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Observations Lab

Non-Linear Views on Financial Markets and the Economy, based on Friedrich Hayek's paper on decentralized knowledge, "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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Robustness in organisms and markets

How does something like the stock market maintain its growth while being buffeted by mutations of economic and political systems and problems such as wars and inflations. How does it cope?

Victor Niederhoffer
Daily Speculations, November 21, 2021

Global Modern Monetary Theory and what it means for Currency Market Volatility

In the simplest terms, Modern Monetary Theory (MMT) posits that a sovereign country with the ability to print its own currency should do so. This theory laughs at the notion that the growth in debt of a sovereign nation results in risk of default and thus too much debt is bad. […]

Vineer Bhansali
LongTail Alpha, September 2, 2021

A nihilist set on a destructive path?

There was a time when i thought that to speculate you had to be a nihilist set on destruction - tu consens ou plutôt aspires à ta ruine?? That you had to yearn for your own demise..? Hold on..? Perhaps I succeeded?

Hugh Hendry, March 2021

The Big Problem of Small Change

The Big Problem of Small Change offers the first credible and analytically sound explanation of how a problem that dogged monetary authorities for hundreds of years was finally solved.

Thomas J. Sargent, François R. Velde
Princeton University Press, November 2003

"In a million years I am trying to picture an inverted yield curve and a rate hike."

Quote

Danielle DiMartino Booth
Danielle DiMartino Booth of Quill Intelligence at the 2021 New Orleans Investment Conference, 11 November 2021

Turning the Word Upside Down: How Cantillon Redefined the Entrepreneur

Mark Thornton*
The Quarterly Journal of Austrian Economics, Volume 23, No. 3-4, 265-280, Fall/Winter 2020

Stagflation: More Than A Short-Term Risk

For once, let us propose a medium-term economic perspective, an attitude quite contrary to the genes of Gavekal-IS which focus on measuring situations rather than forecasting, but paradoxes have never killed anyone.

Didier Darcet
Gavekal-IS, Publication Nr 126, Risk Measurement, October 15, 2021

Exposure of European company revenues

"This structural trend in Asia, particularly China and India, is one which European companies have increasingly grown exposure to over the past three decades."

Niall Gallagher, Investment Director, European Equities
GAM Investments, GAM Active Equity Series: Innovative Alpha Generation, 21 September 2021

Part 2: What to do in the case of sustained inflation

We have a relatively sanguine view on the likelihood of inflation becoming ingrained in the much as it pains us to agree with the Fed). However, the dark arts of macroeconomics are notoriously tricky, and we have often talked of the need to build robust (as opposed to optimal) portfolios – effectively, portfolios that can withstand multiple outcomes.

James Montier and Philip Pilkington
GMO, White Papers, 21 September 2021

This lady is for turning - why the Bank of England should lead the tightening cycle.

As bond investors we constantly focus on economic growth, inflation, and interest rates. In order to understand the potential moves in the above we focus at the crux of the problem which is the labour market. One way we have looked at this over the years is looking at the supply and demand for labour.

Richard Woolnough, Manager of M&G (Lux) Optimal Income Fund.
M&G Investments, Bond Vigilantes, 14 September 2021

Is Tapering Tightening? Or Is Tapering Less Easing?

As central banks pare back their asset purchases, the process will have the effect of slowing the decline in the stock of bonds that the private sector needs to hold relative to when the central bank was buying bonds more aggressively.

BCA Research, Chart Of The Week, September 17, 2021

Tuning in to reasonable expectations

Why should long-term investors care about market forecasts? Vanguard, after all, has long counseled investors to set a strategy based on their investment goals and to stick to it, tuning out the noise along the way.

Joseph H. Davis, Ph.D., Vanguard global chief economist
Vanguard, Insights, September 16, 2021

Sidelined Corporate Cash Enters the Game

Corporations are flush with cash. Among companies in the S&P 500 alone, cash balances are above $1.9 trillion in total. After record bond issuance in 2020 and profits hitting new highs, many companies are debating “What should we do with all this money?”

Kevin O’Neil, Research Analyst
BrandyWine Global, Around the Curve, September 13, 2021

The Dividend Divide

There is a significant gap between dividends’ reality and how many investors envision them.

Fisher Investments Editorial Staff
Fisher Investments, 09 September 2021

Narrative Fragmentation and the Business Cycle

Christoph Bertsch, Isaiah Hull, Xin Zhang
Sveriges Riksbank Working Paper Series, No. 401, January 2021

Three Little Birds - when Lawyers run Central Banks

Rise up this mornin’ Smiled with the risin’ sun Three little birds Pitch by my doorstep Singin’ sweet songs Of melodies pure and true Sayin’, “This is my message to you-ou-ou:” Singin’: “Don’t worry about a thing, worry about a thing, oh! Every little thing gonna be all right. Don’t […]

Vineer Bhansali
Long Tail Alpha, July 20, 2021

Deep evidence that factor investing works well in bond markets

More than two centuries of data confirms that value, momentum and low risk offer attractive premiums. These are consistent across various market and macroeconomic scenarios.

Guido Baltussen, Lead Portfolio Manager
Robeco, Insights, 12 July 2021
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