Tag

Commodities

Jul 22

Why the Japanese Yen Carry Trade Matters

By Blog
One thread from the complex sweater that is global finance to keep an eye on is the reversal of the Japanese yen carry trade. As a refresher, for decades investors have been conditioned to borrow in cheap, low-interest yen, buy foreign assets (U.S. assets) that yield or earn more, then eventually sell them and pay off those yen loans at a profit. A declining yen gives the carry trade an additional boost to profits. Sell dollar assets at higher prices, convert those dollars into a cheaper yen (getting more yen), then pay off the loan with money left over from…
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Jul 17

Understanding Today’s Commodity Cycle

By Blog
A colleague asked some good questions about a dollar cycle/commodities chart I shared last week (first chart below). The chart showed commodities (gold line) rising over the last five years while the dollar (black and red line) has been rising and stocks (gray line) have also been rising. This is abnormal, as historically the broad commodity cycle tends to be inversely related to stocks and dollar strength. This aberration could be explained by the enormity of passive investing, indexation, and intense actions to keep stocks afloat by the powers that be in an effort to stave off a very messy…
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May 15

Short-term Returns, Longer-term Cycles, and the Role of De-Dollarization

By Blog
Those watching the performance of risk assets like stocks and commodities since the beginning of the year can be forgiven if their heads are spinning.  Most risk assets were up the first two months of the year, with the S&P barely so.  March saw most risk assets sell off, except oil which continued its upward climb, only for stocks to rebound in April while precious metals continued seeing more sellers than buyers, and oil moved sideways.  Up, up, sideways for oil; up, down, down for precious metals; and, up, down, up for stocks.  Every month there’s a new winner and…
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Apr 16

Investor or Speculator – Part II

By Blog
If you think about the last time we had widespread social strife and turmoil in the United States in tandem with expensive financial markets, your recollection will probably take you back to the sixties. Between anti-war protests, the civil rights movement, entitlement reform, and a re-tooling of criminal justice policies and laws, there was plenty of fodder for calm, dispassionate chats with friends and family. It’s probably no coincidence that this swell of activity came toward the end of a post-World War II economic expansion that brought economic comfort to many and stock markets to rather lofty heights. What followed,…
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Mar 19

Investor or Speculator – Which Are You?

By Blog
Speculative manias are incredibly difficult to navigate without injury. For every millionaire produced by the technology bubble of the late 1990’s, there are countless stories of people losing their life savings or worse. Fast-moving markets that are well beyond any reasonable assessment of fair value can reverse course without warning, reason, or sympathy for the investors who don’t have the good fortune to exit the game before the music stops. This is the problem with speculation: because, like moths to a flame, we’re attracted to those assets that are rapidly going up in price and garnering enthusiastic praise, there is…
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Feb 13

Lost In Speculation

By Blog
When someone gets lost, it doesn’t happen suddenly, nor does the realization of it. It’s a progression from being “not lost”, to being a little turned around, to getting somewhat concerned, more concerned, then officially lost. If one gets lost in the presence of their spouse, then there’s generally some debate about the issue along that progression. Throw in overconfidence, denial, blame, and eventually, if we’re lucky, maybe an admission of some responsibility for getting lost. We all know the feeling when it comes to being lost on the road. Most, if they’re being honest, know the feeling of being…
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Jan 11

2022 Asset Class Returns: Year in Review

By Blog
Toward the end of last year’s “Year in Review” piece I wrote: “You may be in the camp of investors that sees a year like this year as an opportunity lost as opposed to a sign that we have entered dangerous stock market times.”  2021 was one of those years where the US stock market outperformed most other investment categories by enough that it may have been easy for investors to assume there was less risk in the market than there really was at the end of last year. Unfortunately, to many investors’ surprise, 2022 came along and proved that,…
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Mar 11

Ask Cadence: Are you optimistic for 2021?

By Blog
Yes. 2021 has the potential to be a very interesting year for a host of reasons. First, the risks and uncertainties: Covid-19 – We just don’t know how quickly the majority of people will get vaccinated and subsequently get back to a more normal existence. In addition, there are unknowns in terms of new variants and the effect they will have on the number of infections and severity of illness. Most are assuming that some semblance of normalcy will return for the second part of this year, but we just don’t know how the course of events will play out…
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