Happy Thanksgiving 2020!

It’s been a rough year, but there’s always something to be thankful for. On my short list in 2020: American democracy survives. It’s taken a beating recently, but the challenges are also powerful reminders of what’s at stake. Judge Billings Learned Hand said it best: “Liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can save it.”

The Delicate Art Of Forecasting Inflation Risk

US inflation was low before the pandemic started and as the nation heads into what’s shaping up to be a rough winter of resurgent Covid-19 the odds appear low for higher pricing pressure in the near term. But as investors, economists and policy makers consider life on the other side of the coronavirus crisis, contemplating the possibility of firmer inflation is gaining traction as a forecasting exercise.

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Macro Briefing: 25 November 2020

Yellen, incoming Treasury Sec, will be key voice in Biden’s economic policy: NYT
Biden team lays out foreign policy agenda for new administration: CNBC
Biden administration will inherit one of the weakest labor markets in history: PLTC
Dow Jones Industrials rise to record 30,000: WSJ
Coronavirus cases flooding hospitals in America’s heartland: RTRS
US jobless claims expected to hold at high level in today’s update: WSJ
Richmond Fed Mfg Index slipped in Nov but remains solidly positive: RF
US consumer confidence falls as coronavirus cases rise: PLTC
US home price index’s 1-year gain accelerates to 6-year high: WSJ

Beta Is A Useful Risk Metric—If You Use It Correctly

In a world awash in identified risk factors, the original quantitative profile of investment risk long ago fell from grace. If you spend ten minutes on the internet searching for research that finds beta to be irrelevant, at best, you’ll quickly line up reading material for a month. But the majority of the criticism focuses on beta’s weakness for parsing individual stocks. By that standard, beta suffers several well-known and reportedly fatal flaws as a risk measure. But applied to asset classes in the context of portfolio design and management, beta’s far from dead.

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Macro Briefing: 24 November 2020

Key gov’t agency (finally) recognizes Biden’s win: CNN
Biden selects former Fed chief Yellen as Treasury Sec: WSJ
Eurozone falls back into recession in November, survey data shows: IHSM
German business sentiment falls again, suggesting Q4 economic decline: RTRS
Chicago Fed president: expects rates to stay near zero through 2024: RTRS
Bitcoin above $19,000 for first time since 2017: BBG
US economic growth accelerated in Oct via Chicago Fed index: CF
US PMI survey data: “recovery gains further momentum” in November: IHSM

Macro Briefing: 23 November 2020

Biden team prepares for double-dip US recession in 2021: NYT
Oxford-AstraZeneca Covid vaccine: ‘highly effective’ at preventing virus: CNBC
China says it will respond to US admiral’s Taiwan visit: RTRS
Hospitalized Covid-19 patients surviving at higher rates: STAT
Will Covid-19 unleash pent-up demand? WSJ
G20 nations pledge to extend debt relief in 2021: RTRS
UK’s four-month expansion ended in Nov as coronavirus recession returns: IHSM
Eurozone economy falls back into recession via PMI survey data for Nov: IHSM

Book Bits: 21 November 2020

How I Invest My Money: Finance experts reveal how they save, spend, and invest
Joshua Brown and Brian Portnoy
Interview with co-author (Brown) via NPR
Do you ever wonder how some of the world’s top financial advisors invest their own money?
If so, you aren’t the only one. Last summer, CEO of Ritholtz Wealth Management Josh Brown wrote a blog post titled How I Invest My Own Money that went viral in the finance and investment community.
Turns out, people are really curious as to how successful investors build their personal portfolios.
This blog post eventually turned into a book with Brian Portnoy called How I Invest My Money: Finance experts reveal how they save, spend, and invest where top investors share their personal investment strategies.

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Fat Tails Everywhere? Profiling Extreme Returns: Part IV

One of the biggest challenges for managing tail-risk expectations is the limitation on clarity imposed by history. For most markets, the post-World War II era provides the primary if not the only dataset. But expanding the opportunity set into some asset classes further reduces the available track record. Think junk bonds and emerging markets, for instance. How can we solve this challenge? Simulations are the first choice in the toolkit.
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