Blog Posts

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 […]

The fundamental value of a financial asset is the amount of cash that can be extracted from it discounted back to the present. When you buy a financial asset you’re putting up a lump sum payment for a series of future cash flows. So, any question of ‘is the stock market overvalued?’ has to come […]

Every now and then, you hear of a high-profile business that either fails or “flops” in the sense of losing a massive portion of its value. WeWork flopped for various reasons, including: an inflated valuation that couldn’t be supported through the financial reality of the business a workable but flawed business model sloppy governance mismanaged […]

In US cities and other parts of the world, a series of protests, riots, and social conflict have broken out over the murder of George Floyd. Unrest over racial tensions and/or police brutality – followed by attempts to restore order – is a pattern that’s occurred many times historically. Within the past 50 years or […]

High-ranking members of the Trump administration have asserted that Hong Kong no longer merits a special status as it pertains to trade. This could give the semi-autonomous territory treatment similar to that reserved for mainland China. To this point, the US has given Hong Kong favorable trading terms. This policy dates back before Hong Kong’s […]

The difficult thing about doing well in the markets is that it’s not whether results turn out “good” or “bad” for a particular asset or asset class but how things turn out relative to what’s already discounted in the price. The range of information that it unknown is going to be far greater than whatever […]

Markets and economies work in what are called cycles, or in a series of logically-driven patterns. In capitalist economies, which is most of the world, expansions and contractions in credit are what drive economic and market cycles. The game Monopoly is a useful analogy to apply to the broader economy. If you understand how Monopoly […]

Negative interest rate policy, commonly abbreviated NIRP, is employed in other parts of the developed world outside the US. Japan has its front end rates at minus-10bps (0.1 percent) and has been that way since early-2016. (Source: tradingeconomics.com)   The euro zone’s deposit facility rate has been negative since 2014 and was dropped to minus-50bps […]

Cash provides safety, liquidity, and optionality. Having some part of your portfolio in cash is important for a buffer room and overall protection. Traders who always expend all of their cash to stay “fully invested” will inevitably face frequent margin calls. Bonds are a promise to deliver currency over time. Because of their duration, they […]