Category Archives: Strategy

The Ruble’s Currency Crisis

After sliding slowly down for most of the year, The Russian ruble dropped 20% in the last ten days. The slide began with the weakening Russian economy, sanctions imposed by the US and the EU last summer and falling oil prices.  All these factors were present for many weeks and none explain the sharp move seen at the right hand end of the chart where the ruble/dollar rate jumps. There were two immediate causes. The first, and less important, was a bill passed by Congress authorizing additional Read more [...]

Blood in the bourses of Moscow

Things are not all well with Russian equities.  The S&P Russia Broad Market Index has lost more than half its value in U.S. dollar terms since the summer.  There is figurative blood on the streets.  If we were to follow the example of the founding members of the Rothschild banking dynasty, we would be lending money to Russian companies and buying up their shares. The case for investing in Russia now is certainly thought-provoking.  At current prices, the Russian BMI is trading on a trailing Read more [...]

A Keynesian Puzzle for Fed Watchers

The Wall Street Journal and Bloomberg surveys both report that Fed watchers and economists continue to expect the Fed to raise interest rates beginning in mid-2015.  There is enough widespread agreement that the Fed will move on interest rates next year that some forecasters now predict that the Fed’s next policy statement will drop the phrase “for a considerable period of time” when describing how long rates will remain at current levels. At the same time, a few Fed officials and regional Read more [...]

Crisis and Opportunity

Last Saturday's Wall Street Journal carried an excellent list of "16 Rules for Investors to Live By."  I was particularly impressed by rule #1: "All past market crashes are viewed as opportunities, but all future market crashes are viewed as risks."  Serendipitously, the 16 rules followed close on the heels of our latest white paper, which deals with many of the same concepts.  In particular, volatility rises when markets crash, and volatility and opportunity are closely related. It's Read more [...]

Islamic Index Market Update: November 2014

November Highlights: Islamic Indices Continue to Outperform Conventional Benchmarks Globally U.S. Markets Power Higher While Europe, Asia-Pacific and Emerging Markets Weaken MENA Equity Markets Sell off Sharply in October & November, Trimming 2014 Gains Most major Shariah-compliant benchmarks continue to outperform their conventional counterparts in 2014 as Information Technology and Health Care - which tend to be overweight in Islamic Indices – have been sector leaders, and Financials Read more [...]

The Simple Economics of Oil

Now that the shock of oil under $75 per barrel and gasoline under $3 per gallon has begun to wear off, the debate has shifted to when oil prices will rebound.  A look at the economics of supply and demand suggests that the rebound probably won’t take prices back over $100 that quickly.  Unlike earlier oil price collapses, this time both demand and supply moved and both pushed prices down.  The collapse of oil prices when the global financial crisis morphed into the Great Recession was driven Read more [...]

A Santa Claus Rally? Yes, Virginia…

Theories that aim to predict stock market performance range from the complicated and impenetrable to the arcane and simply ridiculous.  But some are wonderfully clear: for example, December is usually a good month.  In the festive spirit, and not to be taken too seriously,  we've duly found that the evidence supports the existence of a “Santa Claus Rally”. Our test of choice, which we may as well call a “Santa Score”, is the result of dividing the average performance each December Read more [...]

Fear of Falling Prices

Anxiety over deflation is wide-spread and increasing.  The New York Times lead editorial on Sunday warned that weakening commodity prices may be a harbinger deflation or a hint of economic decline.   Despite a few contrary voices, both policy makers and investors seem concerned.  Are the fears misplaced? Or would deflation be a large step backward? The chart shows 101 years of American inflation measured by the CPI. Prices move all the time – not just stock prices but prices of almost Read more [...]

Real Estate Rising and GICS

Real estate, once the villain of the financial crisis, is now lauded as the place to find yield, diversification and maybe stability.  Before REITs became eligible for the S&P 500 in October 2001, real estate investing either meant direct ownership or a specialized corner of the stock market.   The recovery from the financial crisis focused attention on real estate and REITs to understand what happened and why.  With equity markets at record highs and yields and interest rates at record lows, Read more [...]

Bumpy Roads Ahead in European Equities

Three things typify systemic equity crises. Firstly, volatility increases. Secondly, correlations rise. And lastly, the stock market falls. October was a difficult month for European equities. The S&P Europe 350 fell by over 3%, taking a day-to-day lead from Greek government bond prices, and with every sector and nearly every country posting a loss for the month.  A 3% loss is not unusual, nor remarkable. But the warning lights are flashing… 22-day realized volatility in the S&P Read more [...]