Blog

Aug 14

Return of Capital

By Casey Clarke Blog

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…

Jul 22

Higher Rates

By Casey Clarke Blog

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…

Jul 17

Low Yields = High Risk

By Casey Clarke Blog

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…

Jun 24

Beware the Target-Date Fund Cookie Cutter

By Steve DeBoth Blog

It has been nearly six years since we published a Cadence Clips piece on target-date funds. Since then, they have continued being implemented to the point that I cannot remember the last time I saw a client’s 401(k) investment choices where target-date funds were not offered. Much has happened in six years, and despite COVID, war in Europe, continued political acrimony at home and abroad to name a few, the price of the S&P 500 has doubled since June 2019 when we published that target-date fund piece entitled, “It Pays to Know What Is Under the Hood with Target-Date Funds”. …

Jun 13

Economic Indicators: Employment

By Casey Clarke Blog

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…

May 16

Certainty

By Casey Clarke Blog

One of the things we’re heavily deficient in these days is certainty. Whether one views current events as good, bad, or indifferent, most would agree that the ability to predict where we’ll be in six to twelve months with any confidence is more difficult than it’s been in quite some time. This is anxiety-provoking, and as homo-sapiens, we don’t like to feel anxious or scared. Fear leads to poorly calculated decisions, and bad investment decisions, especially when made repeatedly, can set one back irreparably on their financial path. As ephemeral as it might be to obtain in reality, the perception…

Apr 15

Market Fireworks – What Now?

By Casey Clarke Blog

As of the moment I’m rapping on these keys, the market as measured by the S&P 500 is down roughly -5% so far this year, with its peak to trough drop of around -12% happening from mid-February through mid-March. That’s been enough to get some people anxious that declining portfolio balances could get worse, while others, with plenty of support from financial media, are viewing this decline as an opportunity to buy more of their favorite stocks cheaper. Only time will tell which group is correct with respect to this particular decline and over a short timeframe, but as we…

Mar 17

Remembering Japan – No Sirens

By Casey Clarke Blog

In the decade leading up to the 1989 peak in the Japanese stock market, there was little to complain about. Almost everybody with shares of stock or real estate was watching their net worth rise, month after month, nearly uninterrupted. It became so easy to make money in the stock market that work ethic declined, leisure time increased, and many corporations found it easier and more profitable to augment their core business activities with stock market activity. According to Edward Chancellor in “Devil Take the Hindmost”, “Japanese politicians were not solely guided by public duty in their desire to support…

Feb 12

Tax Math: Weirder Than Regular Math

By Steve DeBoth Blog

No one really looks forward to tax season, do they? Many of us enjoy the end of winter and the beginning of spring, and when you think of it that way it’s pleasant enough. As soon as you call it “tax season”, well, that doesn’t usually evoke the same emotions. Call it spring, and you think of flowers and sunshine; call it “tax season”, and you think of forms, deadlines and checks to write. With the negative feelings “tax season” evokes, it’s no wonder that along with it comes some frequent misperceptions. For example, how do you feel about paying…

Jan 14

Ask Cadence: What is the Japanese carry trade and is it something to worry about?

By Casey Clarke Blog

A carry trade is when you borrow money and use it to make another investment that you believe will be more profitable than the costs associated with borrowing. In the case of the Japanese yen carry trade, participants with the intention of investing in the U.S. will borrow money at low interest rates in Japan, convert the local currency (yen) to U.S. dollars, then invest those dollars in an asset or assets in the United States they believe will earn more than the cost of the loan in Japan. Assuming currency exchange rates are stable, the math is really quite…

Have A Question?

Return of Capital

Higher Rates

Low Yields = High Risk

Beware the Target-Date Fund Cookie Cutter

Economic Indicators: Employment

Certainty

Market Fireworks – What Now?

Remembering Japan – No Sirens

Tax Math: Weirder Than Regular Math

Ask Cadence: What is the Japanese carry trade and is it something to worry about?

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