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The Credit Markets Have Stalled

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Credit markets often move before the equity markets, and this can offer helpful information about the near-term path of equity prices. In general, I like to see credit confirming what the equity markets seem to be saying. When credit stalls, like it is now, I take notice. Investment grade spreads recovered about 30bps between January […]

Currency Markets & Knightian Uncertainty

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Knightian uncertainty is named after University of Chicago economist Frank Knight (1885–1972), who distinguished risk and uncertainty in his work Risk, Uncertainty, and Profit: “Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated…. The essential fact is that ‘risk’ means in some cases a quantity susceptible of measurement, while at […]

Santa’s Gift to Investors: Global Oversold Conditions Present Buying Opportunity

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The S&P 500 experienced a waterfall decline in December, something rarely seen. Measuring the decline using a 30-day Wilder Relative Strength Index, it is clear the extremes recently experienced. On Christmas Eve, the S&P 500 punctured 30% on the RSI, something that has only happened several times in since 1990. Similar extreme readings were seen […]

Prognosis for Fourth Quarter Growth

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One of the more well-recognized Now-Casting data series is the GDPNow series produced by the Federal Reserve of Atlanta. Every day they incorporate economic data releases and update their estimate for GDP growth in the current quarter. GDPNow is a great source of information on the real-time performance of the US economy. Growth expectations, after […]

Three Hints on the Direction of Chinese Assets

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The Chinese stock market is closed this week for the Golden Week holiday. On this side of the Pacific the markets have been busy this week with US Treasury bond yields breaking out and stocks selling off—especially technology—based on the revelation that China implanted devices in technology products shipped to the US. After being closed […]

Small Caps Fail to Break Out

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  Among the major groups of stocks around the world that we follow, US small-cap stocks have been the best performer over the last decade as the USD experienced a strong bull market. US small caps have outperformed our mid/large group of developed companies by almost 40% over the last 10 years. The relative performance […]