One method we utilize to determine if an investment has illiquidity risk is to calculate its autocorrelation of returns1. . Autocorrelation is a measurement of the relationship of one period’s return to the prior period’s return. A large positive autocorrelation indicates that the prior quarter’s return is predictive of the next quarter’s return. This usually […]
In the late 1940s De Beers began using their iconic slogan, “A Diamond is Forever.” For almost the entire 20th century the De Beers monopoly controlled 80 to 90% of the supply of diamonds. Even though diamonds are not rare and among the most common gemstones, De Beers’ successful marketing campaign and limiting of supply […]
With a year-to-date return of 28% for the S&P 500, 2024 has been, thus far, a spectacular year for investors. Beyond returns, investors are starting to enjoy an environment of lower overall portfolio risk. As the year closes, the market’s biggest concerns around central bank policy and global elections have found clarity or resolution. This […]
Technology themes have been driving markets. Semiconductors were the first to benefit from the AI theme. Next was a second order effect, Utilities rallied as they benefit from the massive power demands of AI data centers. Broadening financial inclusion through mobile banking is another technology advancement that is improving the lives of people in developing […]
Emerging markets investors assume political and governance risks, most notably from the high concentration of Chinese stocks in emerging markets indices in recent years However, the growth of Taiwan’s semiconductor industry and the emergence of India as a strong competitor to China are diversifying the China concentration in developing market indices. In 2020, China’s outsized […]
Share repurchases by companies, also known as buybacks, have become the preferred method for S&P 500 corporations to reward their shareholders. Goldman Sachs expects S&P 500 companies to repurchase $1.1 trillion of their own stock next year, up from an expected $925 billion in 2024. Apple has been the most prominent reacquirer of its own […]
Watching the first few days of Olympic swimming, it is striking to see the narrowing of the time intervals between winning and losing. Higher levels of competition drive gains in efficiency, which in swimming are noticeable and incredible. Video stroke analysis, weight training, nutrition, better coaching, quicker swimsuits that reduce drag, and global talent scouting […]
To paraphrase Twain, the rumors of the U.S. dollar’s death were greatly exaggerated. Coming into 2024, the consensus opinion was that a slowing U.S. economy and Fed rate cuts should push the dollar lower. The opposite has occurred, with Asian currencies, especially the Japanese yen seeing devaluation, as its exchange rate versus the dollar fell […]
From 1970 through 1984, the return of the S&P 500 outperformed inflation by 1 percent per annum. From 1985 onward, the S&P has outperformed CPI by 8 percent annually. The expansion of government deficits and a falling personal saving rate go a long way in explaining the much-improved performance of the stock market. The chart […]
The stock market and people looking to buy houses and cars are anxiously yearning for rate cuts, but this brief note is going to focus on the positive, the glass-half-full, side of higher rates. Today’s high, by recent standards, interest rates make achieving longer-term investment success much more attainable and are a large benefit to […]