Category Archives: Strategy

Who’s Afraid of a Carbon Tax?

As far as equity investors might experience them, the risks of a potential “carbon tax” are more easily fathomed than the rewards.  Emissions data are available for most large companies and – taking basic assumptions on the likely form of taxation – we can easily examine which market segments face the greater risks. Estimating The Impact Read more […]

Unnaturally Negative Interest Rates

Negative interest rates – you pay for the privilege of keeping your money in the bank – are current monetary policy in Japan and some European countries.  Negative interest rates pose questions: Are they here? Why would anyone pay the bank to keep money?  Do they make economic sense? Why would a central bank set Read more […]

Who Fuelled the Oil Bonds Bubble?

It has become popular to blame passive investors and index funds for the recent rise (and fall) in prices for U.S. high yield bonds.  The thesis – placing passive investors as the culprit – goes as follows: There have been material, positive flows into passive bond funds, at the expense of active funds. Passive bond funds Read more […]

Expect more starting and stopping at the Fed on Interest rates.

Given the FOMC minutes released yesterday we expect to see two rate increases in 2016. The next move is likely to be in June, not at the April 27th meeting. Some analysts blame disagreements within the Fed for what they see as inconsistent and changing policy.  While it is difficult to anticipate short term market Read more […]

Necessary, but not sufficient

In the popular imagination, “big business” is responsible for climate change.  In fact, corporate emissions of greenhouse gasses are a small part of the problem; it is quite possible that corporations also provide our best hope for a solution. The current reality – what we know to be true – is that governments worldwide are shortly expected to commit to Read more […]

The Teleology of Smart Beta

As assets tracking factor indices grow, so does the attention paid to evaluating and promoting these so-called “smart beta” funds.  Even the nomenclature attracts attention.  Professor William Sharpe, famous among other things for introducing the concept of beta to academic finance, has said that the term “smart beta” makes him “definitionally sick,” and lesser lights than Read more […]

Can House Prices Keep Rising?

Prices of existing homes rose 5.3% in the year ended December 2015, more than twice the rate of inflation.   However, the pace of price increases varies across the country with the strongest gains in the west and the weakest in the northeast, as shown by the chart.  Sales of both new and existing homes Read more […]

Active Management in Volatile Markets

More than a year ago, a number of commentators expressed confidence that 2015 would be the year when active equity management proved its value.  After all, the market had risen steadily for six years, and with stretched valuations, market volatility was likely to rise — creating opportunities for active managers to add value by skillful risk control. Read more […]

Schisms

The world seems to be awash with schisms these days.  There are always great divides in politics, but this year they seem greater than usual.  However, the schisms and splits in the financial world matter more for now: at the Fed, in differing growth rates among the US, Europe and China, and between stocks and Read more […]

In Search of the Low Volatility Anomaly

By now we’re very familiar with the oft discussed “Low Vol Anomaly”. Diverging from conventional finance theory, which tells us that risk and return are directly related, low volatility stocks have outperformed over time and, as expected, with lower volatility. Ample research and evidence point to the existence of a low volatility factor comparable to Read more […]