Trading Blog

In trading and investing, you’re putting up a lump sum in the expectation that it will produce a stream of income in the future whether through the price movement (especially from a “trading” perspective) or through the cash that it throws off (particularly with respect to “investing”). For it to be enduring over the long-run, […]

The US stock market saw a V-shaped recovery from the Covid-19 losses. This is not unusual. The financial economy is different from the real economy. If central banks pull their levers to get adequate liquidity back into the system, you’ll see financial assets get purchased. The financial economy leads the real economy. Generally, it’s easier […]

The Covid-19 pandemic has accelerated a new paradigm in monetary and fiscal policy. This has implications for investing in a zero interest rate environment. For a brief refresher, which has been covered in other articles in more depth, there are three broad categories of monetary policy. i) Adjustment of short-term interest rates. Once you get […]

The financial markets and the economy are inextricably linked together. Understanding these cause and effect relationships and what market equilibriums are necessary to achieve is important to have a sense of where markets are likely to go. The financial system is what provides money and credit into the real economy. Money (what payments are settled […]

Overview The US stock market has recently had its fastest 50 percent rise ever, occurring in the span of just over a couple months. Markets are looking forward to a post-crisis investing period, and have priced in a full, eventual recovery. Nonetheless, because earnings will take a while to recover and many industries will not […]

The macroeconomic environment is evolving and has implications for investing. Before we get into the current backdrop, we’ll talk a bit about where we were before the Covid-19 pandemic and work our way into the realities and challenges of today and what that means going forward. Before the Covid-19 pandemic Before the pandemic we were […]

In a recession, the US dollar typically rises. If we look at a chart of DXY (US dollar index), we can see a rise in 2008 due to the subprime crisis and a milder one in 2020 due to the Covid-19 pandemic. The 2008 USD appreciation ended once the Fed eased in a material way. […]

Investing in gold is not usually the first allocation priority in most people’s portfolios. It does, however, have an important role to play when it’s allocated in the right amount that can both enhance returns and reduce risk. Gold is treated much closer to a monetary asset or a currency than a commodity subject to […]

Let’s say there’s a company whose fundamental valuation doesn’t support itself and likely will never support itself. In that case, you might want to short sell (“short”) the company’s stock. However, given the “markets can remain irrational longer than you can stay solvent” this can be a painful process. Stocks are the most popular asset […]

Developed market countries have very messy financial situations. Because interest rates are already at rock-bottom levels and quantitative easing (asset buying) programs have mostly run their course, pushing money and credit into the system to relieve debt burdens requires tertiary forms of monetary policy. Accordingly, this is leading to concepts of how to pay for […]