Trading Blog

Are Stocks Too Risky? What To Do

Traditionally, toward the end of bull markets, assets of the worst quality tend to take off. We’re also seeing this type of froth in certain pockets of the market. For example, Tesla, despite its poor balance sheet, difficulty in selling cars profitably, and its status as a car company (a capital-intensive, thin margin industry) has […]

15 Key Economic Questions for the US Going Forward

The US economy weakened in 2019 after the above-trend pace set in 2017 and 2018. A yield curve inversion in various parts of the US Treasury curve stoked fears of elevated recession risk (e.g., 30-year was below the fed funds rate, 3-month and 10-year inverted, as well as the traditional 2-year and 10-year inversion), though […]

How to Make $100,000 Per Year From the Markets Within 4 Years

People flock to the financial markets with the intention of making money and securing themselves financially. This article provides an illustrative example of how to make $100,000 per year from the markets. For most, this amount is enough to support a quality lifestyle. At the least, it’s a nice side income stream that alone would […]

How Money Creation Works

The way money creation works in an economy and how the commercial banking system operates is broadly misunderstood. The way that it’s commonly taught in introductory economics textbooks is that a commercial bank takes in other people’s money (i.e., deposits) and then lends out this money in the form of loans. For non-bank financial institutions, […]

Inter-Commodity Spreads (ICS) and Relative Value Trades

Inter-commodity spreads (commonly known as ICS), represent the spreads between different futures contracts. Certain brokerages (e.g., Interactive Brokers) and futures exchanges (e.g., CME Group) allow you to trade them directly. The purpose of inter-commodity spreads (ICS) Many traders employ spread, or relative value, strategies. Broadly speaking, this means selling an expensive asset and buying an […]

The 3 Main Forms of Monetary Policy

We are in unique times in the markets given the current limitations of where we are in the economic cycle. We are both late in the business cycle while at the same time there is limited room with traditional monetary policy tools should the economy turn down. As covered in a different article, there are […]

Asset Class Starting Points for 2020

Many traders peg the success of their year to the starting point of an index that most closely resembles the market they trade. The most commonly tracked index is the S&P 500, often referred to by its ticker SPX. Those who are more tech focused will look more at the NASDAQ. Small cap managers who […]

Why Interest Rates Can’t Rise Much

The IIF recently published that the global debt stock has reached $255.3 trillion at the end of 2019. This also doesn’t take into account non-debt liabilities like pensions and healthcare (which, when capitalized, are many times larger), and are debt-like in nature because they represent future IOUs. Namely, retirees expect that they will receive retirement […]

Corridor System vs. Floor System in Monetary Policy

Traders watch the Federal Reserve because it’s the entity that controls all money and credit created in the economy. It does this directly by creating money, and indirectly by changing how borrowers and lenders are likely to act with each other (by changing interest rates and through macroprudential policies it can execute through its regulatory […]

Portfolio Construction: 4 Ways to Reduce Risk

Portfolio construction and the concept of building a better portfolio beyond the way assets come pre-packaged to you is one of the most under-talked about areas in finance. As we write this to close out 2019, stock market indices in the US and many throughout the world are hitting new all-time highs. Traders are keen […]

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