Afleveringen
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In this episode with SIACharts' President, Paul Kornfeld, we kick off our conversation with the recent changes in the Federal Reserve's rate cut projections and the performance of various stocks. We question whether it's a good time to 'buy the dip or sell the rip.' We get into the use of SIA charts in analyzing market trends and making investment decisions. What are the benefits of using a systematic approach and relative strength analysis? We touch on the challenges and opportunities of 24/7 trading, and the pressure that's mounting for moneycenter banks. We dive into the importance of having a rules-based approach and risk management in investing. We discuss the opportunities and risks in the market, and in particular the generational opportunity in the energy and materials sectors. Wending our way through the conversation, Paul peels back the layers on the importance of diversification and the need to consider the opportunity cost of investing in certain sectors. There's also the potential impact of various serious geopolitical events on international markets to weigh and the importance of incorporating risk management strategies, now. What has been the historical performance of different sectors and how great is the potential for a shift in market dynamics. What is the market indicating are trends to follow in specific sectors? What is the potential impact of inflation on portfolios and how great is the need to consider alternative asset classes?
<h3>Takeaways</h3>
<ul>
<li>The Federal Reserve's rate cut projections have been revised, leading to uncertainty in the market.</li>
<li>Using SIA charts and a systematic approach can help investors analyze market trends and make informed investment decisions.</li>
<li>24/7 trading presents both opportunities and challenges for investors, and risk management is crucial in navigating the market.</li>
<li>Money center banks are facing pressure due to rising interest rates, and it's important to monitor their performance.</li>
<li>Having a rules-based approach and discipline in investing can help mitigate emotional biases and improve investment outcomes.</li>
<li>There are opportunities for profitability in sectors like energy and materials</li>
<li>Diversification is important to mitigate risk and take advantage of different market opportunities.</li>
<li>Consider the opportunity cost of investing in certain sectors and evaluate the potential for higher profitability in other areas.</li>
<li>Geopolitical events can have a significant impact on international markets, and it's important to monitor and adjust investment strategies accordingly.</li>
<li>Incorporating risk management strategies is crucial to protect portfolios during market fluctuations.</li>
<li>The historical performance of different sectors can provide insights into potential future trends and opportunities in the market. Diversification and following trends in specific sectors can provide opportunities in the current market environment.</li>
<li>Inflation is expected to remain sticky, and portfolios need to consider alternative asset classes to fill the void left by bonds.</li>
<li>SIACharts is a tool that simplifies research and provides actionable insights for advisors.</li>
</ul>
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In this conversation, Mike and Pierre talk to Tobias Carlisle, Managing Principal and Chief Investment Officer at Acquirers Funds, LLC, and portfolio manager of ZIG and DEEP ETFs. Toby shares his approach to value investing and the historical perspective he brings to the art of investing. He also talks about the performance of value investing and the importance of staying consistent with your strategy. Our conversation highlights the benefits of a systematic and quantitative approach to investing. We explore the challenges and strategies of value investing. Toby emphasizes the importance of having a systematic design and sticking to a set of rules to avoid emotional and behavioral mistakes. We discuss the ideological debate between value and growth investing and the need for a balanced approach. Our conversation turns to the role of activism in value investing and the importance of avoiding ruin and focusing on survival. The conversation continues with Toby sharing his insights into portfolio construction and the baked-in returns of value investing. We further explore the concept of investing in value stocks and the challenges that come with it – the importance of considering the long-term perspective and the potential for high returns despite short-term fluctuations. Mike and Toby deconstruct the role of market feedback loops and the impact of market crashes on investment strategies. Toby highlights the significance of character and reputation in investing. We ask Toby about his upcoming book 'Invincible' and its exploration of the parallels between value investing, Sun Tzu's 'Art of War,' and Lao Tzu's 'Tao Te Ching.'
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Zijn er afleveringen die ontbreken?
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In this episode, our conversation with Aubrey Basdeo, Head of Fixed Income at Guardian Capital LP, we focus on the fixed income landscape and the outlook for interest rates in the US and Canada, the Federal Reserve's approach to inflation and interest rate cuts, as well as the differences between the US and Canadian economies, the impact of mortgage rates on consumer spending and the potential for rate cuts by the Bank of Canada. Overall, the conversation highlights the importance of maximizing optionality and the challenges of monetary policy in a changing economic environment, various topics related to central banks, portfolio construction, and fixed income investing. Our main themes include the shift in central bank narratives, the impact of inflation on monetary policy, the changing dynamics of portfolio construction, the shifting climate in holding duration for the sake of hedging portfolios, and the critical importance of using active management in fixed income. Our conversation also touches lightheartedly on the challenges faced by different generations in the current economic environment.
Timestamped Highlights:
00:00 Maximizing Optionality: The Federal Reserve's Approach to Interest Rate Cuts
12:10 US Exceptionalism: Strong Growth and Pro-Growth Policies
15:55 Challenges in the Canadian Economy: Higher Mortgage Rates and Slower Job Growth
17:54 American homeowners have tax deduction advantage.
21:16 Bank of Canada needs to pivot on inflation.
24:32 Bond market optimism can spell consumer pessimism.
26:43 Bank of Canada rate likely to rise.
32:32 Portfolio construction shifting due to global changes.
35:26 Hedging portfolio with fixed income shifted focus.
40:24 Fed should be less restrictive, economy speed-dependent.
43:20 Bank of Canada will ease rates moderately.
48:29 Central banks shift risk approach, requiring active management.
50:45 Focus on coupon, not duration, for returns.
54:12 Economic growth needs younger population to sustain.
"The mistake is that if they're going to make a mistake, it's that they're going to be focused on that two number (~2% neutral rate) and insist that they need to get to that, rather than you're on that trajectory towards two and you can start to ease at that point." "The world that we're entering into in terms of how things are going to, the factors that we're gonna be reacting to are going to be different from those factors that guided portfolio construction for the past 30 years." "If you're looking for duration as the hedge to the portfolio, that's not going to provide it in the same way that it did 10 years ago."TakeawaysThe Federal Reserve is aiming to maximize optionality in its approach to interest rate cuts, with the possibility of three cuts, two cuts, or no cuts depending on the evolution of inflation and the economy.The US economy is showing signs of exceptionalism, with strong growth and pro-growth policies driving the outlook for interest rates. In contrast, Europe and China are facing slower growth and export-driven challenges.The Bank of Canada is expected to ease interest rates ahead of the Federal Reserve, as the Canadian economy faces challenges from higher mortgage rates and slower job growth.The impact of mortgage rates on consumer spending differs between the US and Canada, with American homeowners benefiting from tax deductions and longer-term mortgages.Bond investors are optimistic about the potential for rate cuts, while consumers may be more pessimistic due to the potential impact on disposable income.The Bank of Canada will need to carefully navigate the path of easing, considering the impact on inflation, the interest rate differential with the US, and the potential depreciation of the Canadian dollar. Central banks may shift their narrative from targeting a specific inflation number to being less restrictive in their policies.Portfolio construction needs to adapt to a changing economic environment and regime shift.Duration may no longer provide the same level of protection in portfolios as it did in the past.Investors should focus on the belly of the yield curve for fixed income exposure.Active management is crucial in navigating the risks and opportunities in the fixed income market.The current economic environment has different implications for different generations.Copyright © AdvisorAnalyst.com
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In this conversation, Doomberg (https://doomberg.substack.com/) joins Pierre and Mike to discuss various topics including Bitcoin, the parallel between Michael Saylor and Hugo Stinnes, speculative mania, the parallels in the borrowing strategy of Hugo Stinnes and Michael Saylor, the pumpamentals driving distortions in the market and the flywheel effect, the geopolitical implications of the Russia-Ukraine conflict, the dangers of do-gooders and climate newspeak, and the natural gas situation and its unexpected impact on the economy.
The conversation covers various topics related to the resource and wealth potential of Canada and the US, the prolific natural gas development in the US, the strength of the US economy, Mexico's hidden benefit from natural gas, the importance of secure borders, the economic boom in northern Mexico, the inconsistency of border security measures, the price discrepancy between natural gas and oil, the impact of natural gas prices on the economy, the role of natural gas in manufacturing, the implications of the Tonga eruption, the debate on climate change and carbon emissions, the potential consequences of sanctions on Russia, the capabilities of Russia, China, and India, the dangers of provoking Russia, the dangers of provoking Iran, the rise of nuclear power and gold, the 'Prime' time data center and the future of energy, and the importance of nuclear power for the AI revolution.
Takeaways
- Michael Saylor's bet on Bitcoin has paid off, demonstrating the potential of high volatility assets.
- Speculative manias often precede currency debasements, making Bitcoin and crypto of interest.
- The borrowing strategy of Hugo Stinnes (WWI) and Michael Saylor (today) highlights the importance of real assets.
- Pumpamentals and the flywheel effect can create market distortions and lead to irrational behavior.
- The Russia-Ukraine conflict and geopolitical tensions have significant implications for energy markets.
- The dangers of do-gooders and climate newspeak can lead to the suppression of speech and the lack of trade-off discussions.
- The abundance of natural gas in North America has prevented a potential recession and supported the manufacturing and industrial sectors. Canada and the US have significant resource potential under the right leadership.
- The US is the most prolific natural gas producer in the world, with a sophisticated downstream manufacturing sector that takes advantage of cheap hydrocarbons.
- Mexico is a hidden beneficiary of the natural gas boom, with an industrial boom happening in northern Mexico powered by cheap natural gas.
- Secure borders are important for stability and economic growth.
- The price discrepancy between natural gas and oil has significant implications for the economy.
- Nuclear power and gold play important roles in the future of energy and wealth preservation.
- The AI revolution and the electrification of various industries will drive the demand for energy.
Where to find Doomberg
Doomberg on Substack
Copyright © AdvisorAnalyst.com
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This is one of the trickiest times in investing history marked by heightened uncertainty, distorted valuations, regime change and increased volatility in both equity and bond markets. For good reason, advisors have increasingly turned to shifting parts of the portfolios they manage away from traditional equity and bond assets in return for exposure to structured note and investment strategies that provide structured investing outcomes from those same asset categories.
In this conversation with Bill Bamber, CFA, Chief Executive Officer at BMO Global Asset Management, we are treated to a behind-the-scenes look at how and why BMO GAM developed and launched its innovative Strategic Equity Yield Fund (SEYF) solution (in June 2023). What was the thinking behind innovating this?
Investors face unforeseen risks, eroded correlations, as well as unprecedented decision-making challenges due to the proliferation of choices of individual structured products in the marketplace. SEYF is an elegant, actively managed, one-ticket solution for investors, the likes of which were once only available to large institutional investors, via the capital markets desk.
We discuss the rationale and strategic thinking behind BMO GAM launching this type of actively managed capital markets-based solution for accessing the best ideas and best strategies in the structured note market, in the form of a mutual fund. Now accessible to all investors, this is a milestone unto itself, to solve what have become some quintessential problems for investors desiring structured outcome solutions for their portfolio, in an always-on, always available format.
Bill Bamber, CFA, brings 3 decades worth of expertise in the capital markets space to BMO GAM. As CEO, he is leading this drive to bring wide investor accessibility to structured capital markets investing strategies for everyday investors. This solution provides the enhanced yield plus capital appreciation potential and liquidity investors are seeking, along with the sophistication of stability, structured downside protection and price-seeking power, owing to the economies of scale of the firm’s substantial global trading operations.
Thank you for listening!
About Bill Bamber, CFA
Chief Executive Officer
BMO Global Asset Management
Bill Bamber joined BMO Wealth Management in April 2022 as Head of Synthetic Asset Management and is currently the CEO of BMO Global Asset Management. Bill has more than 30 years of experience in the Financial Services Industry, including extensive experience in International Capital Markets, most notably in exotic derivatives spanning all asset classes as well as global structuring and structured products.
Prior to joining BMO, Bill oversaw Structured Products and Quantitative Investment Strategy businesses globally and led many ground-breaking initiatives and innovative indices. He has held senior positions at International and North American financial institutions including a focus on equity derivative structuring in the Americas.
Bill is well-known as an innovator in the investment industry with an outstanding track record for product firsts around the world. This includes pioneering the world’s first Emerging Market ETF (STX40 SJ Equity) and creating the first MLP-linked security both inside (AMJ US Equity) and outside of the U.S. He was also the first to create a listed trading platform for zero-coupon South African gilts.
Bill is a Chartered Financial Analyst (CFA) and holds both a Master of Management Analytics and a Master of Business Administration from Queen’s University.
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This episode with guest Mario Cianfarani, Head of Distribution at Vanguard Canada kicks off delving into 2024's First Challenge: Bond yields and the importance of re-positioning cash for the long term given the likelihood of central banks shifting towards rate cuts in 2024.
- It’s time to consider how to put money back to work, to shift from a defensive market stance to a more opportunistic investment approach, and its implications on advising with regard to 60/40 portfolios and bonds. We discuss the challenge posed by having funds on standby in short-term instruments and cash equivalents, and emphasize sticking to or revisiting long-term investment strategy despite today’s uncertainty and market fluctuations.
- Challenge Two: We discuss the importance and challenge of investors being able to stick to their predetermined plans emphasizing the value of guidance provided by advisors. Do they have plans THEY can stick to? How can you properly get them to that state? The nature of markets has always required the necessity of portfolio diversification, and HOW you diversify is even more important, now, as is the ability to adhere to long-term investment strategies. Mario makes the point that advisors should communicate their value by widening the scope of their client discussions. That goes far beyond selecting stocks or managing portfolios, demonstrating their role, in financial planning, behavioural coaching, estate and tax planning. It’s very important to consider context when making investment decisions and utilizing viewpoints and data, for managing portfolios.
Pierre highlights the considerable value-add of tapping in to (such as) Vanguard’s deep experience and resources to enhance portfolio construction and bolster investor trust in the quality of the source of guidance, in the context of the reintroduction of interest rates, i.e. the impact and gravity of that. Our discussion sheds light on how the zero interest rate environment has influenced now distorted valuation models and investment strategies, highlighting a return to investing principles in response to effects of higher interest rates.
The conversation touches on the increasing professionalization and personalization in wealth management, Mario references Vanguard's seminal research into Advisors Alpha and the significance investors attach to services.
Challenge Three: The conversation wraps up by discussing the impact of wealth transfer on succession planning for advisors suggesting it's high time to consider the notion of promoting a multi-generational approach, to managing family wealth, OR face the high risk being traded out, replaced, as their key advisor at succession. How can you strategically begin to approach this problem?
Thank you for watching and listening!
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Ilan Kolet, Institutional Portfolio manager in Fidelity's Global Asset Allocation Team, joins us to discuss the most important questions he and his team mates, David Wolf and David Tulk have been fielding at the start of 2024. We delve into the unexpected shifts in monetary policy led by the Federal Reserve and mull over the repercussions of potential rate cuts on inflation volatility, weaving through the intricacies of the Fed's data-driven stance and 'pivot' toward a less restrictive monetary environment.
In the context of historical reflections and economic projections, Kolet elaborates on the team’s optimism regarding the US market, supported by a belief in a productivity boom that dallies with the possibility of economic prosperity, low inflation, and equity strength. We get into Canadian fiscal policy, where Kolet voices concerns about Canada's macroeconomy potentially trailing in equities and fixed income, and how the team is allocating to Canada. Kolet sheds light on the team’s investment strategy, from high-conviction underweights and overweights to the complexities and nuances of handling asset allocation.
Throughout the episode, it's clear that the core of the discussion isn't merely the transactional aspects of investment but relates to the broader challenges advisors face when reconciling market complexities with client needs. The episode provides Fidelity's highest conviction global asset allocation guidance through the labyrinth of 2024's financial mixed and uncertain landscape.
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John De Goey, Portfolio Manager and Investment Advisor at Designed Wealth Management joins us to discuss and explore the current investment landscape and the choices available to investors. He highlights the importance of managing risk and staying on the short end of the yield curve, for time being where fixed income is concerned. We also delve into the topics of optimism and pessimism, with a focus on the potential challenges and uncertainties in the market. We talk about the shifts in real estate markets, particularly the shift happening that's favouring the US Sun Belt, and the potential impact of climate change on investments. De Goey urges investors to be prepared and take proactive measures to balance risk in their portfolios. He also cautions against unrealistic expectations for future returns. Is your portfolio equipped to handle unknown variables and tail risks?
Our chat wraps up with a nudge to uphold a diverse and balanced portfolio, mindful of the effects of surging interest rates. Remember, Balanced Asset Allocation and Balanced Funds are not the same - risk management is key. Unlike a traditional 60/40 'balanced fund', a balanced asset allocation approach ensures apt risk distribution.
We explore the perils of unchecked optimism in the finance sector and how to construct a resilient, well-equipped portfolio. We ponder the withdrawal effects of quantitative easing and the necessity to confront market realities. We also investigate the financial industry's positivity bias and the knock-on effects of negativity.
De Goey's "dumbest thing he's heard" takes a jab at data manipulation to bolster a narrative. We delve into the need to anticipate potential pitfalls and the importance of diversification as a safety net. Our dialogue concludes with a conversation about managing expectations, loss aversion, and the task of keeping clients invested for the long haul. Certainly, plenty to contemplate.
TakeawaysStay on the short end of the yield curve for now, and manage risk in the current market.Be cautious of excessive optimism and be prepared for potential challenges and uncertainties.Consider investments in real estate, traditional inflation hedges, and diversified portfolios.Recognize the changing investment landscape and adjust expectations for future returns. Blind optimism in the financial industry can be dangerous, as it can lead to a lack of preparedness for potential risks.Quantitative easing has created withdrawal symptoms in the market, and it is important to face the reality of the current situation.The financial services industry has a commercial imperative to be optimistic, but it is crucial to consider both the positive and negative aspects of investing.Cherry-picking data to support a narrative is not a reliable approach, and it is important to consider the full picture.Proper diversification is like insurance for a portfolio, and it is essential to mitigate potential harm.Expectations management, loss aversion, and maintaining perspective are key in keeping clients invested for the long term.Timestamped Highlights:[00:00] Introduction
[01:01] Investment Choices in the Current Market
[03:31] Optimism and Pessimism
[06:07] Shifts in Real Estate Markets
[06:56] The Sun Belt and Financial Centers
[08:20] Concerns and Pessimism
[10:32] Preparing for Uncertain Times
[16:06] Lowering Expectations for the Future
[21:12] Balancing Climate Obligations and Economic Growth
[26:04] Preparing for a Lower Standard of Living
[31:05] The Danger of Optimism Bias
[35:47] The Importance of Being Prepared
[41:49] Diversification and Balance in Portfolios
[46:16] The Impact of Rising Rates
[48:40] The Danger of Blind Optimism
[49:14] The Withdrawal Symptoms of Quantitative Easing
[50:20] The Commercial Imperative of Optimism in the Financial Services Industry
[51:18] The Cascading Effect of Pessimism in the Market
[52:16] The Dumbest Thing Heard: Cherry-Picking Data to Support a Narrative
[55:43] Listening for Quips and Side Comments in Financial Media
[58:32] The Afterglow of Reaction to Bad Economic News
[01:00:36] The Importance of Considering What Could Go Wrong
[01:02:31] Optimism with Insurance: Proper Diversification
[01:05:55] Expectations Management and Loss Aversion
[01:07:29] The Challenge of Minimizing Losses and Maintaining Perspective
[01:09:29] The Difficulty of Keeping Clients Invested for the Long Term
[01:11:36] The Struggle of Getting Clients to Embrace Diversification
[01:14:33] Differentiating Between Great Companies and Great Stocks
[01:15:16] The Historical Perspective of Overvalued Markets
[01:17:41] The Redistribution of Wealth During Flat Markets
[01:20:55] The Need for Realism and Mitigating Potential Harm
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Join us for this enlightening conversation with Ilan Kolet, Institutional Portfolio Manager, Global Asset Allocation Team, at Fidelity Investments, as we delve into the economic outlook for 2024. Kolet provides invaluable insight into the Canadian and US economies, the housing market, investment strategies, and inflation protection. We explore the impact of interest rates, consumer spending, and central bank policies on investments. Kolet's expertise sheds light on asset allocation, portfolio diversification, and the potential implications of elevated inflation rates, making this episode an absolute must-listen.
Timestamped Highlights:[00:00] Introduction - career - Bank of Canada, under Dodge and Carney, to Bloomberg, then Fidelity in Boston.
[05:24] Thoughts on Market optimism.
[12:10] Potential US economic growth boosted by technology.
[17:36] Labor market shows resilience and interest concerns.
[23:19] Reduced consumer spending leads to economic impact.
[29:47] Asset allocation process involves feedback from managers.
[33:03] Elevated rates causing financial stress in Canada.
[38:11] Diversifying and explaining investments to numerous clients.
[43:33] Services drive inflation, labor market drives expenses.
[48:45] US government faces challenges in refunding debt.
[57:25] Researchers on Wellington acknowledge economic sensitivities, rates outlook.
[01:02:28] Leverage negative sentiment, be cautious in exuberance.
[01:06:15] Questioning fixed income view, cash overweight strategic.
[01:10:13] Investors have many short and long-term options.
[01:17:30] Working with talented teams on global research.
Where to find Ilan Kolet, Fidelity Investments:Fidelity Investments Canada - Asset Allocation Quarterly
Bio
Ilan Kolet on Linkedin
Global Asset Allocation Team - Fidelity Investments
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In this insightful discussion, Dino Bourdos, Portfolio Manager & Head of Investment Solutions at Guardian Capital LP delves into the intricacies of investment strategies, particularly focusing on the use of derivatives, covered call strategies, and the impact of market dynamics on investment decisions. With his extensive experience in the field, Bourdos offers valuable insights into the challenges and opportunities in the current economic landscape, making this a must-watch for investors and financial professionals alike.
Timestamped Highlights:
[00:02:19] - Impact of 2008 Financial Crisis on Individual Investors: Discussion on how the 2008 crisis led to a need for risk management strategies for individual investors, leading to the development of innovative options strategies.
[00:03:39] - Guardian Capital's Approach to Asset Management: Insights into Guardian Capital's strategies, including the use of machine learning and AI in stock selection and the launch of innovative solutions like the Tontine.
[00:09:47] - Creating Awareness in Investment Strategies: Emphasis on the importance of understanding the mechanics of investment strategies and setting realistic expectations to avoid misconceptions.
[00:10:46] - Role of Advisors in Setting Expectations: The significance of advisors setting correct expectations and working towards delivering on them, particularly in relation to mutual funds and systematic withdrawal plans.
[00:21:02] - Fundamentals Over Yield in Investment Choices: The discussion focuses on the importance of the underlying asset in investments, rather than just the yield, and the necessity of a portfolio's ability to grow and sustain payments.
[00:24:31] - Cover Call Strategies for Long-Term Growth: How cover call strategies can be integrated into long-term investment plans, providing tax-efficient income while maintaining portfolio value.
[00:29:04] - Personal Investment Strategy Using Home Equity: A personal anecdote about using home equity to invest in a cover call strategy, highlighting a creative approach to wealth creation.
[00:32:35] - Opportunities in Single Stock Options: Discussion on the transition from index options to single stock options and the different opportunities they present in the market.
[00:36:02] - Navigating Market Volatility with Covered Call Strategies: Insights into the use of covered call strategies during market downturns and the importance of being pragmatic and prudent in investment decisions.
[00:37:16] - Adapting Investment Strategies Amidst Global Transitions: Commentary on adapting investment strategies in response to global shifts such as from globalism to protectionism and low to high interest rates.
Where to find Dino BourdosDino Bourdos on Linkedin
Guardian Capital LP
Research: Is the yield on your Covered Call Fund too high?
Copyright © AdvisorAnalyst.com
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Join us in conversation with Joaquin Kritz Lara, Chief Economist at Numera Analytics, as we explore the intricate world of global economics and financial markets. Hosted by Pierre Daillie and Richard Laterman, the discussion delves into the nuances of macroeconometrics, the dynamics of inflation, and the complexities of investment strategies in today's volatile market.
Joaquin brings his extensive experience in macroeconomic analysis and model building, offering unique insights into the causal relationships between economic variables and their impact on financial markets. The conversation also touches on the rigidity of Europe's job markets, the influence of geopolitical events, and the critical role of domain knowledge in leveraging AI tools like ChatGPT for economic analysis.
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Timestamped Highlights
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[00:01:16] Introduction of Joaquin Kritz Lara, emphasizing his role and expertise in the financial sector.
[00:07:23] Discussion on macroeconomic dynamics and Fed policy impacts on financial markets, identifying a late-cycle stage in G10 countries.
[00:22:59] Analysis of the lag between real interest rate changes and consumption growth in developed markets, indicating a late-cycle economic stage.
[00:25:30] Examination of the slow-moving banking crisis and its effects on the international demand for U.S. Treasuries and term premiums.
[00:34:00] Conversation about the final stage of an economic expansion phase and the determination of optimal asset allocation weights for different investors.
[00:50:10] Discussion on complementing stock-bond portfolios in light of paradigm shifts, focusing on asset class correlations and regime shifts.
[01:29:49] Discussion on the limitations of AI tools like ChatGPT in financial analysis, highlighting the importance of domain knowledge.
[01:31:51] Conclusion of the discussion, expressing appreciation for Joaquin Kritz Lara's insights and mentioning the sharing of research for further queries.
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Where to find Joaquin Kritz Lara
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Joaquin Kritz Lara on Linkedin
Numera Analytics
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Quoted Research
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Numera Analytics - US Asset Allocation - October 2023
Numera Analytics - Global Asset Allocation - October 2023
Numera Analytics - Top Conviction Calls - Week 42 - October 2023
Copyright © AdvisorAnalyst.com
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Join us for this insight-rich conversation with Michael Robbins, a distinguished figure in quantitative asset management. He is an author, thought leader, Professor of Graduate Studies in Quantitative Investing at Columbia University, and a sitting CIO. Our conversation focuses on quantitative trading, asset management, and financial modeling. Michael's recently published book, "Quantitative Asset Management," offers insights into the complexities and nuances of quantitative strategies. We delve deep into the intricacies of Global Tactical Asset Allocation (GTA) and explore the nuances of quantitative investment strategies.
HIGHLIGHTSUnderstanding GTAA: We start by defining Global Tactical Asset Allocation and discussing effective approaches and potential pitfalls in employing this strategy.
[04:18] - Adam Butler discusses the unique challenges and advantages small investors face compared to large investors, emphasizing the benefit of portfolio agility for smaller investors.
Investment Strategy Insights: Michael Robbins shares his expertise on various aspects of investment strategies, including the importance of a fund's management team, the significance of qualitative factors, and the role of an advisor in making informed investment decisions.
Quantitative Strategies: We explore the realm of quantitative strategies, discussing hyperparameters, the impact of biases, and the importance of defining investment goals.
The Role of Machine Learning: Delve into the use of machine learning in finance, understanding overfitting, and the challenges of translating complex financial data into actionable strategies.
[24:20] - Pierre Daillie and Michael Robbins explore the concept of overfitting in algorithmic strategies and the skepticism surrounding backtesting, highlighting the importance of a solid theoretical foundation behind investment strategies.
[34:47] - The conversation shifts to the importance of qualitative factors in investment, such as the management team's experience and the terms of investment, which are crucial alongside performance metrics.
[26:58] - Michael Robbins emphasizes the need to eliminate luck and human bias from systematic investment programs, advocating for a more quantitative and systematic approach to investing.
[42:08] - Michael Robbins and Pierre Daillie discuss the often overlooked aspect of the personality and charisma of analytical experts in investment management, and how it affects investment decisions.
Practical Advice for Investors: Gain insights on what investors should look for in funds, the importance of diversification, and how to avoid common mistakes in quantitative investing.
[1:01:56] - The article concludes with a discussion on expanding investment horizons and differentiating oneself as an advisor by exploring unique investment strategies, as suggested by Michael Robbins.
*****
📚 About Michael Robbins: Michael Robbins is an acclaimed author and expert in finance, Professor of Graduate Studies in Quantitative Investing at Columbia University in New York, and a sitting CIO. He is known for his deep understanding of quantitative strategies and asset allocation. His insights provide valuable guidance for both new and seasoned investors.
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Where to find Michael Robbins, CFA
Michael Robbins on Linkedin
Michael Robbins' book - Quantitative Asset Management
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👍 Like and Share: If you find this discussion informative, please like, share, and comment below with your thoughts or questions.
#InvestmentStrategies #GlobalTacticalAssetAllocation #QuantitativeInvesting #MichaelRobbins
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We're excited to share our conversation with two distinguished guests from WisdomTree, Jeremy Schwartz and Jeff Weniger. Jeremy Schwartz, CFA, Global Chief Investment Officer at WisdomTree, shares his views on the market and economy from his vantage point of overseeing all of WisdomTree's investment activity. Jeff Weniger, CFA, Head of Equity Strategy at WisdomTree, shares current insights from his team's analysis of stock market trends and macroeconomic developments.
Where to find our guests:
Jeremy Schwartz
Jeff Weniger
Timestamped Highlights[00:00] Fed Rate Hikes and Economic Impact - We begin with Jeremy Schwartz and Jeff Weniger's analysis of Powell's speeches, highlighting inconsistencies and effects on housing.
[04:55] Inflation and Monetary Policy Concerns over housing data, skewed rental data, and Powell's neutral stance.
[08:33] Central Bank Policies and Banking Industry Challenges - Powell's inflation goals, bravery of central banks, and future risks in banking.
[15:58] Banking Industry Changes and Consumer Behavior - Funding challenges for banks, high net worth individuals holding cash, and consumer spending patterns.
[20:14] Housing Market Dynamics and Potential Correction - Correction trends in housing market, millennial supply issues, and recession implications.
[26:31] Housing Market Trends: Homeowners and Renters - Low home sales volume impact, focus on home prices vs. activity, and new construction's effect on home improvement.
[33:13] Housing Market Trends and Employment Resilience - Demand for new homes and companies’ resilience to rate hikes.
[36:49] Economic Trends, Monetary Policy, Investment Opportunities - Impact of interest rates on tech companies, Dallas Fed report, and investment insights.
[41:48] Labor Market Changes and Economic Uncertainty - Frustration with employment dynamics, real estate professionals’ struggles, and COVID-19's impact.
[47:05] Economic Impact of Demographic Shifts and Monetary Policy - Low interest rates influencing retirement, generational conflict, and political impacts.
[53:12] Economic Stimulus, Budget Deficits, Stock Valuations - Discussion on potential stimulus, budget deficits, and high-valuation companies like Nvidia.
[58:35] Nvidia's Potential as a Prime AI Stock - Cisco's market position contrasted with Nvidia, and the parallel potential of a Japanese stock market resurgence.
[1:01:31] Investing in Japanese Equities] Warren Buffett's Japanese investments, hedging currency risk, and equity investment psychology.
[1:07:28] Japanese Economy: Labor Costs and Profit Margins - Cultural shifts in Japan, labor arbitrage, and wage gap comparisons.
[1:11:50] India's Role in Global Politics and Economy - India's demographic advantages, investment valuation importance, and geopolitical role.
[1:17:58] Cultural Exports and Media Representation - Global cultural exports' impact, Hollywood and Bollywood influence, and increased American interest in foreign cultures.
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Discover how covered call strategies can help investors profit from rising volatility in today's markets. Nicolas Piquard, Chief Options Strategist at Hamilton ETFs, shares his insights on using covered call options strategies to generate income from popular bank and utilities stock holdings (HMAX and UMAX). Piquard also discusses in depth, the case for the new and timely opportunity of using a covered call strategy to enhance returns from bonds, and how Hamilton ETFs' HBND works.
Learn why this innovative approach allows for more nuanced portfolio adjustments, without taking on additional risk.
Nicolas Piquard: Monetizing Volatility in Bonds (a First) & EquitiesTimestamped Summary:[00:00:00] Monetizing volatility with Hamilton ETFs Chief Options Strategist Nicolas Piquard
- Nick Piquard shares insights on monetizing volatility in equity and bond markets.
[00:01:16] Bank earnings, volatility, and covered calls with a focus on Canadian banks.
- discusses his career in the options space, from sell side to buy side, and his current work at Hamilton ETFs.
- Daillie asks about the outlook for bank earnings in light of recent results and expectations.
- provides a mixed view, citing both positive and negative factors, including rising interest rates and a weaker economy.
- notes that Canadian banks have historically been less volatile than US banks, but current market conditions create potential buy opportunities (0:05:25).
[00:07:06] The attractiveness of covered calls in the current market environment, with strong dividends and potential for extra yield .
[00:08:06] Covered call options in a volatile market.
Daillie notes the prevalence of Canadian bank ownership in US banks and stadium naming rights, suggesting it's a source of national pride.
- believes there are good deals to be had in regional banks due to their low valuation, but they need access to capital to overcome challenges.
- highlights the potential opportunities for covered call option writers in a volatile market, as the price of call options increases in such environments.
- advises focusing on selling call options at the higher end of a price range to maximize performance, rather than selling too much upside at a single point.
- advises navigating short-term market volatility by using covered call strategies, avoiding short-term lows, and taking advantage of market whipsaws.
- explains how to navigate a volatile market by writing fewer call options and waiting for better entry points.
- provides an example of how to manage a situation like this in the Canadian banking sector.
[00:17:45] Options trading strategies and their implementation.
Active call strategy can help diversify exposure and adapt to changing market conditions.
- emphasizes importance of proper management of covered call strategies for long-term success.
[00:21:51] Covered call strategies in volatile markets.
- Investors seek tax-efficient income through covered call strategies on safe assets like Canadian banks and utilities, freeing up time for other investment decisions.
- Investors may seek insurance against large cap tech names, generating premiums for investors.
- discusses the benefits of using a covered call strategy in volatile markets, particularly in sectors like tech and energy where upside potential is high.
- notes that while the strategy involves giving up some upside potential, the increased yield from selling call options can help offset this trade-off.
[00:27:48] Using covered calls to diversify and generate income in a volatile market.
- Investors may benefit from diversifying into covered calls to monetize volatility in a potentially uncertain financial environment.
- Investors seeking income can use covered call strategies to monetize volatility while maintaining existing portfolio holdings.
[00:32:10] Tax loss selling and bond market strategies.
Daillie highlights the tax loss selling opportunity in the banking sector, where investors can capture tax efficient income and enhance overall yield.
- Hamilton's new ETF exploits volatility and yield in the bond market, a strategy that has not been done before, with investors asking why it hasn't been explored earlier.
- explains that TLT, a bond ETF, has become a popular proxy for long-term yields due to its liquidity and size, making it an attractive option for covered call strategies.
- Daillie agrees, noting that TLT has become a shorthand for long-duration bonds and its options market has become liquid, making it an ideal choice for traders.
- explains why there hasn't been any previous covered call BOND ETF formations. The concept didn't have any traction to become popular until recently, citing bond market trends and Fed actions.
[00:38:52] Long-term bond yields and inflation.
- identifies two key factors driving the market: investors' perception of inflation and the ability to lock in high yields with safety.
- discusses factors contributing to sticky inflation, including demographic changes, globalization, and monetary policy.
- Counterarguments include concerns about global debt levels and the potential for higher rates to cause economic issues.
[00:44:25] Interest rate volatility and its impact on financial markets.
- notes that traditional buyers of US Treasuries, such as China and Japan, are becoming less active due to high yields in their own bond markets, potentially impacting US interest rates.
- highlights a chart showing the correlation between interest rate volatility and equity volatility, with both increasing in recent years despite the VIX decreasing.
- believes that interest rate volatility will continue to rise due to the Fed's balance sheet reduction, leading to higher VIX levels.
[00:50:01] A new ETF strategy for fixed income investors (HBND).
- Investors can now access extra yield through a new ETF that combines fixed income exposure with covered call strategy, using TLT as the underlying bond.
- discusses using a covered call strategy with US Treasuries to generate income with lower risk.
[00:54:24] Bond market volatility and investment strategies.
- Investors may benefit from exploiting long-term yield opportunities in the bond market, particularly through covered call strategies, given the current high volatility environment and potential for sustained government spending.
- Investors can fine-tune portfolios with new opportunities for volatility monetization.
- is excited about the opportunity in bond ETFs, seeing it as a timely and popular investment opportunity.
- discuss the potential of adjusting portfolio trim without major attitude adjustment, using analogies like boat engine trim and volume control.
Closing
Where to find Nicolas PiquardNicolas Piquard on Linkedin
Hamilton ETFs
Strategies discussed:HMAX - Hamilton Canadian Financials Yield Maximizer ETF
HBND -Hamilton U.S. Bond Yield Maximizer ETF
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Darius Dale, Chief Strategist & Founder at 42 Macro LLC joins us for an end of Q3 360˚ take, looking back at the last year for context, and looking forward to 2024. He shares his insight from his firm's econometric modeling, and what it is all saying about the economy and markets behaviour for the upcoming quarters and year ahead. Dale eloquently unpacks all the factors driving inflation and market in the context of today's heightened uncertainty surrounding inflation, policy, rates, and market dynamics.
Timestamped Highlights[00:02:25] Darius Dale believes that factors supporting growth persist into next year, inflation has surprisingly decreased, and the Fed's policy remains unchanged.
[00:04:19] China's economy reopening without fiscal stimulus, Europe's growth faltering with sticky inflation causing bond market volatility. Bank of Japan likely to tweak yield curve control. Implications for asset markets.
[00:06:55] Despite concerns about inflation, consumer income and personal spending have exceeded inflation levels. Limited vulnerability in the credit cycle and decreased exposure to the manufacturing sector indicate a more resilient economy.
[00:13:17] Darius Dale's insight, discussing a temporary risk-off scenario, the expectation of a return to equity leadership, and the potential lag in seeing the impact of interest rates on the economy. The author questions whether these circumstances will lead to a leapfrogging of debt maturity.
[00:16:41] Stock market tends to peak with employment cycle, indicating potential retail risk accumulation. Difficulty in answering question of factor dispersion.
[00:20:09] University of Michigan employment survey shows numbers inconsistent with recession patterns. Other indicators also suggest recession is unlikely.
[00:22:14] Most US mortgage holders have 30-year mortgages at low rates, so rising interest rates will take time to impact the housing market.
[00:26:04] There have been few changes in central bank policy rate expectations, but significant moves in floor policy rates, led by the US. The US economy has been performing better than expected, causing investors to believe there is no recession. The fixed income market has seen interesting trends, with minimal impact from the regional banking crisis.
[00:30:48] High interest rates will discourage refinancing for both corporate and household sectors; longest duration since the early 80s.
[00:31:53] Refinancing into higher interest rates is economically irrational. Rates will matter eventually, but not now. The Fed's policy has created a big spread between payments and instrument yields, dragging it into a higher rate regime.
[00:35:27] The mortgage rate spread is causing stagnation in the housing market, leading to a decrease in existing home sales and an increase in new home construction.
[00:40:37] We discuss the potential for higher inflation and the use of a model to project inflation trends. It suggests that the underlying trend of inflation may be around 2.5% to 3%.
[00:44:07] The author specializes in building quantitative models backed by proven techniques. They developed an investment strategy to outperform the standard 60-40 approach by reducing bond holdings and using various risk management overlays.
[00:48:50] We discuss the inflationary era in bond market, potential for term premium to rise, bond bulls buying undervalued market.
[00:52:05] 42 Macro publishes research and prognostications on the market. They made successful calls in early January and May based on their process. They focus on behavioral aspects and reorganized their process for better outcomes.
Visit 42macro.com for more.
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Terry Dimock, Chief Risk & Execution Officer, at National Bank Investments is our guest. In this episode, Terry takes us on a journey through NBI's OP4+ Open Architecture Investment process and framework, shedding light on the importance of creating value, the prioritization of organization, people, and process, and the meticulous monitoring of portfolios. Terry shares valuable insights into the selection of portfolio managers, the logic of integrating ESG factors, and the challenges and opportunities in the ever-changing investment landscape. We explore the inner workings of NBI's investment management process and discover how they navigate the complexities of the market to deliver exceptional results for their investors.
Timestamped Highlights:[00:00:00] Opening remarks and introduction to Terry Dimock, a luminary in investment management.
[00:04:37] In 2012, National Bank sold its asset manager and adopted an open architecture approach to build solutions using the best portfolio managers in the world. They created OP4+, an acronym that defines what they look for in a portfolio manager, with "O" standing for organization.
[00:07:00] Where does value come from? How value is created, and the importance of people and process. Terry explains the pillars of OP4+ and monitoring portfolio positions. The goal is to ensure that the process is followed and glitches are avoided.
[00:10:03] How are NBI's sub-advisor portfolio managers evaluated? Terry emphasizes the importance of portfolio manager selection, and the under-recognition of the risk involved is discussed. We discuss his team's role at National Bank Investments in reducing advisor and client burden in evaluating managers.
[00:13:13] The CIO office uses teamwork to identify asset classes and portfolio needs. They may add or change managers to diversify portfolios. NBI's Open Architecture allows flexibility in adding a multitude of asset classes and managers.
[00:16:21] We seek the best portfolio managers with a long track record, particularly in less liquid investments. Fees in these categories can be high, but we value diversification, careful selection, and scale.
[00:19:28] Quarterly performance attribution calls are held with all portfolio managers to assess performance and confirm adherence to OP4+ process. Bi-weekly check-ins and yearly on-site visits ensure trust and accuracy in information provided.
[00:24:29] Investors should consider environmental risks and the management of companies they invest in. For example, PG&E faced lawsuits and bankruptcy due to poor management after 2019 forest fires. Analysts reduced positions in companies with high risk and poor governance. It is important to analyze potential risks and ensure investment aligns with environmental objectives to avoid negative outcomes. Considering and factoring in ESG concerns was a logical decision.
[00:28:10] Terry emphasizes the need for a transition to renewable energy, ensuring job security and sustainable business practices, despite political opposition.
[00:29:56] Investors should use ESG to make credible and accountable decisions. Becoming a signatory of the UN principles for responsible investment demonstrates seriousness. Proof points about using ESG factors are necessary.
[00:33:57] We assess performance criteria and compare active managers to ETFs to ensure value for end-investors. Focus on process, not short-term metrics.
[00:36:25] Gaps in portfolio, lack of diversity, and changes can unearth reasons to lose confidence in a portfolio manager's inclusion in NBI's program.
[00:41:11] AI, like ChatGPT, will enhance analysis and automation, allowing focus on critical tasks. Progress in technology has consistently improved efficiency. Younger generations adapt quickly.
[00:43:22] Terry closes the conversation noting that NBI is constantly working at improving qualitative and quantitative aspects of the OP4+ process, focused on finding the right information and metrics for future success.
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Where to find Terry Dimock
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Terry Dimock on Linkedin
National Bank Investments
Copyright © AdvisorAnalyst.com
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The head of the Doomberg team, maestros at deciphering the complex symphony of the financial world is our guest. The Doomberg team are well-known for their uncanny ability to recognize patterns before they emerge and connect the dots between topics you'd never think related. They've mastered the art of making the intricate realms of finance accessible. They have become, by far, the most popular Substack. Doomberg join us for a deep, deep dive into their most recent market insights, highlighting the less-than-obvious dualities, contradictions, impacts, and connections in the realm of financial markets.
Timestamped Highlights:
[00:02:07] Doomberg, a small team with experience in the commodity sector launched Doomberg in 2021, now the most subscribed Substack, after pivoting from a consulting firm due to COVID-19. They now research and write 7 to 8 pieces a month with no strict deadlines.
[00:08:37] A framework for assessing scientific breakthroughs, focusing e.g. on a claimed room temperature superconductor. It emphasizes the importance of considering the credibility of those involved, where the research is published, the scientific process, the context of previous claims, and what to expect next. Ultimately, the text expresses deep skepticism and the need for more evidence.
[00:19:37] The potential benefits of a technical singularity, including advancements in grid rewiring, quantum computing, and high-tech electronics. It highlights the difficulty in predicting the specific inventions that could arise and the significant impact it would have.
[00:24:59] Doomberg discusses the relationship between energy, order, and standard of living. He argues that higher energy density leads to economic prosperity and that restrictions on fossil fuel consumption merely shift the privilege. The global south's consumption of fossil fuels is seen as predictable and sustainable within the author's framework.
[00:30:36] The progressive environmental left opposes nuclear power and carbon capture for reasons related to their desire for fewer humans (Malthusians) and resource conservation. They want less energy and advocate for intermittent renewables. Their intentions are not about carbon emissions.
[00:39:29] In periods of energy abundance, currencies are influenced by manufacturing performance and value-added capabilities. In energy scarcity, energy becomes the key resource, affecting currency strength. During shortages, energy producers profit from price increases. The understanding of energy's significance reveals the less relevance of currency fluctuations. A mild winter in 2022 shifted to energy abundance, causing coal, natural gas, and oil prices to drop, impacting currencies. Russia's currency weakens during surplus energy periods. Energy positioning explains most currency moves during scarcity, but not during abundance. Currency serves as a means to store, transport, and utilize energy.
[00:45:21] Ontario's Green Energy Act caused government waste and enriched insiders, costing taxpayers billions. In 2018, the ruling liberal party was ousted, and the act was revoked. Ontario now focuses on nuclear energy.
[00:52:29] Canada, UAE, and Japan are embracing nuclear power, while most of Europe except Germany is realizing its importance. Pain and political change are necessary for progress.
[01:00:06] Traditional media outlets claim both that drought relief disproves climate change and that climate volatility is the cause.
[01:04:11] The story of Tulare Lake. A California tribe's devastated loss when their lake was drained by dams and diversions, is now seen as a climate crisis causing flooding. The reclaimed lake is viewed as both a salvation and a food growing paradise lost due to climate change.
[01:08:16] The book "The New Dealers War" is recommended and highlights China's dominance in key industries and the need for caution in foreign engagements.
[01:14:26] The US lacks knowledge, China controls Tellurium supply in solar industry.
[01:20:00] Focus on leadership at home, support US prosperity, influence policy, cautious about China, not worried about physical safety. US political system intact despite partisan bickering.
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Where to find Doomberg:
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Doomberg - Substack
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Where to find the Raise Your Average crew:
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ReSolve Asset Management
ReSolve Asset Management Blog
Mike Philbrick on Linkedin
Rodrigo Gordillo on Linkedin
Adam Butler on Linkedin
Pierre Daillie on Linkedin
Joseph Lamanna on Linkedin
AdvisorAnalyst.com
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Paul Kornfeld, President at SIACharts joins us for an comprehensive update featuring SIACharts' insights - we talked about relative strength rankings and how they can guide your investment decisions globally. Small-cap stocks in the US may be lower ranked compared to their large-cap counterparts, but Canadian small-cap stocks are showing promise. We also discussed the movement in energy markets – they've been on the decline but set for gains, while alternatives have been gaining momentum. And fixed income? While it hasn't shown much improvement, it's waiting for that bounce back when interest rates start dropping. Stay away from underperforming areas, follow the analysis, and keep an eye out for sector opportunities in Canada and the US. And, we even explored potential investment opportunities in Mexico, and India. These countries are aligning with western interests, less vulnerable to China's influence, and have charts showing clear breakouts.
Timestamped Highlights:
[00:03:24] We discuss discuss market performance, interest rates, inflation.
[00:10:48] Market recovering, room for growth, market breadth.
[00:15:17] Mega-cap tech stocks dominate market returns. Breath problem persists. Financial recovery underway. Transportation sector improves. Sector flows signal concerns. July historically positive, but caution for August-September.
[00:26:48] Seasonality varies across different market areas. Building an ensemble of indicators is important. Market could be overbought and a bit exuberant. Consider tightening risk levels and taking profits. Summer seasonality may present challenges.
[00:30:02] Expectations for Q4 earnings are changing, with certain sectors predicted to have higher earnings. Information technology remains strong, while utilities have surprisingly high expectations.
[00:36:00] Stocks lagging, utilities messy, no clear trends
[00:44:11] Rankings show US outperforming Canada due to sector composition.
[00:46:50] Global, Europe, international, US Small Cap, Canadian Small Cap, energy markets, alternatives, North American Equity, emerging markets, fixed income, bond valuations, underperformance, sector analysis
[00:53:07] Real estate market booming in Calgary.
[00:56:58] Price expected to pause at resistance level. Support at 125. Potential move down 1%. Resistance at 139. Range between 128 to 138. Short-term outlook weakened. Not bullish for USD.
[01:03:10] US has performed well, Nasdaq has potential.
[01:09:15] Point figure chart eliminates short-term noise. Candlestick chart has more noise. Point figure chart shows value in different time periods. Visuals help identify upside and levels. Long-term view is important. Russell 2000 chart is noisier with a smaller range.
[01:13:06] International markets have potential, particularly Argentina, Mexico, and India. Emerging markets may catch up with developed markets.
[01:20:33] Security mindset challenges, breakout opportunities, orderly uptrend. Reassuring narrative: supply chain shift to aligned countries. Risk management and accumulation strategies. Pay attention to new highs in portfolio.
[01:36:42] Summarizing the text in 6 words: Simplified commodity strategy with low volatility.
[01:40:41] Increased dispersion across asset classes creates opportunities.
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Where to find Paul Kornfeld and SIACharts:
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Paul Kornfeld on Linkedin
SIACharts.com
SIACharts on Twitter
SIACharts on Linkedin
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Where to find the Raise Your Average crew:
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ReSolve Asset Management
ReSolve Asset Management Blog
Mike Philbrick on Linkedin
Rodrigo Gordillo on Linkedin
Adam Butler on Linkedin
Pierre Daillie on Linkedin
Joseph Lamanna on Linkedin
AdvisorAnalyst.com
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Meketa Investment Group, a consulting company with a rich history, wants to make the complicated language of investing easier for everyone.
In this episode Jason Josephiac and Ryan Lobdell of Meketa Investment Group discuss the educational paper they released this year that tries to clear up much of this confusion.
They note that calling something a "hedge fund" is a bit like saying "sports" without saying which sport you mean - which could be anything from football to car racing (think football ≠ car racing). Just like in sports, it's important to have a well-rounded team with different strengths, and Meketa's Josephiac and Lobdell want to help investors do this with their investments.
Our conversation delves into how the best teams have both a strong attack (offense) and a strong defense. It's the same with investing. If your investments are all attacking (basically going after growth), you might be taking on more risk than you think and leaving yourself open (to being attacked) on the defense side. This might mean you're not set up as well as you could be to consistently do well. They also point out that some programs that are supposed to protect you (like playing defense in sports) might not really be doing that job well.
We discuss all of the accessible investment tools and strategies an investor have at the ready to build a championship level portfolio.
Thank you for listening.
Where to find Ryan Lobdell & Jason Josephiac:Ryan Lobdell on Linkedin
Jason Josepiac on Linkedin
Read the whitepaper: Risk Mitigating Strategies (RMS) Framework
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Recorded June 23, 2023 - Recorded June 23, 2023 - In this conversation, Pierre Daillie talks with Hugh Hendry, Founder, Eclectica Macro, a.k.a The Acid Capitalist, about the current financial landscape. They discuss topics such as the debt ceiling deal, the fear of supply, the rise of tech stocks, the appeal of long duration treasuries, and the deficiency of demand caused by China's oversupply. They also touch on the impact of Xi Jinping's policies and the posturing between China and the US. Overall, the conversation highlights the potential risks and opportunities in the global financial system. In this conversation, Hugh Hendry discusses the wealth destruction caused by the flat stock market and the growing debt problem with China. He highlights the symbiotic relationship between the Communist Party of China and Wall Street, as well as the conflict of interest in US capital markets. Hendry emphasizes the importance of trend in trading and shares his investment strategy, including the allocation of assets such as stocks, treasuries, and Bitcoin. He also discusses the potential opportunities in long bonds and the glitch at Boeing, and a trade in Apple.
TAKEAWAYSThe fear of a synchronized global recession and the potential impact on the financial markets.The appeal of long duration treasuries as a safe haven asset in a potentially weakening economy.The concentration of market gains in a few mega cap tech stocks and the potential risks of a market correction.The impact of China's oversupply on global markets and the deficiency of demand caused by their trade surplus. The stock market is flat, causing wealth destruction.There is a symbiotic relationship between the Communist Party of China and Wall Street.US capital markets have a conflict of interest that prevents them from addressing the real market problems.Trend is crucial in trading and asset allocation.KEY TIMESTAMPS[00:00] Introduction and Setting the Stage
[02:31] Debt Ceiling Deal and Liquidity Concerns
[03:44] The Fear of Supply and Risk Aversion
[05:29] The Rise of Tech Stocks and Riskless Securities
[07:02] The Appeal of Long Duration Treasuries
[07:36] Inflation and Real Rates
[09:36] Mean Reversion and Treasuries
[11:44] The Market's Dependence on Mega Cap Tech Stocks
[13:29] The Hated Rally and Missed Opportunities
[14:38] The Belief System and Valuation of Stocks
[16:09] The Coiled Spring and Potential Correction
[19:45] Debt Ceiling and the Chinese Economy
[20:34] Mutually Assured Destruction and Debt Ceiling
[24:35] The Deficiency of Demand and Chinese Oversupply
[29:18] The Impact of Xi Jinping's Policies
[37:57] China's Wealth and Posturing
[39:21] The Wealth Destruction
[40:35] The Real Problem with China
[41:39] The Symbiotic Relationship between China and Wall Street
[42:43] The Monetary Policy of the US
[43:50] The Conflict of Interest in Capital Markets
[44:45] The Search for Equilibrium
[46:33] Investment Strategy: Quadratic Expression
[47:52] The Role of Cash in Asset Allocation
[49:52] The Potential of Bitcoin
[51:39] The Relative Sizes of Gold and Bitcoin
[55:26] The Correlation between Bitcoin and NASDAQ
[57:19] The Importance of Trend in Trading
[58:47] The Decline of Hedge Funds
[59:23] The Glaring Opportunity in Long Bonds
[01:02:24] A Parallel with 2003
[01:03:39] The Conflict of Agendas
[01:06:22] The Glitch at Boeing
[01:11:27] The Most Glaring Opportunity
[01:13:49] Where to Find Hugh Hendry
HIGHLIGHTSThe Magnificent Seven Stocks:
Hendry notes that in every major bear market, certain stocks, referred to as the "Magnificent Seven," are perceived as being independent of broader market trends. These include companies like Nvidia and AMD, considered less economically sensitive within equity allocations.He draws parallels between the valuation of these stocks and Bitcoin, suggesting that their market value is more influenced by belief systems than traditional financial metrics, similar to how art is valued.Hendry discusses the valuation of the U.S. stock market, highlighting its size relative to the GDP and expressing skepticism about overly optimistic market projections.He mentions a cautious investment approach, allocating about 15% of his portfolio to these specific stocks, emphasizing the importance of following market trends in his investment decisions.On US Treasury Bonds:
Hendry addresses concerns about the U.S. Treasury issuing a large amount of bonds and its impact on prices.He draws parallels with the 2008 financial crisis, noting the importance of confidence in collateral, which often includes U.S. Treasury bonds.Hendry observes a mean reversion in Treasury prices, suggesting that current trading levels are relatively rare and could present buying opportunities.On China:
Hendry discusses the probability of a confrontation between China and Taiwan, expressing concerns about the increasing likelihood of such an event.He critiques China's economic growth, labeling it as 'fake growth' and pointing out that despite the appearance of progress, real wealth creation has been lacking.Hendry also touches on China's role in global trade and economic imbalances, particularly how it redistributes wealth within its economy and buys financial assets in the United States.We discuss the symbiotic relationship between the Communist Party of China and Wall Street, suggesting both have prospered in the current environment. As a result, there is no desire on Wall Street for the was the US manages its Capital Account.On Bitcoin:
He talks about the changing correlation between Bitcoin and NASDAQ, suggesting that such correlations can be misleading.Hendry expresses interest in investing in Bitcoin, particularly as its value had significantly decreased.He discusses Bitcoin's potential for growth, considering its market size relative to the larger segment it belongs to.Hendry likens Bitcoin's valuation to a belief system, similar to how art is valued.Copyright © AdvisorAnalyst.com
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