Category Archives: Markets

Behavioral Biases

Posted on August 22, 2018 by Gemmer Asset

    “Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance.”   ― Daniel Kahneman, “Thinking, Fast and Slow”   Behavioral finance is a relatively new field. Part psychology, part finance, its practitioners have attempted to identify biases that individual investors have so they can be mindful of their effects when making investment decisions.   What I thought I’d do in this post…
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Market Recap

Posted on August 17, 2018 by Gemmer Asset

  August has a habit of throwing up surprises for investors. Those of a certain age might remember Augusts of 1998 (Russian default), 2007 (first redemption freeze of sub-prime crisis), 2011 (U.S. sovereign downgrade) and 2015 (renminbi devaluation/S&P 500 flash crash). The chart below shows the drawdowns in equities, EM assets, and hedge funds in each August going back to 1997.     This August is giving us another emerging market scare. The currencies of…
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‘90’s Flashback

Posted on August 15, 2018 by Gemmer Asset

  Ahhh, that takes me back to simpler times. Pets.com, flip phones, Netscape web browsers. Now while Prince’s song was referring to the world ending at the turn of the millennium, for emerging market investors the world actually came close to ending in 1997 and 1998. Both Thailand and Russia ran into some financial difficulties and Long-Term Capital Management managed to implode in an entertaining fashion. The Fed cut rates as a result and this…
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Do Liquid Alternatives Help A Portfolio’s Risk Adjusted Return?

Posted on August 14, 2018 by Gemmer Asset

I won’t beat around the bush, the answer to this question is, like many things, nuanced. It really depends on the alternative fund/vehicle you use. Obviously with hindsight we can pick the best fund, but its another story when you’re trying to make a judgement about whether or not an alternative fund will be additive to your portfolio ex-ante.   Morningstar came out with an interesting paper on this topic. In it, Jason Kephart attempts…
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Apple Hits $1 Trillion

Posted on August 2, 2018 by Gemmer Asset

  Well, it finally happened. On the back of a very positive earnings release, Apple hit $1 trillion in market cap.  That’s a “1” followed by 12 zeros…   Its hard to remember those pre-iPhone days, but amazingly it wasn’t that long ago. The first iPhone was released in June of 2007. To put the recent news in perspective, the company’s market cap was $91 billion back then… that’s a $909 billion dollar increase!!  …
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Currency Moves

Posted on August 1, 2018 by Gemmer Asset

There have been some big currency moves lately, particularly in the emerging world (Argentina – I’m looking at you!).  In fact, not a single emerging market currency has appreciated versus the dollar over the past six months, with the average loss being -9.4%! Turkey and Latin America have been hurt particularly bad.     Down -42%, -34%, -18%… these moves are huge, particularly for currencies. The effect this type of currency depreciation has on a…
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Always Look Under The Hood

Posted on July 27, 2018 by Gemmer Asset

“FANG” has become a popular term in finance circles over the past few years (or more recently “FAANG”). It’s an abbreviation for 4 (or 5) major US tech companies Facebook, Amazon, Netflix and Google – the second A in “FAANG” stands for Apple. And because these days there is an ETF for everything (see here and here), there is an ETF for this new acronym – its ticker is of course: FNG.   This new…
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Housing – Is the Bloom off the Rose?

Posted on July 24, 2018 by Gemmer Asset

There has been some interesting housing data over the last couple days that might point towards a marked slowdown coming, at least in certain markets.   June Existing Home Sales   Existing home sales slipped 0.6% in June from the previous month and are now down 2.2% year-over-year. This is now the third month in a row of lower sales. The decline is pretty small given the run up of the last few years, but…
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Is High Yield Worth The Risk?

Posted on July 19, 2018 by Gemmer Asset

Given where credit spreads are (see below) and the fact that we’re late in the economic cycle, it’s worth asking the question: is taking high yield credit risk worth it?     If you look at yield alone, the roughly 6% you’re getting from junk bonds is certainly appealing, but we’d argue that there are three main risks to having this type of credit exposure at this stage in the cycle.   High Yield Spreads…
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Emerging Markets – An Alternative View

Posted on June 28, 2018 by Gemmer Asset

Over two centuries ago, famed British banker Nathan Mayer Rothschild coined the trading phrase, “buy on the sound of cannons; sell on the sound of trumpets.” He was insinuating that markets tend to panic at the outbreak of wars (“the sound of cannons”), presenting good long-term values. On the other hand, markets typically become sanguine once a conflict comes to an end (“the sound of trumpets”), driving them to elevated levels where traders may want…
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