Deflating Demand - US Economic Outlook 21Q3

America’s bifurcated economy faces a long-dormant specter, inflation. The root cause is a jump in good demand induced by Pandemic policies. Reversal of the policies will deflate demand and inflation as businesses adapt.

Global Portfolio Strategy 21Q3 - China's Emerging Peak

Reopening the global economy brings inflation pressures as supply chains lag accelerating demand. While investors rightly fret about inflation, the greater risk may lay with China’s real estate bubble. The unraveling of a credit bubble can bring a debt-deflation spiral that counters the narrative of the moment, inflation. Investors are now beholden to the Federal Reserve’s monetary policy exit and China’s ability to deflate their debt bubble.

Global Equity Markets: Third Quarter 2021 Relocating Value

U.S. value investors endured underperformance for two decades. Values acolytes continue to preach patience and resolve to their detriment. Value investing is alive and well outside of the U.S. Following the global trade patterns for goods for its location is a well-rewarded endeavor.

U.S. Economic Outlook 2021 First Quarter

Fiscal and monetary stimulus is brewing a magnanimous concoction to lift the economy. While the stimulus ingredients are similar globally, the paths are diverging. The result is a multi-speed global recovery that reduces the variability of global growth. The greater challenge is diminished growth in the long-term as tax increases and debt service crowd out other fiscal programs.

US Economic Outlook 2021 Second Quarter

Fiscal and monetary stimulus ignited the durable goods and housing markets in a frenzy of activity. It will not endure without further stimulus and result in slower growth in the next year as purchases brought forward are not replaced. This highwire act will require balanced policy responses as the next steps. The risks to housing prices and of deflation are material.

Global Portfolio Strategy 2021Q2 - Inflation: A Supply Phenomenon

The challenge for financial markets is that unprecedented monetary and fiscal stimulus delivered high valuations in most asset classes, while supply demand imbalance delivers higher inflation. The latter is temporary, while the former more enduring. In this environment, timing is everything. Now is the moment for active investing to add value.

America’s Pyrrhic Victory

America can see the light at the end of the tunnel. The challenge is that not all the world is as fortunate as America in their access to a vaccine, nor do they have a substantial population that developed antibodies after contracting the virus. This situation ensures that the global recovery may not parallel the American experience.

Global Portfolio Strategy 2021 Q1 - Stimulating Exuberance

Easy credit and exciting new technologies compel the investor while sage investors remember past bubbles and speak of prudent valuations. The tune is tactical investing. The question is whether to dance or sit it out.

US Economic Outlook 2020 Q4- After the Boom, A Bill Awaits

A boom year will follow the devastating prior year with the leisure sector the primary driver. The summer travel season may be the best on record and lift the economy. Everything has a cost. Higher taxes and debt service in the future suggest targeted fiscal policy.

Global Portfolio Strategy 2020 Q4 - A Collision of Sentiment & Value

Valuation levels suggest the continued primacy of equities is doubtful, particularly for US technology. The quandary is that valuation gaps can endure for years. The primacy of sentiment makes it a year of tactical investing. Timing is everything.

Risk Parity - A Primer

The practicality of risk parity enables an asset allocation paradigm with risk management at its core. The transparency and liquidity empower a timely transition from the current state to a risk-focused future. Risk parity invests without compromise.

Demographics, Deficits, & Deflation

Secular trends are conspiring with the Pandemic to reduce demand in the US. A newfound thrift by consumers from the Pandemic would further slow growth and is unnecessary. Policy action is required to avoid a decade’s long impairment of consumption. Best pay now, rather than a higher bill later.

Global Portfolio Strategy - Third Quarter

It is the best of times for equities. It is the worst of times for employment and interest rates. The earnings season arrives with its insight into the durability of business during the Pandemic. Volatility may reign across markets. For the prepared, risk will offer opportunity.

Liquid Alternatives: A Primer

The key to successful long-term investing is managing risk. The hedge fund investment process is long, arduous, and requires experienced professionals using sophisticated analytical tools to ensure value to the portfolio. Liquid alternatives overcome these barriers for the investor.

Interest Rates: A Growth Story

Interest rates in the US are at levels never seen before. Before the Pandemic, the expectation was that the increasing productivity of the Millennial generation would modestly lift real rates. Without an effective policy response, that outcome is doubtful and could repress real rates for decades. Investors are forewarned that this time is not different.

Corporate Pension Strategy 20Q2

Monetary policy is solving one problem and creating another. A reversal of equities may not result in a corresponding increase in credit spreads due to Fed actions. Thus, an equity decline would impair assets with no similar reduction of liabilities. Sponsor beware.

A Pandemic Policy Without a Plan

During a period requiring leaders, the US had politicians. Instead of addressing the problem in front of them, their eyes are fixed on the next election and placating their adoring masses. The long-term effect may be a lost generation. The short-term outcome may be needless hardship for those industries that are primarily hit.

An Opening Act to Repudiate

A bad opening foretells show cancellation. Australia and Hawaii reveal the threat of early openings even with near eradication of the virus. Leaders face an unequivocal dilemma: limiting travel outside your bubble and gathering inside with the consequential economic impact or accepting the increased deaths and concede the prior economic sacrifice was meaningless. Plaintive politicians know these alternatives are an atrocious trade.

Global Portfolio Strategy - Second Quarter 2020

Global problems require global solutions. The United States is a pariah for its inability to address the Pandemic. The investing implications are profound. Without election and virus certainty, volatility reigns as the malevolent monarch of the markets.

Prelude to Pandemic

The first wave is just beginning, not ending. The good news is that the fatality rates appear lower than initially measured. The bad news is that the US reproduction rate’s current growth would return to the May 1st level by July 4th.

Requiem for Value Investing

Value investors are asking themselves, will the promise of value investing return to prominence? The answer is multi-faceted. Indeed, value investors experienced under-performance versus the broader market and growth stocks for the last thirteen years.

The End of Retail

Change is inevitable. The retail catastrophe occurring now highlights this statement.

Global Portfolio Strategy 2020

The US expansion is long in the tooth. The investor needs only ask one question this year: how will
global growth continue?

The Productivity Gap

The story of growth is productivity. Doing more with less. Before one can do more with less, one must learn.

US Economic Outlook 2019

The economic environment in the US has a stable consumer and supportive
fiscal policy, which should carry the US economy for the year with government
expenditures supporting. The question is whether investment will rebound or is the decade long expansion ending?

US Economic Outlook 2018

The economic environment in the US continues to show a stable consumer, rebounding investment, and supportive fiscal policy. The lone detractor from growth is the continuing drag from net exports, but this is merely an accounting identity.

Accounting for Corporate Penions

The key to a successful defined benefit pension plan is managing risk. The pension plan is a significant employee benefit that supports retention and corporate culture in the long-term. The pension plan liability may represent a considerable proportion of the corporation's balance sheet and materially impact the income statement. Accounting for a defined benefit pension plan is notorious for its arcane regulations and the dual regimes of statutory and financial accounting. A few critical elements are crucial to managing the pension.

Yield Curve Modeling

The yield curve and interest rate levels are difficult to forecast in aggregate or individually. Forecasting accuracy is improved when focusing on the factors that describe the term structure and augmenting the models with a market or economic variable.

Manager Research

As much as it is difficult to foresee what technology will change the world a decade from now, it is equally tricky identifying top investment managers in advance. A few key ingredients distinguish an environment that permits success to grow when it arrives.

Equity Factor Models

Multi-factors models are a leading portfolio management tool due to the pioneering work of Fama and French (1992) who showed that more than a single factor explained US equity market returns.