All Posts By

Casey Clarke

Jan 15

A Year for the Non-Conformists

By Blog
“Twice two times four is not life. It is the beginning of death.” - Fyodor Dostoyevsky, Notes From The Underground Cadence was founded with the philosophy that cycles, valuations, and the sentiment of crowds matter far more than mainstream financial services and media would have you believe. Not necessarily at first, or even for most of the time, but eventually with rather abrupt suddenness, they matter supremely. It’s not lost on our clients that we are still in the midst of the biggest stock bull market in history as measured by time and gain – we’ve been guarding them from…
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Dec 15

The Clean Energy Deception

By Blog
There aren’t many people out there that don’t care about the environment. There also aren’t many people out there who would willingly pay more for an energy source that didn’t offer clear advantages over less expensive ones, but a narrative can go a long way toward shaping perception and behavior despite the facts underlying it. Take the “clean energy” movement that created almost as much hype among investors as it did profit for Wall Street. The gist, as we’re all very familiar with given its proximity to the Climate Change narrative, is that traditional oil and gas energy is dirty,…
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Nov 14

Questioning Conventional Wisdom – Limitless Market Growth

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If you read our letters fairly regularly, you’ve probably picked up on the fact that we like to question the conventional, especially when our observations don’t confirm it, and even more so when embedded conflicts and incentives provide support for that convention. Take for example the notion that stocks can somehow return double digits even though the economy is growing at a substantially slower rate. How is this possible? Don’t think and just accept, some might say. Thinking only delays your ability and dampens your enthusiasm to invest blindly in something that is good for the goose. And as we…
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Oct 15

Middle of the Night Financial Thoughts

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Yes, our clients pay us to lie awake in the middle of the night so that they don’t have to – at least when it comes to financial markets and economic matters that could affect them. We’re not talking anxiety-filled nights, but rather quiet, pondering nights where the chaos of the day has subsided, the routine-related boxes have been checked, and the brain can run free. In somewhat random, freewheeling fashion, here are a few of the thoughts I’ve recently spent time spinning. Asymmetry The notion of asymmetry is an important one when it comes to investing: the condition where…
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Sep 12

Employment and Stocks

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Markets seem to be ignoring the incredibly large and record-setting downward adjustment to jobs (>900k for 2024). However, the state of employment over a long period of time, it turns out, is incredibly important to the stock market. Below we see a four-year rate of change for both the employment to population statistics (now negative for almost two years year over year) and the S&P 500. Extremely well correlated. The little red and green blips on the far right of the chart show how the trends will change in the coming months assuming the current levels stay the same –…
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Aug 21

Unstable Bitcoin Narrative

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This notion that Bitcoin is digital gold continues not to hold up when looking at how it behaves in “risk-off” environments. As much as I like the fundamental premise of it being the people’s currency, decentralized and at arms-length from government control, the fact is that it acts more as a speculative asset than any type of store of value. Maybe that will change, but for the moment, that narrative is secondary to Bitcoin being a speculation. The chart below shows Bitcoin in blue, Nasdaq 100 in red, and Gold in yellow. Visually, you can see that Bitcoin seems to…
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Aug 14

Return of Capital

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There have always been and will always be points in time where investors pivot from wanting return on their capital to just plain wanting their money back. The exact factors that take the collective emotional state from greed to fear are different every time and impossible to predict, but so long as humans remain in control of their own decision-making, along with their full array of emotions, arrive they will. We can think about these swings between greed and fear over multiple timeframes – ranging anywhere from intra-day to the very long term, almost generational cycles. We can also think…
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Jul 22

Higher Rates

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A simple macro observation… In the past, recessions followed inverted yield curves – when long-term market rates dip below short-term market rates. That hasn’t been true this time around, yet, probably because that phenomenon typically involves aggressive Fed rate cuts to help normalize the yield curve (bring it back into positive territory). This time, the yield curve has begun normalization without those cuts, mostly due to long duration rates rising because of inflation fears, solvency concerns, and other factors. Probably a cleaner and more accurate way to think about interest rates and their effect on the economy is to look…
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Jul 17

Low Yields = High Risk

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For 95 years since 1902, the cyclically adjusted earnings yield for the S&P 500 has averaged 7.9% and the dividend yield, 4.6%. Since 1997, they have averaged 3.7% and 1.8% respectively. Currently, they are 2.8% and 1.3%. Combined, investors could expect to earn 4.1% from corporate earnings growth and dividends, which is a full 8.4% below the long term, almost 100-year average. It is also below the “risk-free yield” of the 10-year U.S. treasury at 4.25%. Below, we can see just how anomalous this return profile for the market is and has been. Historically, we’ve seen other low points just…
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Jun 13

Economic Indicators: Employment

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A couple data points to ponder… First is an update of disabilities across the general population, and more relevant to the economy, within the U.S. workforce. You can see the trend continues to rise since early 2021. Some would have ideas around what might have contributed to this rise. Regardless, there are fewer healthy, productive people available within the workforce to drive economic productivity. AI couldn’t come quickly enough, but with more people sidelined, it begs the question as to the ability of the consumer to spend tomorrow the same way it did yesterday. The below chart looks at disabilities…
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