Book Bits | 8 August 2020

Boom and Bust: A Global History of Financial Bubbles
William Quinn and John D. Turner
Summary via publisher (Cambridge U. Press)
Why do stock and housing markets sometimes experience amazing booms followed by massive busts and why is this happening more and more frequently? In order to answer these questions, William Quinn and John D. Turner take us on a riveting ride through the history of financial bubbles, visiting, among other places, Paris and London in 1720, Latin America in the 1820s, Melbourne in the 1880s, New York in the 1920s, Tokyo in the 1980s, Silicon Valley in the 1990s and Shanghai in the 2000s. As they do so, they help us understand why bubbles happen, and why some have catastrophic economic, social and political consequences whilst others have actually benefited society. They reveal that bubbles start when investors and speculators react to new technology or political initiatives, showing that our ability to predict future bubbles will ultimately come down to being able to predict these sparks.

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Relaunched: The ETF Portfolio Strategist

Last November, The ETF Portfolio Strategist (ETF-PS) debuted in beta form. The original plan was to formally roll it out in Q1:2020. But thanks to a certain health crisis that reordered life as we know it, priorities shifted and, well, here we are in August. No matter — the case for market intelligence and analytics on ETF-based portfolio strategies is an evergreen topic and so we’re back – delayed but no less committed to crunching the numbers and analyzing the crucial trends for making informed decisions on portfolio design and management via ETFs.

The design has changed a bit from the initial concept. The main difference is that ETF-PS components will be published individually on a semi-regular schedule rather than in one complete issue on a given day. The other big change: the newsletter will appear here: etfps.substack.com To receive updates of future editions, subscribe today!

Research Review | 7 August 2020 | Gold

Is Gold a Hedge or Safe Haven Asset during COVID–19 Crisis?
Md Akhtaruzzaman (Australian Catholic University), et al.
May 15, 2020
The COVID–19 pandemic has shaken the global financial markets. Our study examines the role of gold as a safe haven asset during the different phases of this COVID–19 crisis by utilizing an intraday dataset. The empirical findings show that dynamic conditional correlations (DCCs) between intraday gold and international equity returns (S&P500, Euro Stoxx 50, Nikkei 225, and China FTSE A50 indices) are negative during Phase I (December 31, 2019−March 16, 2020) of the COVID–19 pandemic, indicating that gold is a safe haven asset for these stock markets. However, gold has lost its property as a safe haven asset for these markets during Phase II (March 17−April 24, 2020). The optimal weights of gold in the portfolios of S&P500, Euro Stoxx 50, Nikkei 225 and WTI crude oil has significantly increased during Phase II, suggesting that investors have increased the optimal weights of gold as ‘flight-to-safety assets’ during the crisis period. The results also show that hedging costs have significantly increased during Phase II. The hedging effectiveness (HE) index shows that the hedge is effective for portfolios containing gold and major financial assets. Our results are robust to alternative specifications of the DCC-GARCH model.
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Macro Briefing | 7 August 2020

No progress on talks between GOP and Dems on new coronavirus relief: Politico
Trump orders ban on US dealings with Chinese-owned TikTok and WeChat: CNBC
Economists expect slowdown in job gain for today’s July payrolls report: BBG
Trump reimposes 10% tariff on some Canadian aluminum imports: BBC
US small business relief program set to end as jobless count remains high: NYT
China’s exports rose 7.2% y-o-y, driven by demand for medical supplies: CNBC
German industrial output rose sharply in June: MW
US jobless claims rose 1.186mm last week–softest gain in pandemic to date: CNBC
US job cuts rebounded in July after two months of softer gains: CG&C
Gold closed higher again on Thursday–15th straight daily gain:

Pondering Negative Real Yields And Higher Inflation Forecasts

These are strange days for the US government bond market. Inflation-indexed Treasuries are pricing in higher inflation expectations as real (inflation-adjusted) yields tumble. In “normal” times the consensus view would probably advise that one of these trends is misguided. But in the new world order of the coronavirus crisis it’s timely to ask: Could both of these market-implied conditions be accurate or at least reasonable?
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Macro Briefing | 6 August 2020

Still no sign of a deal between GOP and Dems on coronavirus relief: TH
Bank of England leaves rates unchanged, warns of slow recovery: CNBC
German manufacturing orders surged in June: MW
World food prices continued to rise in July: Reuters
World economy expands in July, first time since January: IHS Markit
US ISM Services PMI: sector growth picked up in July: MW
US Services PMI: sector’s business activity stabilizes but demand fades: IHS Markit
US private payrolls rise by only 167,000 in July–far below expectations: CNBC

US Economy Remains Vulnerable Amid Wave Of Ongoing Layoffs

Employment is expected to rebound again in this week’s update on payrolls in July, but it’s still premature to equate positive monthly hiring comparisons with an all-clear signal for the labor-market and economic outlook. A more reliable measure of what’s brewing can be found in two weekly reports: initial and continuing jobless claims. On both fronts, the numbers are still flashing warnings.

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Macro Briefing | 5 August 2020

Search for survivors continues in Beirut after massive blast at port: BBC
Dems and GOP report progress on coronavirus relief bill: CNBC
Risk of conflict between China and Taiwan may be rising: CNBC
One-fifth of US small businesses dismiss or plant to dismiss workers: BBG
Looking for investment wins if the Dems sweep in November: II
Eurozone Composite PMI: output rose at fastest rate in 2 years in July: IHS Markit
UK Services PMI posts strongest rise in five years in July: IHS Markit
China Services PMI: growth slowed in July: Reuters
US factory orders rose for a second month in June: MW
Gold continues to rally, reaching record high: BBC