Stuart wrote last year on some of the challenges associated with relying solely upon the Shiller P/E as a measure of equity valuation. This debate has been widely covered and is somewhat moot at any rate, given that the US market is looking expensive relative to history… Read the article
Month: January 2018
The weird and frightening world of rising interest rates: The market is going to have to make a call
Real interest rates are an anchor for the valuation of all assets. The classical theory of interest holds that as a ‘discount rate,’ they embed the market’s relative preference for cash today over cash in the future.
The US cash rate is arguably the best sense we… Read the article
Thank goodness for the end of ‘easy money’
Is it true that “the easy money has been made?”
This is something that it has been common to hear over the last couple of years and, it seems, is even more common today.
But, as Morgan Housel pointed out in 2015:
A summary of Q4 2017: Have we climbed the ‘wall of worry’? Or: How I learned to stop worrying and love the boom
One of the most common clichés of the last couple of years is the idea that we have been in ‘the most hated bull market in history.” Today attitudes are shifting.
Dave wrote in summer 2016 about a pivotal moment in investor psychology and asset… Read the article
The range of irrelevance for interest rates
Despite the fact that interest rates determine all asset valuations, there is nothing close to a general theory of interest rate determination. In 2016, I wrote about the flaws of a belief in an equilibrium rate of interest (typically known as R* in the academic literature) and the overemphasis… Read the article
2018 Market Calendar: Will these be the major financial events in 2018?
There are a couple of reasons why we don’t believe that forecasting short term events is a sustainable investment approach.
First, it is very difficult: how can one have a sustainable forecasting ‘edge’ over and above what is currently priced into the market on something like an election result?… Read the article