock market performance as a referendum on their success. Most have seemed to understand that taking credit also means accepting blame, and no one would want to make the tortured argument that the positive moves reflect well on their presidency but that the negative moves do not.
A Steady Monetary Policy Course, for Now
Fed Chair Janet Yellen covered no new ground in her monetary policy testimony to Congress, but that didn’t stop financial market participants from trying. While the CPI report drew a closer focus, past inflation figures don’t tell us a lot about future inflation.