Does the Energy Sector Rally Have Legs?
The Energy sector has been a difficult place to invest over the past several years. We have been bearish on the group since 2014, as we view exploding US shale oil production as a destabilizing force that undermines the traditional “price making” power of OPEC. We also think that long-term demand growth for petroleum products […]
Inflationary Pressure
TIPS spreads have been rising since last summer, which indicates that inflationary pressures may finally be brewing in the economy. While rising inflation expectations have tended to be good for the broader market over the past 10 years (denoted by SPX on the chart), it has favored some sectors more than others. On average (red […]
Strike Down the Band
Shaun White just won his third gold medal in the halfpipe. The sport has advanced a lot in the 12 years since his first Olympic medal. The 2006 winning run contained a front-side 1080, a McTwist, and a 900. By 2018, this collection of moves would not even qualify for the Olympics. The winning run […]
On The Defense
Where do stock investors tend to go when they feel the need to play defense? For the last three decades, Consumer Staples, Utilities and Health Care sectors have been relatively safe ports during market storms. All three groups have generated significant outperformance when the broader market has fallen by at least 10%. Of the three, […]
Debt and Growth Don’t Mix
Companies that can sustain their own growth through positive free cash flow have long been prized on Wall Street. However, early stage companies and companies growing rapidly may not always be capable of realizing their growth opportunities without external financing. Finance professionals are trained to be indifferent between equity and debt as long as the […]
Disruption Eruption
Rarely have we come upon such a simple, stark picture of rapid technological disruption as we find displayed in this chart. As recently as early 2015, taxi and rental car receipts represented a combined 75% of all corporate ground transportation travel reimbursements in the U.S. By late 2016, Uber and Lyft reimbursements had grown to […]
Passive Activism. What the What?
Social investing is fraught with actual and potential challenges. Socially-responsible investors sometimes find that their social goals conflict with their targeted investment performance or portfolio diversification guidelines. Investors often rely upon biased social metric scores provided by third-party firms. All of this being the case, we think the rise of passive social investment vehicles could […]
The Closely-Watched Treasury Yield Curve
The closely-watched 10yr/2yr Treasury yield curve continues to flatten, which is causing no shortage of hand-wringing. At the risk of oversimplifying what is happening, curve flattening is a function of short term rates rising faster than long term rates. The stock market generally reacts favorably during periods when the yield curve is flattening. But there […]
1st Quarter 2018: A Visit From An Old Friend
Market volatility has returned from an extended vacation, resulting in a roughly 10% correction for the S&P 500 since its January high and a -.8% decline for the 1st quarter of 2018. This was the index’s first 10% correction in two years, and it broke a streak of nine consecutive quarterly gains dating back to […]
Meet Rosie Jetson
The robots are coming! The robots are coming! Adapting Paul Revere’s call to arms, we are told that robots are coming and that they will take our jobs. The capabilities of automation advance daily; however, the significance of the technical challenge looks to be underestimated. Established Robotics Applications Are Growing Significant Technical Challenges Remain Technical […]