Great chart here from Josh Brown today showing the real after-tax return from cash relative to other asset classes (see figure 1).  It stresses how important it is to understand the role of cash in a portfolio and how damaging it can be to hold excessive cash levels at all times. One of the things I am trying to achieve [...]

Interesting data point this morning from the Merrill Lynch fund manager survey showing the extreme hatred for commodities at present (see figure 1).  I’ve always hated the idea of “investing” in commodities so it’s interesting to see these extreme swings in sentiment.  I basically think the chart below should show a negative blue bar across the entire timeframe. Anyhow, this [...]

Here’s a comprehensive rundown of what to expect from tomorrow’s big Fed decision:

Europe has been postponing the recapitalisation of its banking sector. This column argues that it has been doing so for far too long. Without such a recapitalisation, the danger is that economic stagnation will continue for a long period, thereby putting Europe on a course towards Japanese-style inertia and the proliferation of zombie banks.

Passive investing strategies that emulate an index have become increasingly popular. But passive investing can go awry when sector concentrations leave investors exposed to unintended risks.

The year over year reading of 1.7% core inflationis well below the Fed’s target upper boundary of 2% and unlikely to impact policy moving forward. In fact, this gives the Fed some breathing room even as we begin to see unemployment readings that get increasingly close to their 6.5% target.

The most ominous indicator of China’s potential slowdown is the nation’s inverted long-term interest rate curve. The chart below shows the latest quotes on domestic interest rate swaps. Inverted yield curves often signal an economic downturn in the near future …

We often hear about how the government needs to run its budget just like a household does. It’s an easy analogy to understand, but it’s also completely wrong. But first let’s review some of the MR basics. First, most of the money in our monetary system is called “inside money” because it is created inside the private sector in the [...]

Good stuff here from Didier Sornette.  Sornette has done some superb risk on behavioral finance and risk management.  This recent Ted Talk is a must watch: “While financial crashes, recessions, earthquakes and other extreme events appear chaotic, Didier Sornette’s research is focused on finding out whether they are, in fact, predictable. They may happen often as a surprise, he suggests, [...]

Everywhere I go I seem to be seeing articles and commentary about how interest rates are surging and about to destroy the world we live in.  Economists are having debates about a 10 bps move in Japanese Government Bonds.  Mortgage brokers are telling you to buy your next house before interest rates surge all the way back to the level [...]