Sentiment shift on Tesla a warning sign for all riskier assets
JPMorgan Chase's price target reduction for Tesla is the clearest indication yet of a shift in sentiment that investors should see as a broader risk-off marker.
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Tesla is back looking for money, this time to fuel an Asian expansion
Tesla is a completely speculative, junk-rated venture. Investors in the company are betting on Elon Musk's celebrity as a forward-thinker, hoping he can ramp up production and achieve significant economies of scale
Italy means risk-off yes, but contagion will remain limited
For now, think of Italy as a short-term risk-off trigger that has limited longer-term impact. To me, this presents a buying opportunity.
Hedging against rising global political uncertainty
Starting in 2007, global markets were buffeted by a series of financial and economic crises that created the greatest deflationary scare since the Great Depression. We have left out-and-out crisis mode. But the challenges are still…
Negative interest rates are just a tax on reserves that lowers net interest margins
The primacy of monetary policy continues unabated as central banks go further and further down the rat hole of increasingly desperate measures to boost demand. First, it was quantitative easing. Now, the latest scheme is negative interest…
Asset allocation in a period of wealth mean reversion
Mean Reversion of Wealth is one of the six structural mega-trends that we have identified. As is pretty obvious when looking at chart 2, wealth creation during the great bull market of 1981-2000 was quite extraordinary and, in our opinion,…
A Return to Fundamentals?
The Absolute Return Letter, July 2015
“In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”
Mark Zuckerberg
Greece on the brink
A Greek, an Irishman and a Portuguese walk…
A mental model for understanding policy errors and consistency anchors using the Fed and Greece
One of the great things about markets and economics is that there is a lot of uncertainty built into them because, unlike traditional macroeconomic modelling assumptions, real people are unpredictable and irrational. This makes life…
The crashing oil price is now a market crisis problem
While I try not to be too alarmist here, it is clear now that the drop in oil prices has been both precipitous enough and long-enduring enough that we should start talking about this as a crisis in the making. We have an interconnectedness…
Candidates for tail risk in 2015
Having just given you a mental model for thinking about tail risk, the natural next analysis is where the tail risk might be. Here are a few candidates.