Category: Market Updates

Baseball players are well known for their superstitions. Numerous accounts identify idiosyncrasies such as wearing the same pair of socks, driving the same route to the ballpark, eating the same pre-game meal as quite common among Big Leaguers. These behaviors do not occur by accident.

The financial crisis of 2008 was supposed to be an extremely unlikely event, at least according to probability models. Given the fact that the stock market experienced a major decline in 2002, the probability of another bear market in the same decade was assumed to be remote. Yet, that’s not what occurred. The “higher than expected” negative outcomes in the past decade have led to criticism of the probability models that govern much of how global finance is conducted.

John Maynard Keynes called it a “barbarous relic.” In the fifth century B.C., it was described as a “child of Zeus.” Gold. A currency. A mystery. An obsession. Peter Bernstein in his book, The Power of Gold, points out: “Gold is a mass of contradictions. People believe that gold is a refuge until it is taken seriously; then it becomes a curse.”

This paper explores various methods of portfolio insurance. Portfolio Insurance is a method of protecting the principal of a portfolio in volatile markets. As the name of the concept implies, there is a cost associated with protecting against significant downside variance.

This paper explores the concept of Financial Repression and discusses portfolio adjustments that may be necessary to manage investments in this environment.

“Here we go again!” one might say, dreadfully, with regard to the prospect of runaway inflation in the near future. The Consumer Price Index (CPI) rose 12.2 percent in 1974; in August 1975, annualized inflation in Great Britain nearly reached a staggering 27 percent. During the miserable economic decade of the 1970s, unemployment was high, and economists crafted what came to be known as the “Misery Index.”

The 1930s witnessed the enactment of landmark pieces of securities legislation, many of which were directed toward preventing a recurrence of the factors that either caused or contributed to the Great Depression. At the time, one of the purported causes of the Crash of 1929 and its aftermath was identified as excessive speculation in capital markets by ostensibly unregulated banking institutions using depositor funds. Eighty years later, we are faced with an almost “déjà vu” as financial market reform occupies the center stage of public debate. The rhetoric today is eerily reminiscent of the rhetoric of yesteryear.