Strategy

There is no shortage of things to worry about as we start 2023.  The Federal Reserve is (rightly, in our opinion) worried about inflation becoming entrenched, and so is likely to continue hiking interest rates for much of 2023.  Putin looks unlikely to concede defeat in Ukraine, and his desperation may lead to escalation, potentially even of the nuclear variety.  California seems to be washing away while remaining in a drought.  China has loosened the zero-Covid policies that helped the country continue functioning during the first stage of the pandemic, while much of the rest of the world shut down. ...

by Tom Konrad Ph.D., CFA Four weeks ago, I predicted that the 12% market correction we had seen would turn into a true bear market.  Bear markets are often defined as a decline of more than 20% for the major market indexes, but I find it more useful to focus on long term changes in investor sentiment. What I did not predict was just how severe the effect of the coronovirus shutdown would be on the economy.  I thought we would need the combined of the effect of the shutdown and investors re-assessing their risk tolerance to bring us into full...

by Jan Schalkwijk, CFA ESG investing is all the rage these days. That is, investing that includes the non-traditional  environmental, social, and governance factors in the investment process.  Its appeal to the broader investment industry is twofold: 1) The writing is on the wall: as wealth is passed down to younger generations who in the aggregate care more about values alignment, the asset management industry does not want to lose the assets and the fees they generate. 2) Thematic investing is popular and ESG is one of the hottest themes. Wall Street is not going to miss out. Much like crypto...

by Tom Konrad, Ph.D., CFA 2020 ended with a massive spike in clean energy stock prices.  From the end of October, election euphoria drove Invesco WilderHill Clean Energy ETF (PBW) from $63.32 to $136 at the close on February 9th, a 114% gain in 100 days.   Joe Biden is as strong a supporter of clean energy as Donald Trump was a supporter of big fossil fuel companies, but even with control of the presidency and both chambers of congress, there is a limit to what a president can do in a short time.  This is especially true when their top priority...

Only a couple weeks ago, I quoted the market aphorism, “In the short-run, the market is a voting machine, but in the long-run, it is a weighing machine.” It comes to mind again now that Robinhood types are short squeezing hedge funds with GameStop (GME) and other nostalgia stocks.   It's another example that any strategy that relies on valuation affecting prices in the short run (like stonks betting that GME would go down because it lacks a viable business) is incredibly risky.  It's also incredibly risky to bet that any trend driven by popularity will last.  Eventually, there are going...

Why Free Commissions are a Game-Changer For Small Investors by Tom Konrad, Ph.D. CFA Last month, Charles Schwab (SCHW), E-Trade (ETFC), and Ameritrade (AMTD) all dropped their commissions for online stock trades to $0. They also dropped commissions on options contract to $0.65 per contract. The change opens up cost-effective individual stock investing to even the smallest investor, and also allows many more investors to use option strategies.  For those wondering if there is a catch, and how these brokers will make money with $0 commissions, see here.  The short version is that they make money on your cash deposits, and from...