There’s good news and bad news for our trio of proprietary strategies in last week’s performance round-up. Relative to the benchmark (Global Beta 16 (G.B16)), all three outperformed for the trading week through Friday, July 16. Alas, the outperformance was in the form of lesser declines, ranging 0.5% to 1.0% losses. The benchmark shed 1.1%.
Book Bits: 17 July 2021
David Kauders
Summary via publisher (Sparkling Books)
Why were economies sluggish before the pandemic arrived? Why have interest rates paid by businesses and households been rising even though deposit rates are nil? Does the policy of bailing out economies, now followed by most governments and central banks, bring any dangers? In The Financial System Limit, British investment manager David Kauders FRSA puts forward three radical theories which together provide the answers to these questions. These theories show that Keynesian economics has gradually turned from a benefit to society, into a damaging scheme. Other economic policies are also not addressing the fundamental problem, which is the world’s inability to afford private sector debts already created.
Adrian Wooldridge
Review via The Wall Street Journal
In 1958, the British sociologist Michael Young published “The Rise of the Meritocracy,” a fictional narrative that imagined a world where leaders in business and government would be chosen on the basis of talent and effort rather than social status, wealth or power. But the book, which brought the word “meritocracy” into the English language, wasn’t written to celebrate such a world. To the contrary, it was intended as a warning that those who fell behind in the competition to get ahead were likely to resent the new elite and would eventually rebel.
As Adrian Wooldridge notes in “The Aristocracy of Talent: How Meritocracy Made the Modern World,” Young predicted that the rebellion would occur in 2034. But in the U.S. and Britain, it seems to have already begun.
Sheera Frenkel and Cecilia Kang
Interview with authors via NPR
A new book investigates Facebook’s failure to protect against spreading hate speech, disinformation, conspiracy theories and calls to violence. The book also shows how Facebook became an advertising company, monetizing its users and their data. The book is called “An Ugly Truth: Inside Facebook’s Battle For Domination.” My guests are the authors, Sheera Frenkel and Cecilia Kang, who are reporters for The New York Times. Frenkel covers cybersecurity and is based in San Francisco and covers technology and regulatory policy and is based in Washington, D.C.
● The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion
Eliot Brown and Maureen Farrell
Review via Publishers Weekly
Wall Street Journal reporters Brown and Farrell trace the rise and fall of WeWork in this drama-filled debut, a cautionary tale of startup excess. Brown and Farrell follow charming, ambitious, and reckless founder and CEO Adam Neumann from his start as a baby clothes salesman in 2006 to the head of a unicorn startup that carried a market value of tens of billions of dollars. WeWork’s early success stoked unheard-of investments, but increasing ambitions and a lack of focus (including the goal to overhaul the world’s education system) drove such erratic corporate behavior as acquiring a wave pool maker in hopes of enhancing WeWork communities.
● American Marxism
Mark R. Levin
Summary via publisher (Threshold Editions/Simon & Schuster)
In American Marxism, Levin explains how the core elements of Marxist ideology are now pervasive in American society and culture—from our schools, the press, and corporations, to Hollywood, the Democratic Party, and the Biden presidency—and how it is often cloaked in deceptive labels like “progressivism,” “democratic socialism,” “social activism,” and more.
● Four Internets: Data, Geopolitics, and the Governance of Cyberspace
Kieron O’Hara, et al.
Summary via publisher (Oxford U. Press)
The Internet has become a staple of modern civilized life, now as vital a utility as electricity. But despite its growing influence, the Internet isn’t as stable as it might seem; rather, it can be best thought of as a network of networks reliant on developing technical and social measures to function, including hardware, software, standards, and protocols. As millions of new internet users sign on each year, governing bodies need to balance evolving social ideas surrounding internet use against shifting political pressures on internet governance–or risk disconnection.
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The ETF Portfolio Strategist: 16 July 2021
- US stocks break a 3-week winning streak
- Bonds continue to rally
- Across-the-board losses for our strategy benchmark this week
Research Review | 16 July 2021 | Forecasting
Forecasting the Long-Term Equity Premium for Asset Allocation
Athanasios Sakkas (U. of Nottingham) and Nikolaos Tessaromatis (EDHEC)
July 12, 2021
Long-term country equity premium forecasts based on a cross-sectional global factor model (CS-GFM), where factors represent compensation for risks proxied by valuation and financial variables, are superior, statistically and economically, from forecasts based on time-series prediction models commonly used in academia and practice. CS-GFM equity premium forecasts produce significant utility gains compared to long-term asset allocation strategies based on eighteen commonly used prediction models, consistently across the US and ten developed equity markets.
Macro Briefing: 16 July 2021
* Catastrophic flooding in Germany has killed at least 93 people
* US set to warn companies about Hong Kong’s ‘deteriorating’ situation, Biden says
* Treasury Sec. Yellen expects ‘several more months of rapid inflation’
* Yields are low despite high inflation due to liquidity, says bond manager
* Corporate debt ratings upgraded at brisk pace as economy recovers
* US industrial output rose in June but mfg component slipped
* US import prices post another strong gain in June
* The auto market is hot as shortage of computer chips limit supply
* NY Fed Mfg Index surges to record high in July
* US jobless claims fell to a new pandemic low last week:
The ETF Portfolio Strategist: 15 July 2021
Last Friday’s pop in the 10-year Treasury yield was cited by some analysts as the end of the recent slide. But this week’s trading so far through Thursday (July 15) suggests otherwise.
Modeling US Stock Market Expected Returns, Part I
In recent posts I reviewed several basic applications for generating fair-value estimates for the 10-year Treasury yield, which can be used as a proxy for projecting return. Let’s expand this effort by forecasting performance for the US equity market over a 10-year window. The goal is developing a baseline outlook for a 60/40 US stock/bond portfolio over a 10-year horizon.
Macro Briefing: 15 July 2021
* Fed Chairman Powell still expects US inflation surge to ease
* China GDP rose less than forecast in Q2 but still strong at +7.9%
* Covid infections rising sharply again in US and Latin America
* US Senate passes bill to ban import of products from China’s Xinjiang region
* Delta Airlines reports first profit since pandemic began
* Low and falling yields haven’t slowed the junk bond market this year
* US factory gate prices surged in June, beating expectations:
Is The “Inflation Is Transitory” Narrative Dead?
Consumer inflation in the US remained surprisingly hot in June, the Labor Department reported yesterday. Taken at face value, the numbers raise more doubts about the Federal Reserve’s assumption that the recent inflation surge is temporary. But a closer look at the numbers paints a more complicated profile.
Macro Briefing: 14 July 2021
* Senate Democrats propose $3.5 trillion infrastructure plan
* US Covid-19 cases rising again after months of decline
* Death toll mounts from protests in parts of South Africa
* Global holdings of Chinese stocks and bonds continues to surge
* US oil demand rebounds to pre-pandemic levels
* Europe set to propose plan to sharply cut use of fossil fuels
* US small business sentiment rose to eight-month high in June
* Inflation in UK picks up to 3-year high
* US consumer inflation continued to accelerate in June:
