Let me begin by saying our equity market trend model signals remain moderately bullish and our bond market trend model signals remain bearish. With that caveat, I do see us speeding down the road with limited visibility to the problem that exists just around the next turn.
One of my big risk concerns is the unknown amount of money in the risk parity trade. Essentially, volatility drives the weighting decisions. If equity market vol is low, then equities get a weighting. If equity market vol picks up, then, by rule, the risk parity strategies rebalance their exposures… in this case, reduce equity market exposure. They are mathematically-driven strategies and all essentially use very similar volatility measurements.
Conferences can be great fun and the final evening usually ends with a gathering at the hotel bar. This year’s Inside ETFs Conference ended with a bang for me. Sitting outside on a couch, 72 degrees, clear sky and comfortably positioned between the hotel bar, pool and ocean, daughter, Brianna, snuck up on me and grabbed the wine from my hand.
Whatever business you might be in, you’ll probably agree with me that a critical key to your success is sales. Of course, you need great product, great team members and grit. But with great product and no sales… No success.
Last week I shared a personal story with you that, frankly, I very much enjoyed writing. It is a story about two good friends and years of hard work that has resulted in something that I believe may someday win a Nobel Prize. For my friend’s sake, I sure hope so.
When Mark Finn speaks, you listen. Commanding, sharp, brilliant. He’s a maverick in the investment business. He’s also a mentor, incredibly humble and frankly one of the nicest human beings you could meet. He continued, “I need your help on something. I’ve got something big and I’m not sure how it should best be packaged.
All buying and selling meets at a point of price. More buyers than sellers, prices move up. More sellers than buyers, prices decline. The dynamics of supply and demand we learned in Econ 101. True for all things. Current conditions? Liquidity, leverage, more buyers than sellers. The bull market advances on.
When I was young, my mother bought me a book written by Grantland Rice. Rice was one of the all-time great sports writers and I was crazy about sports. It was the type of book you could pick up and read a quick story, put down and pick up again… a new story. She later framed the above quote and hung it on my bedroom wall.
I met Philippa Dunne, co-editor of The Liscio Report, at the Camp Kotok fishing trip last August. She dials into state tax receipts and has many deep contacts. What I like is how she tracks the data on the lookout for recession risks. I found the most recent report excellent.
Let’s start today with a look back at the major world market indexes’ performance since October 2007 (the last bull market peak) and also the performance since March 2009 panic low. A tale of two different stories. The first was expensive, leveraged and featured a Fed raising rates. The second was relatively inexpensive and the beginning of unprecedented central bank liquidity.