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Observations Lab

Non-Linear Views on Financial Markets and the Economy, based on Friedrich Hayek's decentralized knowledge paper, "The Use of Knowledge in Society".

Editorial Staff
Fisher Investments MarketMinder, March 31 2020
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Stephen Springham
Knight Frank, The Doomsday of All Scenarios? COVID-19 Market Update, 30/03/2020
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Dr. Brian Taylor, Chief Economist
Global Financial Data, February 27 2020
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Tony Coniaris, Portfolio Manager
Harris Associates, September 5, 2019
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By Daisuke Ikeda, Toan Phan, and Tim Sablik
Federal Reserve Bank of Richmond, Economic Brief, No. 20-01, January 2020
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Latest Observations
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“Stop saying the market makes no sense!”

Quote

Jim Cramer
CNBC, Mad Money, August 3 2020

The Consequences Of “Worthless Cash''

In the second quarter of this year, global equity markets registered their best quarterly performance in two decades. What was behind this record-breaking rebound? A number of explanations appeared possible.

Louis-Vincent Gave
Evergreen GaveKal, July 31, 2020

Federal Charter of 1291

On this first of August 2020, the National Day of the Swiss Confederation, we celebrate a one page document, beautiful in its clarity, common sense, and pragmatism, that gave rise to 729 years of relative peace and prosperity. Imagine how would such a document look like if it had to be written today ?

Investment Office, August 1st 2020

Fire & Fawning

The CEOs of Apple, Amazon, Facebook, and Google are scheduled to testify in front of the US House Judiciary Antitrust Subcommittee. Some thoughts…

Scott Galloway
No Mercy / No Malice, July 24, 2020

$1900 Gold Will Depress Growth. So Did $1,200, $500 and $36 Gold

"This is the definition of slower growth. Consumption is the easy part. It’s the abstinence that drives progress as new ideas are invested in."

John Tamny
RealClearMarkets, July 28, 2020

An Inflationary Contraction III

Duration of Debt and The Inflation Reference

Michael Kendall
Man on the Margin, May 25, 2020

A Perspective on Drawdowns

S&P 500 Percent Off High Since March 9, 2009

Jill Mislinski, “S&P 500 Snapshot: Down 0.47% YTD”
Advisor Perspectives, July 24, 2020

What has driven stock market returns and what could drive them in the future?

Increasing valuations have been the main driver of stock market returns since Covid-19, but when we look over the past five years, we find a different set of drivers.

Sean Markowicz, Strategist, Research and Analytics
Schroders, 24 July 2020

Beware the ''BEVI'' bubble in Asia

In certain sectors in Asia, a speculative fervour has taken hold, particularly among retail investors.

Robin Parbrook, Co-Head of Asian Equity Alternative Investments
Schroders, 24 July 2020

In a sense, the Fed’s great balance sheet expansion “worked because it didn’t work”

Excerpt

Dr. Mickey D. Levy, Chief Economist US, Americas and Asia, member of the Shadow Open Market Committee.
Berenberg Capital Markets, Economics, Macro News, “The Fed’s Aggressive Response to the Crisis: What’s Next?”, 23 July 2020

Fed to Keep Rate Vol Based Leading to Higher Vols in Other Assets

"Risk can neither be created or destroyed, and repressing volatility in one place accentuates it in another."

Variant Perception Research, July 23, 2020

''I see nothing, however, in the present situation that is either menacing or warrants pessimism. During the winter months there may be some slackness or unemployment, but hardly more than is usual at this season each year."

December 31, 1929, press statement of Treasury Secretary Andrew W. Mellon trying to assuage fears that the shock of the crash and the subsequent downturn in the economy would last.

Treasury Secretary Andrew W. Mellon
FRASER, United States, Department of the Treasury, December 31, 1929

Japanese Companies Are Flush With Cash

Cash and liquid assets as percentage of total corporate assets

Archibald Ciganer, Positive Signs for Japan’s Post‐Coronavirus Outlook
T. Rowe Price Insights, June 2020

Equities in a Society of Control, Part I

What was the difference between pre-Napoleonic and post-Napoleonic European societies? The French philosopher Michel Foucault once described the former as ‘Sovereign’ and the latter as ‘Disciplinary’.

Didier Darcet
Gavekal Intelligence Software, The Quant Corner, July 3, 2020

Stocks and the Matthew effect

“The rich get richer and the poor get poorer.” This famous adage has its roots in a biblical verse in the Gospel according to Matthew 25:29: “For to everyone who has will more be given, and he will have abundance; but from him who has not, even what he has will be taken away .”

Steef Bergakker, Senior Portfolio Manager
Robeco, Insights, Graph of the Week, 03 July 2020

Summer Rec

While spending on services is still stuck in the grip of COVID-19, goods-related spending is fast-approaching full recovery. Recreation-related spending is more than 10% above its pre-recession peak.

Tim Quinlan, Senior Economist; Shannon Seery, Economist
Wells Fargo Securities, Economics Group, July 01, 2020

A Supercharged Recovery?

"The good news of a quick US recovery has a worrisome implication."

Mathieu Savary, Global Strategist
BCA Research, Chart Of The Week, June 22, 2020

Memo to the (Virtual) Investment Committee II: Fear and the Psychology of Bear Markets

While it is, of course, a cliché to say that markets are driven by fear and greed, like many clichés this one contains a strong element of truth. The bad news for us humans is that within our brains, emotion appears to have primacy over cognitive function.

James Montier
GMO White Paper, March 25, 2020

Google search terms frequency (worldwide)

January 2020 - May 2020

Laurence Monnier
Aviva Investors, "COVID-19 and data infrastructure: Will demand translate into profit?", 18 June 2020
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