2009 Intermittent Market Commentary - MV Financial
 
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August 25, 2020 MVF Special Update: 08/25/2020
July 7, 2020 MVF Special Update: 07/07/2020
May 12, 2020 MVF Special Update: 5/12/2020
April 13, 2020 MV Special Commentary 4/13/2020
August 16, 2019 MV Weekly Market Flash: Managing Through Uncertainty
August 9, 2019 MV Weekly Market Flash: What We Mean When We Talk About Volatility
July 12, 2019 MV Weekly Market Flash: The Cost of Easy Money
July 3, 2019 MV Weekly Market Flash: Earnings May Matter in 2H19
June 28, 2019 MV Weekly Market Flash: Greenbacks in Wonderland
June 21, 2019 MV Weekly Market Flash: The Insurance Cut and the Melt-Up
June 14, 2019 MV Weekly Market Flash: Risk-Off, With a Side Helping of Large Cap Equities
June 7, 2019 MV Weekly Market Flash: The Problem of Non-Quantifiable Risk
May 31, 2019 MV Weekly Market Flash: Strange Curves
May 24, 2019 MV Weekly Market Flash: Volatility, The Good and The Bad
May 17, 2019 MV Weekly Market Flash: Seven and Ten In China
May 10, 2019 MV Weekly Market Flash: The Performance Art of Trade Talks
May 9, 2019 MVCM Quarterly Newsletter Q1 2019
May 3, 2019 MV Weekly Market Flash: The Most Important Metric Nobody Cares About
April 26, 2019 MV Weekly Market Flash: Could Inflation Be the Wild Card Spoiler?
April 18, 2019 MV Weekly Market Flash: As Goes the Property Sector, So Goes China
April 12, 2019 MV Weekly Market Flash: The Bull Is In the Eye of the Beholder
April 5, 2019 MV Weekly Market Flash: What To Expect When You’re Expecting…Bond Returns
March 29, 2019 MV Weekly Market Flash: Back to Wonderland
March 22, 2019 MV Weekly Market Flash: Something’s Gotta Give
March 20, 2019 2019: The Year Ahead
March 20, 2019 MVCM Quarterly Newsletter Q4 2018
March 20, 2019 MVCM Quarterly Newsletter Q3 2018
March 20, 2019 MVCM Quarterly Newsletter Q2 2018
March 20, 2019 MVCM Quarterly Newsletter Q1 2018
March 20, 2019 MVCM Quarterly Newsletter Q4 2017
March 20, 2019 MVCM Quarterly Newsletter Q3 2017
March 20, 2019 MVCM Quarterly Newsletter Q2 2017
March 20, 2019 MVCM Quarterly Newsletter Q1 2017
March 15, 2019 MV Weekly Market Flash: The EU’s Weak Link
March 8, 2019 MV Weekly Market Flash: Sometimes Bad News Is Actually Bad News
March 1, 2019 MV Weekly Market Flash: The Value Investor’s Lament
February 22, 2019 MV Weekly Market Flash: Inflation Never?
February 15, 2019 MV Weekly Market Flash: Return of the Corridor Trade?
February 8, 2019 MV Weekly Market Flash: Troubled Technicals and Hyper Headlines
February 1, 2019 MV Weekly Market Flash: And There It Is, the Powell Put
January 25, 2019 MV Weekly Market Flash: Why So Glum, Davos Man?
January 18, 2019 MV Weekly Market Flash: Breadknives and the Algos That Make Them
January 11, 2019 MV Weekly Market Flash: Earnings Season Darling Or Another Dead Cat Bounce?
January 4, 2019 MV Weekly Market Flash: Our 2019 Market Outlook
December 28, 2018 MV Weekly Market Flash: The Rule of 19.8 Percent
December 21, 2018 MV Weekly Market Flash: Breathe In, Breathe Out, Repeat
December 14, 2018 MV Weekly Market Flash: China’s Rebalancing, Interrupted
December 7, 2018 MV Weekly Market Flash: Slowdown, Recession or Recession-Plus?
November 30, 2018 MV Weekly Market Flash: Does the Fed Put Still Exist?
November 21, 2018 MV Weekly Market Flash: Theresa May and the Turkeys
November 16, 2018 MV Weekly Market Flash: The Defensive Rotation’s Uphill Climb
November 9, 2018 MV Weekly Market Flash: Relief, Risk and the Big Unknown
November 2, 2018 MV Weekly Market Flash: Four Octobers
October 26, 2018 MV Weekly Market Flash: Narrative Battle Comes into Focus
October 19, 2018 MV Weekly Market Flash: The Italian Debt Job
October 12, 2018 MV Weekly Market Flash: Four Takeaways from the Pullback
October 5, 2018 MV Weekly Market Flash: Bonds Away, We’re Okay
September 28, 2018 MV Weekly Market Flash: Wages, Prices and Rates
September 21, 2018 MV Weekly Market Flash: Sector Spaghetti
September 14, 2018 MV Weekly Market Flash: The Law of Gravity, Post-Crisis
September 7, 2018 MV Weekly Market Flash: Four Rate Hikes and an EM Funk
August 31, 2018 MV Weekly Market Flash: Fall Event Risk Outlook
August 24, 2018 MV Weekly Market Flash: What Record Bull?
August 17, 2018 MV Weekly Market Flash: The Pastor and the Peril
August 10, 2018 MV Weekly Market Flash: Public Markets, Private Markets and Asset Allocation
August 3, 2018 MV Weekly Market Flash: The Great Rotation That Wasn’t
July 27, 2018 MV Weekly Market Flash: Soybeans and Sustainable Growth
July 20, 2018 MV Weekly Market Flash: The Cash Equivalent’s New, Old Look
July 13, 2018 MV Weekly Market Flash: Flat Curves and Rising Markets
July 6, 2018 MV Weekly Market Flash: A Second Half of Contradictions
June 29, 2018 MV Weekly Market Flash: China In Trouble For the Right Reasons
June 22, 2018 MV Weekly Market Flash: The World’s Most Loved, Least Useful Stock Index
June 15, 2018 MV Weekly Market Flash: Technocracy in Trouble
June 8, 2018 MV Weekly Market Flash: Volatility Heads for the Valley
June 7, 2018 Upgrading Non-Profit Retirement Plans: Upgrading IAC Plans to Open Architecture (Part 3 of 3)
June 1, 2018 MV Weekly Market Flash: Another Summer of Europe
May 25, 2018 MV Weekly Market Flash: A World of Pain for Consumer Staples
May 22, 2018 Upgrading Non-Profit Retirement Plans: Strengthening Your Plan with Advisory Services (Part 2 of 3)
May 18, 2018 MV Weekly Market Flash: Baby Blues
May 11, 2018 MV Weekly Market Flash: Populists March on Rome, Investors (Mostly) Shrug
May 8, 2018 Upgrading Non-Profit Retirement Plans: Limitations of Individual Annuity Contracts (Part 1 of 3)
May 4, 2018 MV Weekly Market Flash: Eurozone Falling Out of Sync
April 27, 2018 MV Weekly Market Flash: The Well-Tempered Correction
April 20, 2018 MV Weekly Market Flash: Emerging Markets Resilient, But Currencies Could Spell Trouble
April 13, 2018 MV Weekly Market Flash: Volatility Is In the Eye of the Beholder
April 6, 2018 MV Weekly Market Flash: 1-2-3-4, I Declare a Trade War
March 29, 2018 MV Weekly Market Flash: When Tech Sneezes, the Market Catches Cold
March 23, 2018 MV Weekly Market Flash: Carlyle, Tolstoy and the 2018 Investor
March 16, 2018 MV Weekly Market Flash: The Fork in the Road
March 9, 2018 MV Weekly Market Flash: Bad News Good, Good News Better
March 2, 2018 MV Weekly Market Flash: The Ides of March Come Early This Year
February 23, 2018 MV Weekly Market Flash: Hope Accelerates – Will Reality Follow?
February 16, 2018 MV Weekly Market Flash: The Dollar Is Sitting Out This Party
February 9, 2018 MV Weekly Market Flash: The Peril and the Promise of Higher Rates
February 5, 2018 2018: The Year Ahead
February 2, 2018 MV Weekly Market Flash: Another Miss for Productivity
January 26, 2018 MV Weekly Market Flash: A Market of Wandering Cats
January 19, 2018 MV Weekly Market Flash: Our 2018 Investment Thesis
January 12, 2018 MV Weekly Market Flash: Exuberance and Edginess
January 5, 2018 MV Weekly Market Flash: Bomb Cyclones and Melt-Ups, Hello 2018!
December 29, 2017 MV Weekly Market Flash: People Are Calendar-centric; Markets Are Not
December 22, 2017 MV Weekly Market Flash: Frothing at the Bit(coin)
December 15, 2017 MV Weekly Market Flash: Yellen’s Lesson, Powell’s Challenge
December 8, 2017 MV Weekly Market Flash: The China Syndrome, Again
December 1, 2017 MV Weekly Market Flash: Groundhog Day in December
November 22, 2017 MV Weekly Market Flash: The Turkeys of 2017
November 17, 2017 MV Weekly Market Flash: Still Quiet on the Investment Grade Front (Junk Jitters Notwithstanding)
November 16, 2017 Taking Time Off? Here’s Some Food for Thought Before You Do
November 10, 2017 MV Weekly Market Flash: More Fuel in the Tank for Energy Stocks?
November 3, 2017 MV Weekly Market Flash: Tax Mania!
October 27, 2017 MV Weekly Market Flash: Bond Bull Goes for the Thousand Year Gold
October 20, 2017 MV Weekly Market Flash: The Market’s Next Big Non-Event
October 13, 2017 MV Weekly Market Flash: What’s Next for Emerging Markets?
October 6, 2017 MV Weekly Market Flash: Sunny Skies and Swan Songs
September 29, 2017 MV Weekly Market Flash: The Reflation Pony Returns
September 22, 2017 MV Weekly Market Flash: Inflation, Economists and the Rest of Us
September 15, 2017 MV Weekly Market Flash: Will the Market Party Like it’s 1987?
September 8, 2017 MV Weekly Market Flash: Giving Up on the Greenback?
September 1, 2017 MV Weekly Market Flash: Marathon Bull
August 29, 2017 Don’t Let Your Skepticism of the Markets Keep You from Investing
August 25, 2017 MV Weekly Market Flash: Competing Narratives for Back to School Week
August 18, 2017 MV Weekly Market Flash: Rocky Mountain High
August 11, 2017 MV Weekly Market Flash: Drifts and Shocks
August 4, 2017 MV Weekly Market Flash: Bonds and the Limits of Historical Data
July 28, 2017 MV Weekly Market Flash: Markets and Political Risk
July 21, 2017 MV Weekly Market Flash: Copper, the New Texas Tea?
July 14, 2017 MV Weekly Market Flash: Summer of Confusion
July 7, 2017 MV Weekly Market Flash: 2017 Halftime Report
June 30, 2017 MV Weekly Market Flash: Prices, Rates and the Lowflation Era
June 23, 2017 MV Weekly Market Flash: Confusing Times in Emerging Markets
June 16, 2017 MV Weekly Market Flash: The Market’s Leadership Problem
June 9, 2017 MV Weekly Market Flash: Brexit Shrouded by (London) Fog
June 2, 2017 MV Weekly Market Flash: The Value Effect’s Time of Troubles
May 26, 2017 MV Weekly Market Flash: Stocks Are From Mars, Bonds Are From Venus
May 19, 2017 MV Weekly Market Flash: Inconsequential Tremors
May 12, 2017 MV Weekly Market Flash: The Fed and the Spread
May 8, 2017 You Received a Tax Refund, What Now?
May 5, 2017 MV Weekly Market Flash: Popular Data, Invisible Data
April 28, 2017 MV Weekly Market Flash: The Hard, the Soft and the Ugly
April 25, 2017 To Uber or Not to Uber: When to Stop Sharing & Start Buying
April 24, 2017 Should You Pay Down Student Debt or Save for Retirement First?
April 21, 2017 MV Weekly Market Flash: Eurozone Is Priced for More of the Same
April 13, 2017 MV Weekly Market Flash: End of the Complacency Trade?
April 7, 2017 MV Weekly Market Flash: Noise and Signals in the Labor Market
March 31, 2017 MV Weekly Market Flash: The Dog Days of Spring
March 24, 2017 MV Weekly Market Flash: Oddities Down the Risk Frontier
March 17, 2017 MV Weekly Market Flash: Peak Populism?
March 10, 2017 MV Weekly Market Flash: Crunch Time for “Secular Stagnation”
March 3, 2017 MV Weekly Market Flash: Japan and the Fifty Percent Curse
February 24, 2017 MV Weekly Market Flash: Some Vague Hints of Discontent
February 17, 2017 MV Weekly Market Flash: Political Risk and the Cloak of Invisibility
February 10, 2017 MV Weekly Market Flash: Let the Real Brexit Madness Begin
February 6, 2017 2017: The Year Ahead
February 3, 2017 MV Weekly Market Flash: A Contrarian Case for Europe?
January 27, 2017 MV Weekly Market Flash: GDP Matters, Productivity Matters More
January 20, 2017 MV Weekly Market Flash: Shape-Shifters
January 13, 2017 MV Weekly Market Flash: Our 2017 Investment Thesis
January 6, 2017 MV Weekly Market Flash: The Valuation Ceiling’s Moment of Truth
December 31, 2016 MVCM Quarterly Newsletter December 31st, 2016
December 30, 2016 MV Weekly Market Flash: Dr. Pangloss’s Market
December 23, 2016 MV Weekly Market Flash: Magic Numbers and Animal Spirits
December 16, 2016 MV Weekly Market Flash: Return of the Dot-Plotters
December 9, 2016 MV Weekly Market Flash: Fiscal Policy and Its Limits
December 2, 2016 MV Weekly Market Flash: Predictions Were 2016’s Biggest Loser
November 23, 2016 MV Weekly Market Flash: The Melt-Up Has Arrived
November 18, 2016 MV Weekly Market Flash: The Infrastructure-Reflation Mirage
November 11, 2016 MV Weekly Market Flash: One Question Answered, Three More On Tap
November 4, 2016 MV Weekly Market Flash: Apocalypse Where? The Case for (Guarded) Optimism
October 28, 2016 MV Weekly Market Flash: Quarterly Diversions and the Long Term Growth Mystery
October 21, 2016 MV Weekly Market Flash: A Whole Lot of Nothing
October 14, 2016 MV Weekly Market Flash: Oil Smooths the October Glide Path
October 14, 2016 MVCM Quarterly Newsletter: September 30, 2016
October 7, 2016 MV Weekly Market Flash: Fat Fingers and the Wisdom of Crowds
September 30, 2016 MV Weekly Market Flash: New Adventures of the Old Corridor
September 23, 2016 MV Weekly Market Flash: What We Learned from Policy Week
September 16, 2016 MV Weekly Market Flash: How Hard Is the Valuation Ceiling?
September 9, 2016 MV Weekly Market Flash: A Central Bank Declaration of Independence?
September 2, 2016 MV Weekly Market Flash: Here We Go
August 26, 2016 MV Weekly Market Flash: Janet Yellen’s Long-Term Angst
August 19, 2016 MV Weekly Market Flash: The Flash Crash of ’62, and Other Bear Market Anomalies
August 12, 2016 MV Weekly Market Flash: Another Whiplash Week (and Month, and Year) for Oil
August 11, 2016 MVF Research Special Comment: Presidents, Politics and the Market
August 5, 2016 MV Weekly Market Flash: Event Risk Italiano
July 29, 2016 MV Weekly Market Flash: Consumers Spend, Businesses Save, Stocks Shrug
July 22, 2016 MV Weekly Market Flash: It’s Quiet at the VIX…Too Quiet?
July 15, 2016 MVCM Quarterly Newsletter: June 30, 2016
July 15, 2016 MV Weekly Market Flash: When September Comes
July 8, 2016 MV Weekly Market Flash: Trading Places
June 29, 2016 MV Weekly Market Flash: That Seventies Market
June 24, 2016 MV Weekly Market Flash: And Then There Were 27
June 17, 2016 MV Weekly Market Flash: Tempest in a (British) Teapot
June 15, 2016 MV Research Insights: 2016 Halftime Report
June 10, 2016 MV Weekly Market Flash: Ten Year Bunds at the Event Horizon
June 3, 2016 MV Weekly Market Flash: A Picasso Jobs Report
May 27, 2016 MV Weekly Market Flash: Risk in the Summertime
May 20, 2016 MV Weekly Market Flash: Bank of Japan Goes Full Hedge Fund
May 13, 2016 MV Weekly Market Flash: Mopey Retailers, Perky Consumers
May 6, 2016 MV Weekly Market Flash: Jobs OK, Productivity Not So Much
April 29, 2016 MV Weekly Market Flash: The BoJ’s “Bazooka” Backfires
April 22, 2016 MV Weekly Market Flash: Fifth Time’s the Charm at the Valuation Ceiling?
April 15, 2016 MVCM Quarterly Newsletter: March 31, 2016
April 15, 2016 2016: The Year Ahead
April 15, 2016 MV Weekly Market Flash: China Goes Back to the Sugar Fix
April 8, 2016 MV Weekly Market Flash: The Bovespa Bounce
April 1, 2016 MV Weekly Market Flash: Learning to Love the Slow-Growth Recovery
March 25, 2016 MV Weekly Market Flash: The Underperforming (Non-US) World
March 18, 2016 MV Weekly Market Flash: Welcome Back to the Corridor
March 11, 2016 MV Weekly Market Flash: Quality Rally, We Hardly Knew Ye
March 4, 2016 MV Weekly Market Flash: Still a Long Way to Go for EMs
February 26, 2016 MV Weekly Market Flash: Nice Rally, But Don’t Get Too Comfortable
February 19, 2016 MV Weekly Market Flash: Wages, Prices and the Fed’s Trilemma
February 12, 2016 MV Weekly Market Flash: NIRP Nihilism
February 5, 2016 MV Weekly Market Flash: Headlines Heading South
January 29, 2016 MV Weekly Market Flash: Kuroda Comes to Wonderland (Sort Of)
January 27, 2016 2016: The Year Ahead
January 22, 2016 MV Weekly Market Flash: Slow Burn Pullback
January 15, 2016 MVCM Quarterly Newsletter: December 31, 2015
January 15, 2016 MV Weekly Market Flash: 2016 Investment Thesis: Executive Summary
January 8, 2016 MV Weekly Market Flash: Think Before You Panic—Lessons from 1997-98
December 31, 2015 MV Weekly Market Flash: 2015 Markets in Review: Not Great, Could Have Been Worse
December 18, 2015 MV Weekly Market Flash: Five Observations for a Post-12/16 World
December 11, 2015 MV Weekly Market Flash: 203 and Counting
December 4, 2015 MV Weekly Market Flash: One of Those Weeks
November 25, 2015 MV Weekly Market Flash: Giving Thanks
November 20, 2015 MV Weekly Market Flash: Adele and the Gross Domestic Product
November 13, 2015 MV Weekly Market Flash: Volatility: Peaks, Valleys and Mesas
November 6, 2015 MV Weekly Market Flash: Hello, Rate Hike
October 30, 2015 MV Weekly Market Flash: The Presidential Year Curse, and Other Popular Delusions
October 23, 2015 MV Weekly Market Flash: Quality Rally or Melt-Up?
October 16, 2015 MV Weekly Market Flash: Two Cheers for China’s Consumers
October 15, 2015 MVCM Quarterly Newsletter: September 30, 2015
October 9, 2015 MV Weekly Market Flash: Oil Rally: The Real Deal or Another False Dawn?
October 2, 2015 MV Weekly Market Flash: Jobs and the Limits of Monetary Policy
September 25, 2015 MV Weekly Market Flash: Pullbacks of a Feather…
September 18, 2015 MV Weekly Market Flash: Fed At the Credibility Cliff
September 11, 2015 MV Weekly Market Flash: Emerging Markets: An Unconvincing Quarter Century
September 4, 2015 MV Weekly Market Flash: Goldilocks Versus the Bears
August 28, 2015 MV Weekly Market Flash: Five Things We Learned This Week at the Crazy Farm
August 21, 2015 MV Weekly Market Flash: Large Cap Fortress Breached
August 14, 2015 MV Weekly Market Flash: China, Reserve Club Dreams and the Fed
August 7, 2015 MV Weekly Market Flash: Summer of Misery for Commodities
July 31, 2015 MV Weekly Market Flash: And Now…The Dog Days of Summer
July 24, 2015 MV Special Midyear Comment: The Current State of the Markets
July 17, 2015 MV Weekly Market Flash: The Economic Consequences of the (Eurozone) Peace
July 15, 2015 MVCM Quarterly Newsletter: June 30, 2015
July 10, 2015 MV Weekly Market Flash: Yet Another Week of Crises Deferred
July 6, 2015 MV Technical Market Comment: Greece, Europe and Global Asset Markets
July 2, 2015 MV Weekly Market Flash: Not Dead Yet: Dividend Stocks in a Rising Rate World
June 26, 2015 MV Weekly Market Flash: The Euro Standard
June 19, 2015 MV Weekly Market Flash: …Baby One More Time – Party Like It’s 1998!
June 12, 2015 MV Weekly Market Flash: Interest Rates and your Bond Portfolio
June 5, 2015 MV Weekly Market Flash: Rate Hike? Buy the Pullback
May 29, 2015 MV Weekly Market Flash: Reversing Reversals
May 22, 2015 MV Weekly Market Flash: Another Summer of Tranquility, or Peaks Ahead?
May 15, 2015 MV Weekly Market Flash: Japan – Halfway to Zero
May 8, 2015 MV Weekly Market Flash: Stunted Growth?
May 1, 2015 MV Weekly Market Flash: The Meh Market
April 24, 2015 MV Weekly Market Flash: Brent Breaks Out – More Upside Ahead?
April 17, 2015 MV Weekly Market Flash: Fed Wars: Rosengren v. Bullard
April 15, 2015 MVCM Quarterly Newsletter: March 31, 2015
April 10, 2015 MV Weekly Market Flash: Emerging Markets: In Search of Lost Growth
April 3, 2015 MV Weekly Market Flash: Tricky Currents Ahead
March 27, 2015 MV Weekly Market Flash: Small Caps: Dollar Haven or Danger Zone?
March 20, 2015 MV Weekly Market Flash: Kabuki in the Eccles Building
March 13, 2015 MV Weekly Market Flash: Currency Conundrums
March 6, 2015 MV Weekly Market Flash: Beware the Ides of March
February 27, 2015 MV Weekly Market Flash: NASDAQ Fever, v2.0
February 20, 2015 MV Weekly Market Flash: Look Who’s Growing, Too
February 13, 2015 MV Weekly Market Flash: A Tale of Two Oils
February 6, 2015 MV Weekly Market Flash: Growth Trumps Rates?
January 30, 2015 MV Weekly Market Flash: Volatility in 2015: Peaks and More Peaks
January 23, 2015 MV Weekly Market Flash: Lower for Longer
January 22, 2015 2015: The Year Ahead
January 16, 2015 MV Weekly Market Flash: Retail Sales Slowdown
January 15, 2015 MVCM Quarterly Newsletter: December 31, 2014
January 9, 2015 MV Weekly Market Flash: Jobs, Money and Growth
January 2, 2015 MV Weekley Market Flash: Divergent: The Different Worlds of the Fed and the ECB
December 26, 2014 MV Weekly Market Flash: You Can Go Your Own Way: The 2-Year / 10-Year Split
December 19, 2014 MV Weekly Market Flash: Melt-up? Earnings vs. Animal Spirits
December 12, 2014 MV Weekly Market Flash: Greek Drama, Act III
December 5, 2014 MV Weekly Market Flash: Bulls in the China Shop
November 26, 2014 MV Weekly Market Flash: Giving Thanks
November 21, 2014 MV Weekly Market Flash: The Home Stretch: Charting a Course to 12/31
November 14, 2014 MV Weekly Market Flash: Time for a Check-up: Assessing Performance in the Health Care Sector
November 7, 2014 MV Weekly Market Flash: Russia: The Economic Cost of Geopolitics
October 31, 2014 MV Weekly Market Flash: Hello Goodbye: QE at Home and Abroad
October 24, 2014 MV Weekly Market Flash: Right Back Where We Started From
October 17, 2014 MV Weekly Market Flash: The Growth Debate
October 15, 2014 MVCM Quarterly Newsletter: September 30, 2014
October 10, 2014 MV Weekly Market Flash: Crude Realities: Oil Supply Overwhelms Demand
October 3, 2014 MV Weekly Market Flash: The Never-Changing Story
September 26, 2014 MV Weekly Market Flash: The Dominant Dollar
September 19, 2014 MV Weekly Market Flash: Nae Today, Sí Demà?
September 12, 2014 MV Weekly Market Flash: The Cupertino Circus
September 5, 2014 MV Weekly Market Flash: Jobs: The Great Opt-Out Continues
August 29, 2014 MV Weekly Market Flash: Magic Numbers, Catalysts and Pullbacks
August 22, 2014 MV Weekly Market Flash: Continent at the Crossroads
August 15, 2014 MV Weekly Market Flash: Eurozone: The Fearful Trip is not Done
August 8, 2014 MV Weekly Market Flash: Summer of Noise
August 1, 2014 MV Weekly Market Flash: Yellen’s Dilemma
July 25, 2014 MV Weekly Market Flash: Earnings Season 1, Efficient Markets 0
July 24, 2014 MV Research Insights: The Perils of Past Performance
July 18, 2014 MV Weekly Market Flash: Hiccup or Catalyst?
July 15, 2014 MVCM Quarterly Newsletter: June 30, 2014
July 11, 2014 MV Weekly Market Flash: Yellow Card for Portuguese Banks; Markets Unfazed
July 3, 2014 MV Weekly Market Flash: A Tale of Four Commodities
June 27, 2014 MV Weekly Market Flash: Stocks & Bonds: Everyone Gets a Trophy
June 20, 2014 MV Weekly Market Flash: Money For Nothing And The VIX For Free
June 13, 2014 MV Weekly Market Flash: Let the Dog Days Begin
June 6, 2014 MV Weekly Market Flash: Negative Rate Wonderland
May 30, 2014 MV Weekly Market Flash: Europe’s Elections: Less Drama Than Meets The Eye
May 23, 2014 MV Weekly Market Flash: Where Did All The Risk Go?
May 16, 2014 MV Weekly Market Flash: The Split Market: How Will It Un-split?
May 9, 2014 MV Weekly Market Flash: Send in The Crowds
May 2, 2014 MV Weekly Market Flash: The Planets Align
April 25, 2014 MV Weekly Market Flash: The Strange Case of European Bonds
April 18, 2014 MV Weekly Market Flash: Japan: Is the Sun Finally Rising?
April 14, 2014 MVCM Quarterly Newsletter: March 31, 2014
April 11, 2014 MV Weekly Market Flash: Sector Stories
April 4, 2014 MV Weekly Market Flash: From the Eurobond to the “Flash Boys”
March 28, 2014 MV Weekly Market Flash: Candy Crush: End of the Silly Season?
March 21, 2014 MV Weekly Market Flash: Utilities: The Wild Ride Continues
March 18, 2014 MV Research Insights: The Anatomy of Pullbacks
March 14, 2014 MV Weekly Market Flash: Event Risk Is Back
March 7, 2014 MV Weekly Market Flash: The Winter of Economic Uncertainty
February 28, 2014 MV Weekly Market Flash: China’s Currency Challenge
February 21, 2014 MV Weekly Market Flash: Ukraine, Markets and the Geopolitical X-Factor
February 19, 2014 Understanding the ‘HR Gap’
February 14, 2014 MV Weekly Market Flash: What’s Next for Emerging Markets?
February 7, 2014 MV Weekly Market Flash: Volatility Gap Due To Close?
February 4, 2014 Who is ‘MyRA’?
January 31, 2014 MV Weekly Market Flash: The Market and the Economy
January 24, 2014 MV Weekly Market Flash: Return to Risk-Off?
January 17, 2014 MV Weekly Market Flash: The Vanishing Trade Deficit
January 15, 2014 2014: The Year Ahead
January 10, 2014 MV Weekly Market Flash: Jobs and the Fog of Uncertainty
January 3, 2014 MV Weekly Market Flash: Pondering the “Big Melt”
December 27, 2013 MV Weekly Market Flash: 2013: The Year In Review
December 20, 2013 MV Weekly Market Flash: The Price of Certainty
December 13, 2013 MV Weekly Market Flash: Where’s the December Effect?
December 6, 2013 MV Weekly Market Flash: Economic Cheer vs. Taper Tantrums
November 27, 2013 MV Weekly Market Flash: Giving Thanks
November 22, 2013 MV Weekly Market Flash: The Mystique of Round Numbers
November 15, 2013 MV Weekly Market Flash: The Perils of the Financial Tabloids
November 8, 2013 MV Weekly Market Flash: With a Tweet and a Prayer
November 1, 2013 MV Weekly Market Flash: Growth Markets and False Dawns
October 25, 2013 MV Weekly Market Flash: How Now, Low Dow?
October 19, 2013 MV Weekly Market Flash: Market Mind Games
October 19, 2013 MV Weekly Market Flash: Next Up: 3Q Earnings
October 11, 2013 MVCM Quarterly Newsletter: September 30, 2013
October 4, 2013 MV Weekly Market Flash: Event Risk…and Relief Rallies
September 27, 2013 MV Weekly Market Flash: The Curious Case of the Volatility Gap
September 20, 2013 MV Weekly Market Flash: Taperphobia
September 13, 2013 MV Weekly Market Flash: Steady Tack into Taper Week
September 6, 2013 MV Weekly Market Flash: The Fed’s Jobs Dilemma
August 30, 2013 MV Weekly Market Flash: Thirty Days Has September
August 22, 2013 MV Weekly Market Flash: The Era of Glitches
August 16, 2013 MV Weekly Market Flash: The Inflation Question
August 9, 2013 MV Weekly Market Flash: Is The “China Turn” At Hand?
August 1, 2013 MV Weekly Market Flash: The Dog Days…and Beyond
July 25, 2013 MV Weekly Market Flash: The Vanishing Act of Low Correlations
July 18, 2013 MV Weekly Market Flash: Equities Fever
July 15, 2013 MVCM Quarterly Newsletter: June 30, 2013
July 11, 2013 MV Weekly Market Flash: Bernanke to Market: Party On
June 27, 2013 MV Weekly Market Flash:The Bond Bear’s Shadow
June 20, 2013 MV Market Flash: Hard Times for Hard Assets
June 13, 2013 MV Weekly Market Flash: Rehab? Investors Say No, No, No
June 6, 2013 MV Weekly Market Flash: Japanese Equities Fall…and Fall…And Fall
May 30, 2013 MV Weekly Market Flash: From “Risk On, Risk Off” to “Risk Here, Risk There”
May 16, 2013 MVCM Weekly Market Flash: The Pullback that Still Isn’t
April 24, 2013 MVCM Midweek Market Comment: Apple Embraces the Earnings Culture
April 17, 2013 MVCM Midweek Market Comment: A Tale of Two Ex-Havens
April 12, 2013 MVCM Quarterly Newsletter: March 31, 2013
April 4, 2013 MVCM Midweek Market Comment: What’s Up with Emerging Markets?
March 21, 2013 MVCM Midweek Market Comment: Cyprus: Fury Unites the 1% and the 99%
February 21, 2013 MVCM Midweek Market Comment: Catalysts
February 13, 2013 1527: Hello, Goodbye?
February 7, 2013 MVCM Midweek Market Comment: Flirting With the Bulls
January 23, 2013 2013: The Year Ahead
December 30, 2012 2012 Year in Review: The Year of Living on the Edge
December 19, 2012 MVCM Midweek Market Comment: Happy Birthday to You, ETP’s!
November 21, 2012 MVCM Midweek Market Comment: Reasons to be Thankful
November 7, 2012 Election’s Over: What Happens Next?
November 6, 2012 MVCM Midweek Market Comment: Election Fever Breaks, Eurozone Jitters Return
October 24, 2012 MVCM Quarterly Newsletter: September 30, 2012
October 17, 2012 Midweek Market Comment: Transition: Synthetic Rally to Organic Growth?
October 11, 2012 Midweek Market Comment: Elections, Taxes and Investment Strategy
October 3, 2012 Midweek Market Comment: Debate Over Jobs?
September 25, 2012 Midweek Market Comment: Floors, Ceilings and “Kick the Can”
September 20, 2012 Midweek Market Comment: Competitive Easing
September 14, 2012 Midweek Market Comment: QE3: The Two Key Questions
September 5, 2012 Midweek Market Comment
September 5, 2012 Are Equities a “Cult”?
August 6, 2012 Inside the Libor Scandal: What It Means and Why It Matters
July 12, 2012 MVCM Quarterly Newsletter: June 30, 2012
June 19, 2012 Liquidity, Credit and Solvency
June 6, 2012 200 Days of Tea Leaves
June 1, 2012 The Anatomy of an IPO
April 19, 2012 MVCM Quarterly Newsletter: March 31, 2012
March 28, 2012 First Quarter Flowers, Future Showers?
February 16, 2012 All Over Again?
January 27, 2012 2012: The Year Ahead
December 28, 2011 2011: The Year in Review
November 23, 2011 Directionless Volatility
November 4, 2011 Weekly Market Comment: Occupy Eurozone
October 10, 2011 MVCM Quarterly Newsletter: September 30, 2011
October 7, 2011 October Surprises
September 13, 2011 The New Permanence of Volatility
August 24, 2011 Midweek Market Comment: It’s Ben Week Again!
August 8, 2011 Special Market Comment: Relatives and Absolutes
August 4, 2011 Learning to Ride
July 27, 2011 Midweek Market Comment: Safe Haven Economics 3.0
July 27, 2011 A Healthy Dose of Agnosticism
July 20, 2011 Murdoch, Markets and Mistrust
July 7, 2011 MVCM Quarterly Newsletter: June 30 2011
June 24, 2011 Special Comment: Postmodern Portfolio Theory
June 15, 2011 Midweek Market Comment: Pandora and the Zombies
June 9, 2011 Midweek Market Comment: A Slow-Burning Funk
June 2, 2011 Summertime in Wonderland
May 24, 2011 Midweek Market Comment: Europe’s Woes
May 18, 2011 Midweek Market Comment: Peccadilloes, Policy and Prognosis
May 11, 2011 Midweek Market Comment: The Performance Paradox
May 5, 2011 Health Check on the Economy
April 27, 2011 Treasuries and the Rating Agencies: Newsworthy or Non-Event?
April 10, 2011 MVCM Quarterly Newsletter: March 31 2011
March 16, 2011 Special Market Comment: Japan and the World
March 4, 2011 X-Factors Run Amok: An Uncertain and Volatile Landscape
January 31, 2011 The Year Ahead: Annual Market Outlook 2011
January 12, 2011 Midweek Market Comment
December 16, 2010 End of the Free Lunch? A New Era for Fixed Income
November 17, 2010 Technical Comment: Return of the Eurojitters
November 9, 2010 This Week in Global Markets: Technical Comment
October 27, 2010 Portfolio Migration (1): A Strategy for the New Economic Landscape
October 25, 2010 This Week in Global Markets
October 13, 2010 MVCM Quarterly Newsletter: September 30 2010
October 11, 2010 This Week in Global Markets
September 16, 2010 Technical Comment: Basel III and Much Ado about 2019
August 31, 2010 Quantitative Easing and the Expectations Game
August 2, 2010 The Growth Paradox: GDP, Businesses and Consumers
July 29, 2010 Earnings and Confidence
July 27, 2010 The Apple of Our Eyes
July 12, 2010 The Week Ahead: The Market’s Dog Days
July 12, 2010 MVCM Quarterly Newsletter June 30 2010
June 29, 2010 Midweek Market Comment: The Market’s Exquisite Philosophical Dilemma
June 7, 2010 The Week Ahead: The Friday Flop Continues and Japan Feels the Pain
June 4, 2010 The 3:30 Club
May 25, 2010 In the War Room
May 19, 2010 Midweek Market Comment: Germany and the EU
May 11, 2010 Volatility, the Sequel
May 3, 2010 All-American Bull
April 10, 2010 MVCM Quarterly Newsletter March 31 2010
March 17, 2010 View from the Kayak: More “Starts” than “Fits”
March 5, 2010 The Price of Illusory Growth
January 27, 2010 The Year Ahead: Annual Market Outlook 2010
September 22, 2009 The Path to Tomorrow
August 22, 2009 Bubbles in Wonderland
May 21, 2009 2009 Intermittent Market Commentary
March 30, 2009 Mind the Gap
March 5, 2009 Sunrise over Asia
January 27, 2009 The Year Ahead: Annual Market Outlook 2009
January 13, 2009 Of Mice and Managers
December 10, 2008 We’re Here, What’s Next?
November 13, 2008 The Limits of Analysis
September 16, 2008 Market Tectonics, Balance Sheets and You
August 7, 2008 As Goes the Financial Sector
June 25, 2008 The Bubble Decade
May 18, 2008 Bulls, Bears and Opportunities
March 27, 2008 The DNA of an Economic Crisis
February 27, 2008 Sideways Markets and the V-Word
January 24, 2008 The Year Ahead: Annual Market Outlook 2008
January 18, 2008 When Fear Takes Over
January 15, 2008 Understanding Alternative Assets
November 13, 2007 Economy versus Credit Markets, Round II
October 5, 2007 What About the Fundamentals?
September 13, 2007 The Prudent Man and Mr. Market
August 27, 2007 A Day in the Kayak
June 23, 2007 Bad Medicine and Good Health
May 18, 2007 Supply and Demand
April 19, 2007 Market Timing’s Siren Song
March 22, 2007 Road to Where?
February 27, 2007 Of Goldilocks and Gravity
February 12, 2007 The Risk Disconnect
January 23, 2007 The Year Ahead: Annual Market Outlook 2007
December 11, 2006 Emerged Markets
November 24, 2006 Mean Reversion and Market Tectonics
October 10, 2006 Of Managers and Markets
August 13, 2006 Pausing in the Corridor
July 11, 2006 A Tale of Two CWs
June 8, 2006 Nowhere to Hide
May 18, 2006 Sprints and Marathons, Exuberance and Endurance
April 24, 2006 What Does It All Mean?
March 24, 2006 Realignments on the Horizon
January 24, 2006 X-Factors
January 13, 2006 In With the New
mv-financial
May 21, 2009 | Market Commentary | Katrina Lamb, CFA

2009 Intermittent Market Commentary

Nature abhors a vacuum. While we ponder the meaning of data points suggesting that the worst of the financial meltdown may be behind us, we also have to look forward and consider what comes next. The days of heart-wrenching freefall have subsided, for the time being at least, but for the market to embark on any kind of sustained rally will require leadership – a combination of forces that drive economic growth and profits. Such leadership is not evident in the current environment, but it is likelier than not that its seeds are germinating somewhere in the present day landscape. The forces that propelled the bull market of the 1980s and 1990s were already unfolding in the 1970s. There is always a period between formation and actualization; when ideas and patterns are taking root but have yet to converge into a clear set of affirming forces to enable a macro bull market. We call such periods “gaps”, and our advice is to “mind the gap”. Gap markets are treacherous terrain to navigate, replete with numerous false dawns and ever-shifting market bottoms. Mostly, gap markets are leaderless. We believe we are in such a gap market today and may be for some time. Will we eventually find our way back into a sustained growth pattern? We believe that we will. We have faith in the ability of creative genius to express itself in economically viable ways that benefit people – and that’s what makes for sustainable leadership.

*****

This Quarterly Commentary is a bit of a misnomer as it really does not focus specifically on the performance of investment markets between January 1 and March 31 of this year. Perhaps we should call it “Intermittent Market Outlook” to distinguish it from our Annual Market Outlook. In this document what we do is: first, to examine the case for improvement in the near-term fundamentals: the main idea being that the freefall of last fall and earlier this year has given way to a bumpy sort of bottoming out that could produce successions of short-term rallies and corrections in equity markets. As near-term conditions stabilize, performance among different asset classes has begun to diverge, creating opportunities for outperformance but also increasing the attendant risks. Today we do not enjoy the forgiving tailwinds of a secular bull market, where the pain of allocation, selection and timing mistakes is softened by double-digit returns in the broader equity indexes.

Second, we step back and take a broader look at the current market environment in the context of longer- 2 term economic structures prevailing since the end of the Second World War. We make the argument that we have experienced two defining economic eras – both strongly growth-oriented – during this time represented by the two secular bull markets of 1949-1966 and 1982-2000/2007, with a “gap market” environment from 1966-82 and a second gap market that we would argue began at least in part in the early years of this decade but was obscured by the dramatic last gasp of the ‟82 bull market, leveraged on the fumes of the defining forces of that era: technology-and deregulation-aided innovation in the financial services sector. Thus a legitimate question exists as to when this present gap market actually began: 2000 or 2007? It is not a trifling question: “how much longer are we going to be stuck in the gap?” is everybody‟s concern, and if one were to rely on history for the average duration of gap markets we might be either two or nine years into a fifteen-or-so year cycle (of course historical averages are not a reliable predictor of future performance). We presumably will know in due time: regardless, we believe, the gap will likely persist until the contours of the third postwar economic era come into clearer definition than they are today.

Light Escapes: It’s Not a Black Hole

What light through yonder window breaks? Do we dare to think, midway through the month of May, that this Mother of All Financial Crises is in its waning phase, and that those faint but still visible rays on the horizon portend the dawn of a new day? Most of us certainly hope so after the whiplash we‟ve endured since the economic downturn metastasized into a meltdown last September. It is hard to believe that in the space of seven and a half months or so the S&P 500 has taken us on the following ride: from a post-Labor Day 2008 reading of 1277 it collapsed 41% to 752 by November 20, then scaled a wall of hope up 20% to a bit over 900 by New Year‟s Eve, then promptly dashed those hopes of an early sunrise by cascading another 25% down to 676 on March 9, and finally went on a manic tear of 37% up to graze 930 on May 8. We hope the roller coaster is over, because more vertigo is something very few stomachs are ready to take on.

[Chart]

Stock indexes are not directly investable. The plain truth is that we do not know whether the financial meltdown component of the overall economic crisis is over or not, but we do know that for the time being at least the worst scenario has not played out, and that by itself increases the probability that we have passed the nadir of the financial crisis. Below is a chart that we have updated from its first use in our Annual Market Outlook earlier this year. 3 At the time we had posited that the most important outcome for the direction of investment market indicators was whether or not the credit markets would stabilize.

[Chart]

We have followed this up with an overlay (the red dotted line) and a point with a phrase worthy of Heisenberg‟s Uncertainty Principle for particles in quantum mechanics: you might be here. The credit market did not collapse under its own massive weight into a black hole. Financial institutions are still technically “solvent” – after getting some accounting-magic relief from the burdens of mark-to-market accounting, hundreds of billions of dollars from TARP, TALF and the rest of the alphabet soup of bailout relief, and effective borrowing costs of zero percent. The current phase of the stock market rally got its first impetus in March when Citibank announced that it had managed to turn a slight profit. Hooray, said the market, the banks are returning to profitability. Other voices were somewhat more skeptical. If you let a bank value its assets at something other than current notional market value (e.g. what they “might” be worth in better economics times), give that same bank billions upon billions of real-time cash dollars to spend on its day to day operations (including those famous financial sector payrolls) and charge the bank nothing to borrow money, which it can turn around and lend out at four or five or six percent – well, is there a person above the age of five who could somehow not make money under those circumstances?

But no matter that the expectations bar is so low. Solvency is solvency, and the credit markets have benefitted. 30-year mortgage rates that were grazing 6.5% at the end of last year have trended back below 5%. Six month US dollar LIBOR, which registered an eye-popping 4.5% even as Treasury yields were falling to zero last fall, has subsided to around 1.5%. The performance of fixed income asset classes appears to be reverting to more normal risk-return positions after those unlikely double-digit gains by the least risky part of the market, US Treasuries, for so many months. High yield debt led the bond market upwards in the first quarter and into April, while other non-Treasury asset classes also regained some footing. Sentiment in the investment grade market remains tempered: if the credit market recovery takes firmer hold and more corporations are able to come back to the debt financing markets at more attractive terms then we would expect to see better performance from the higher-rated end of the corporate market.

The table below shows an unusually high level of volatility in bond markets that began in the summer of 2007 when the credit market crisis began. Performance of different fixed income asset classes began to widen over this period and that trend was exacerbated when the crisis went into freefall in fall of 2008. We see some evidence of reconvergence since March, but we will feel more comfortable that the credit crisis is truly behind us when those fixed income spreads are as boring as they were before.

[Chart]

Equity asset classes also show divergence. During the freefall last autumn it was impossible to discern performance along traditional style or location lines: all performed terribly and correlations shot radically up. Over the first four months of this year we see divergence to potentially enable active portfolio tactics.

[Chart]

Such tactics do not come without heightened risks, however. Market timing is a fool‟s game in the best of times, but in a bull market the general upward drift is very forgiving to timing bets gone wrong. The topography of a bear market is much more forbidding, with shorter cycles between intermediate-term rallies and corrections, as we shall see in more detail later in this paper. Consider, for example, the divergence between U.S. value and growth stocks as represented in the above chart. Technology stocks, a major component of growth equity portfolios, have performed relatively better than other sectors in the past several months, though we believe more of that has to do with the financial and homebuilding sectors – key components of value equity indices – performing significantly worse than the market overall.

On several occasions during the first quarter we looked at the value-growth question (our target allocation guidelines have been roughly 50/50 during this period). Each time we came to the conclusion that the risks of a tactical move towards growth outweighed the benefits. Our reasoning, which was a major theme in our Annual Market Outlook published earlier this year, was that if the stock market really is going to embark on a sustained near-term rally it would be on the back of gains in the financial sector first of all, with homebuilding and possibly energy stocks/commodities also firming up as harbingers of an economic turnaround, however modest. In other words, if the market is going to move significantly higher we would expect much of that additional performance to come from the value side of the market and thus find ourselves somewhere not too far from value-growth parity, which is what our allocations suggest. However, we also think that the likeliest outcome of all will be an overall sideways pattern with periodic mini-rallies and corrections – a pattern we think lends itself rather poorly to tactical style bets in general, and affirms our current style-neutral, defensive positioning.

The Tripartite Economy

If indeed the credit market has successfully turned away from the event horizon that threatened its annihilation then we still have to contend with the other two pillars of the platform on which our markets operate: the “real” economy; and the confidence of its participants from consumers to industrial purchasers, from average-Joe taxpayers to hedge fund managers. Markets need these three things: credit to facilitate allocation of capital to its most productive uses; a well-functioning system for the provision and consumption of real goods and services (i.e. the real economy); and the collective confidence of everybody who participates in the system to keep entrusting their stores of value (their savings, their time, their unique human assets that can contribute something worthwhile to the greater economic good).

[Chart]

For much of our post-World War II economic history the credit markets played a predictable, if somewhat unglamorous role: banks lent money to businesses, which invested in capital assets to produce goods and Credit CrisisEconomic CrisisConfidence CrisisInterest rate spreads normalizingBanks surviving, though not healthy Freefall in housing, spending abatedDeflation risk subsidedBoost to GDP from net tradeUnemployment still below ’80-82 highsConfidence Index sharply higher in April“Right track”polls show increased optimism 6 services people wanted to buy, which caused the businesses to grow, creating employment and income opportunities for more people, who saved some of that income and spent the rest, and so on in a virtuous spiral – a positive feedback loop. The relationship between the credit market and the real economy was fairly stable and predictable. Starting in the 1980s that began to change; and the change accelerated into hyperdrive in the early part of the 2000s. Namely: the credit sector mutated into the dominant sector of the real economy per se. In 1980 financial institutions – broadly defined to include deposit-taking institutions (banks and savings & loan institutions), investment banks, brokerage houses, insurance companies and asset managers – accounted for roughly 16% of the total operating profits of the S&P 500 constituent companies. By 2007 that number had risen to 44% and included a whole range of new types of finance companies under the rubric “non-bank financial institutions”, commonly referred to as the “shadow” banking system. This muscled-up new financial order thus accounted for nearly half the profits in the total economy. Even that figure is understated, because many other industries ranging from homebuilders to consumer discretionary goods derived a large part of their own profit growth from financial sector innovations that continually discovered new ways to provide people with the means to borrow ever-greater sums of money.

[Chart]

That the financial system dwarfed the rest of the economy can be seen in numerous ways: one that never ceases to astound us was the growth of the credit default swap (CDS) market, which had a global aggregate notional value of over $62 trillion by 2007. That‟s not a typo: $62 trillion. By comparison the total size of the U.S. Gross Domestic Product (GDP) was about $15.5 trillion in 2007. The growth of finance and its many service industry tributaries kept the overall economy on the uptick for many years, obscuring some growing organic problems in other sectors and, more importantly, a growing inability of household income to keep pace with inflation. Consumer spending, the economy‟s primum mobile, grew on the back of increased household debt, not rising incomes. Not surprisingly, then, when the financial sector bubble finally burst it was a long, hard and vertical descent ending with a shock that will reverberate for years to come.

The Great Deleveraging is now underway as households try to unburden themselves of the unprecedented debt pile-up of the past 10 years and restore the integrity of their household balance sheets. Household savings in the U.S. rose to 3.6% in April this year (it was negative in 2007); expect it to rise further. It‟s not a question of choice, as some media commentators with a persistent hangover of Bubble Economy Syndrome like to profess (usually ending with some silly exhortation to spend as a display of “patriotism”). Households simply will have to save more. Real incomes are no longer even flat – they are in decline and credit lines are tapped out.

This does not mean that we will necessarily see continually declining retail spending every month from here on out. But it does mean that the whole consumer spending equation will likely change. First, people will likely increase the percentage of things they buy with debit cards as opposed to credit cards. Second, because those debit cards are directly related to the here and now – the amount of cash in the checking account today as opposed to the credit balance owed in one month or 12 months from now – the breadth and depth of discretionary and even staple goods choices that people make will contract. Patience will become a virtue again. Plasma TVs and Italian terracotta patios will still be purchased – but not necessarily in the same month or even year. Third, financial institutions will come to play a less active role in this whole consumer equation. All they will have to do is operate checking and savings accounts and issue debit cards – in other words, do what banks used to do before they became high-powered salespeople hawking seemingly (and actually) too-good-to-be-true retail borrowing tools.

All of this matters because, as we never seem to tire of saying, consumer spending has accounted for over 70% of our GDP for the past handful of years, and so fundamental changes to consumer spending and saving patterns will matter greatly. We would take that comment one step further. The twin engines of finance and consumption powered the economy for most of the past 25 years. Finance, aided by the forces of technology, deregulation and globalization, was the driver: without the relentless pace of innovation in the financial sector that managed to turn shopping into the hyperleveraged 24/7 pastime it became, consumer spending would never have grown from its long-term stable level of 65% to 72% of GDP. The macro bull market of 1982-2000/2007 is the most visible testament to this economic era. That bull market had a last, overreaching gasp from 2003-2007 before it finally expired for once and for all.

We believe that we are at the beginning of the third defining economic era since the end of World War II. To appreciate what this potentially means for the investment markets it is worth our looking at the preceding eras – not because history repeats itself but because there are instructive lessons in how markets absorbed change, adjusted to new information and eventually found the next trajectory for growth.

The Third Postwar Economic Era

The day-to-day movements of the stock market say very little about fundamental economic trends. But looking at more than 40 years of stock market performance does tell a story – the creation of wealth and its periodic disappearance, stagnation and re-creation. When some perky newscaster chirps that the “market rose today on lower jobless claims” that is on its face a silly statement: the market rises or falls on any given day for a variety of reasons that cannot be crushed into the bland confines of evening news soundbites. But it is not silly to say that “the economic institutions created by the victorious nations of the Second World War provided a foundation for economic strength that powered a long secular bull market through the 1950s and first half of the 1960s”. With that in mind, let us consider the following chart, showing the performance of the Dow Jones Industrial Average from 1900 through 2009.

[Chart]

The point of this discussion is not a history lesson for its own sake. Nor is it to go back in time, find a particular market cycle and claim that market cycle is now repeating itself. No two economic cycles are ever the same. But in a larger macro sense this picture tells us a lot about what happens during sustained growth periods and during gap markets. There are few similarities between the growth era of 1949-66 and that of 1982-2000/2007. But what they both did have in common were compelling forces that converged into a powerful rationale to buy stocks – secular forces that were strong enough to weather cyclical downturns and keep the upside momentum going so that when the market corrected by, say, 10% it would easily succeed in returning to its previous high point. What that gap market of the 1970s lacked was a compelling rationale that could hold up over shorter-term cycles. That is in no small part because, as we shall see, it was a time of tremendous change: when the forces that would power the 1980s and beyond came into being but had yet to actualize in a meaningful way and be recognized as such.

The First Growth Economy 1949-1966: Institutions for the Greater Good

It would be very difficult for most of us to imagine the mindset of the latter days of World War II. The first 45 years of the 20th century were witness to the dissolution of centuries-old empires and monarchies in Europe and Near Asia, global economic depression and the two most bloody, brutal wars ever waged. 99Bretton Woods Conferences 1944First Postwar Growth Era 1949-661966-82Gap MarketSecond PostwarGrowth Era 1982-2007 9 As the Allied powers saw victory coming within sight in 1944 they convened a series of meetings in a small mountain resort center in Bretton Woods, New Hampshire. At these meetings the finance ministers of the United States, Great Britain, France and other nations hammered out the framework of a postwar New World Order to rebuild devastated economies and implement a workable system of international trade and finance. Out of the Bretton Woods conferences came the creation of the International Monetary Fund, the World Bank and the International Development Bank as supranational institutions to promote economic growth, provide the capital to finance this growth and lift the world‟s poorest nations out of poverty. The United States was the leading light in this new order, and the U.S. dollar was to serve as the world‟s reserve currency. International trade was to be encouraged, but on clear, fixed terms: the currencies of other nations would be fixed in their rate of convertibility to U.S. dollars, and the dollar itself was pegged to the value of gold at the rate of $35 per ounce.

The Bretton Woods institutions proved to be durable, and the global economy enjoyed a sustained period of growth. The Dow Jones Industrial Average, which had languished below 200 until the end of 1949, was approaching 1000 by 1966. However the institutions that governed world trade proved to be too successful for their own good. Countries were growing at different rates of growth but the system of fixed exchange rates constrained the ability of individual countries to manage their own economic destinies, and trade balances and national accounts fell out of whack as a result. Domestic financial markets were tightly controlled, with regulatory caps on interest rates that hindered the ability of many growing but not yet top-rated companies to raise external capital to finance their growth. The Eurodollar market, the forerunner of what was to become the largest component of the global fixed income market, got its start in the early 1960s as an offshore means for U.S. companies to raise dollar-denominated debt outside the regulatory confines of the U.S. domestic market.

In other words, the great and good institutions of Bretton Woods could not handle the growth they had engendered, and the system began to fall apart. By the dawn of the 1970s the system was unsustainable and in August 1971 U.S. President Nixon announced that the U.S. dollar would no longer be pegged to gold – the dissolution of the fixed exchange rate system was the death knell for Bretton Woods.

The First Gap Market 1966-1982: A String of Bad Hair Days

The stock market, as always a leading indicator of economic direction, started its downward trend in 1966, five years before Bretton Woods was officially pronounced dead. What ensued for the next 16 years was a directionless, though far from inert, sideways market. Throughout the 1970s stocks consistently underperformed bonds, though in comparison with the escalation of inflation over the course of the decade neither stocks nor bonds were particularly appealing on real terms – it was a decade where real-value assets like crude oil and gold were the most attractive investment categories.

Directionless though it was over the course of the whole period, the equity markets of the 1970s were characterized by continual intermediate-term bear market rallies and corrections. The following chart illustrates the major peaks and troughs of the S&P 500 over this period.

[Chart]

We call the market of the 1970s a gap market because we see it as a sort of No Man‟s Land in between two defining economic stories (the first we have already described; the second we will get to shortly). What reason was there to invest in equities in the 1970s? Of course it is easy to say that 30 years hence, when we have the luxury of hindsight, but during the period itself it was not all that clear. Markets can rally in the short term on any combination of economic data points, momentum, gut instinct or whatever else moves the spirit. But those rallies tend to fizzle out when investors fail to be convinced that anything fundamental is afoot and cash out their paper profits.

In fact secular bear markets and bull markets don‟t look anything like each other. Bull markets are driven by positive fundamental forces over a substantial multi-year time period. Bear markets – at least the bear markets we have experienced since the beginning of the 20th century – are not driven by some mirror image set of negative forces, at least over the duration of the secular period. Rather, what usually happens is one or more tightly compressed periods where the market seems to come to a collective realization that the good times are over and crumbles (e.g. 1929-1932, 1971-1973, 2008-2009). But apart from those periodic shocks the market is driven only by the lack of a compelling positive story, rather than the existence of a compelling negative story. Look at the shape of the S&P 500 from 1982-2000. There is not one single example, over any time period of five or more consecutive years, of a bear market that mirrors this performance. Hence the term “gap market” rather than “anti-growth market”. The first definable postwar economic era lasted from the late 1940s until the late 1960s. The second definable era began in 1982. This period in between was definable only by its lack of definition – a gap market.

The Second Growth Economy 1982-2000: Greed Is Good

In fact the 1970s gap market was a combustible period of tremendous change. Innovations, discoveries and ways of doing business that would become the rocket fuel of the 1980s and beyond had their genesis in the 1970s. But there was a considerable period between formation and actualization. In the 1970s Apple was just one company out there trying to establish a foothold in this relatively exotic, largely unknown new market of computer technology. Ditto Microsoft and its two Harvard dropout founders of Bill Gates and Paul Allen. The field of technology was growing by leaps and bounds in the 1970s as Moore‟s Law enabled more information to be squeezed into ever-smaller transistors at ever-cheaper costs. Electronic gadgets became more affordable and more interesting. Many of them bore the stamp “Made in Japan”, or “Made in Taiwan”, and imports from those and other Asian countries started to grow.

Technology was also having an impact on financial markets. The Eurodollar market of the 1960s evolved into the rapidly growing Eurobond market of the 1970-80s, and the advent of technology helped enable traders and bankers sitting at remote locations to trade and deal with each other. While the Eurobond market was pushing the boundaries of the still largely regulated world of capital markets, the New York Stock Exchange abandoned its system of fixed commissions on May 1, 1975, one of the first acknowledgments by the Establishment that the days of deregulation were approaching. In 1976 an article appeared in the Journal of Financial Economics by an academician named Michael Jensen. Called “Theory of the firm: Managerial behavior, agency costs and ownership structure”, the article identified structural weaknesses in the ownership and management structure of American corporations. Five years later, that article served as the intellectual blueprint for a takeover of the Gibson Greeting Cards company by a group of private equity investors with the help of a substantial amount of bank financing to support the investors‟ relatively modest equity contribution – the first noteworthy leveraged buyout (LBO).

All of the events we have cited in the previous two paragraphs flashed up at some point during that „70s gap market, but it was not until the 1980s that they started to converge into the kind of compelling meta-story that powers bull markets. Whereas the First Growth Era was a creature of men and the deliberative institutions they built, the Second Growth Era arose from more primal forces of nature: globalization and deregulation, enabled by the rapid growth of information and communications technology. These forces enjoyed political support in Ronald Reagan’s America and Margaret Thatcher’s Great Britain.

By far the greatest beneficiary of these forces was the financial system. Deregulation opened many areas of the financial markets that had long been the province of regulated commercial banks, and their more aggressive cousins the investment banks and securities dealers – and later the non-bank finance companies – moved quickly and decisively. Over the 1980s and 1990s the pace of innovation in the financial sector was relentless and quickly spread out to cover the globe. Innovation occurred at the institutional level – a wider range of financial instruments and strategies for a broad spectrum of large and small corporations to raise money and a segmentation of investors into identifiable niches of specific risk and return objectives – and also at the retail level as banks and non-bank finance companies pioneered the widespread adoption of retail credit instruments from credit cards to durable goods financing plans, money market accounts, creative mortgage financing schemes and all the rest with which we are so familiar today.

Part of the sustainability of this market was of course due to events that, when they happened, served to 12 breathe fresh life into trends already underway. The collapse of the Warsaw Pact nations of Eastern Europe, followed by the demise of the Soviet Union, gave fresh impetus to the globalization imperative. The commercialization of the Internet in the mid-1990s unleashed a whole new succession of technology innovations. Persistently low commodity prices had the effect of keeping inflation in check and interest rate levels below historical averages, helping to sustain high levels of activity in the capital markets.

The Second Gap Market 2000/2007-present: What Next?

As we noted earlier there is a lingering question as to when the second gap market started: was it in 2000 or 2007? Are we closer to or farther away from the end of the gap market and the resumption of growth? In truth, looking to the duration of past gap markets is helpful but not predictive. Time cycles vary notably over long periods, and it may well be that we cycle through this current gap in a greatly reduced span of time as emergent forces become known and captivate the investor class. We don‟t know – and so we are comfortable to simply let that question sit unresolved and open to different opinions.

What we do know, though, is that the Dow and the S&P 500 both recovered from the 2000-2002 downturn to surpass their previous high points in 2006 and 2007 respectively. Moreover the financial sector, the great beneficiary of the Second Growth Era, had its strongest performance ever from 2003-2007. Yes, but…the sector was running on the fumes of sky-high leverage, not viable fundamentals. We would argue that the equities markets of this decade to date were not powered by a fundamentally compelling story but by the artifice of an unsustainable bubble in which a variety of decision agents took actions that were reckless at best, criminal at worst and drove up the price of practically every identifiable risk asset class to levels well beyond their fundamental values. When the music stopped in 2007 it did not come as a major surprise to many market observers (ourselves included), though the cataclysmic and unprecedented collapse of the stock market a year later did have the element of surprise, to say the least.

So here we are in the gap market, trying to navigate the treacheries of false dawns and shifting tectonic plates while searching for the affirmation of whichever emerging trends and discoveries will be the grist for the Third Growth Era, whenever that will be. We don‟t mean identifying one single stock – say some embryonic developer of solar technology or green waste management – and saying “this is it, this one is going to the moon”. It‟s always nice to armchair-quarterback and speculate how it would have been possible to pick out Steve Jobs and Apple from the pack of aspiring technology companies back in the mid-1970s and make gazillions – and some people did, but that‟s more the purview of Lady Luck than the foundation of a disciplined strategy.

However we see a handful of broad themes that in our considered opinion may provide the fertile soil for the next convergence of forces to spur economic growth. We periodically address some of these themes in more detail in our periodic research commentaries and e-updates.

For example, one theme which in our opinion bears giving some thought to is where the next vortex of technology-business convergence will be. As we have described in this paper, although the effect of technology has been felt across a wide range of industries the sector that arguably benefitted the most from the late 1970s onwards was the financial sector: technology facilitated the total transformation of how Wall Street works, from enabling remote dealer quotation markets like Nasdaq to automated depository and clearing systems that gave rise to stock-futures arbitrage, portfolio insurance program trading and eventually the colossal hedge funds that came to dominate the capital markets landscape in the 1990s and the present decade. Compare this to the role of technology in, say, the field of health care. If an American from 1975 were magically transported into 2008 and went to a doctor‟s office for a check-up she would not feel unduly out of her element: her medical records would be pieces of paper in a manila folder with her name written in magic marker. If she switched caregivers her records would have to follow her physically, not as packets of data coursing through bandwidth highways from one provider‟s 13 local area network to another. What is the potential upside – the value creation – from a more intensive convergence of technology with health care – or public utilities, or management of the environment? These are examples of broad themes where we believe “the truth is out there” – and that will figure into our thought process about what that Third Economic Growth Era will look like.

Whatever is going to power that Third Era is happening somewhere today, we are quite convinced. Moreover, many of those emergent phenomena are likely happening somewhere outside the U.S. The world economy has had two distinct appearances during the First and Second Growth Eras. Global Economy 1.0, during the Bretton Woods era of the 1950s and 1960s, was a story of the ascendancy of the U.S. to dominance of world economic trade. The age of globalization – Global Economy 2.0 in the 1980s and 1990s – saw the opening and growth of new markets and the division of the world into the “developed” economies of North America, Western Europe and Japan on the one hand and the “emerging” markets of Latin America, Asia and Central & Eastern Europe on the other.

As we first described in a 2006 research paper “Emerged Markets”, that developed/emerging paradigm has run its course of usefulness and, we believe, is no longer useful as a guideline for allocation of global wealth. In Global Economy 3.0, rather than blandly looking at the world through the traditional prism of developed/emerging markets we think it makes more sense to view the entire world from the standpoint of three primary economic components: capital (or finance) markets, production (of goods and services) markets and consumer markets. Traditionally the locus of capital markets has been the axis of New York and London (perhaps to a lesser extent Tokyo). As the economy deleverages we see an emerging Cash Triangle rising to challenge the longstanding supremacy of New York and London. That triangle extends from the Gulf Cooperation Council countries of the Middle East, to Shanghai, Seoul and Tokyo in northern Asia and south to Singapore, Kuala Lumpur and the growing markets of southern Asia. This triangle contains a vast store of the world‟s net cash savings. The instruments and practices of Islamic finance, a $1 trillion industry, manage a growing amount of the wealth within this triangle. Even in a world where finance is contracting, Islamic finance continues to grow at annual rates of 15-20%.

Beyond the Cash Triangle we see the Asia Pacific region growing in its global importance in all three economic components: capital, production and consumer markets. If this emergent trend metastasizes into a key propelling force of the Third Economic Era then a traditional portfolio allocation – say 5% “emerging markets” of which 2.5% might be related to Asian equities – will most likely be in the position to dramatically underperform. An entirely new way of thinking about global asset allocation is required.

Conclusions

Gap markets are defined by their lack of definition: there is no compelling story to provide the undercurrents of a consistent growth trend, i.e. an overall upward drift through shorter term market cycles. We can argue about whether the current gap market started in 2000 or 2007 – but we are of the opinion that the 2003-2007 rally served as the final dramatic swan song for the macro trends that dominated the bull market of 1982-2000. In any event we believe the current gap market environment will persist for some time yet before a more defined picture of the Third Growth Era emerges. The previous gap market of 1966-1982 was characterized by a succession of false dawns and corrections, and we think this serves as a warning for those who would blindly rush in each time we experience the kind of short-term rally we had at the end of 2008 and again from March to May of this year.

We have maintained a defensive position in our portfolios for over a year now, and will continue to focus full attention on principal protection at the core allocation exposure level. At the same time, we believe that gap markets do present particular opportunities as emergent trends that appear today may be the 14 drivers of sustained performance tomorrow, and we will seek to capitalize on these opportunities wherever possible. Gap markets are a reflection of what the Chinese have long called “interesting times”. Interesting times are not necessarily for the faint of heart. But tumultuous times beget the opportunity for healthy change. The system that collapsed in 2008 had grown unhealthy in many ways: not just financially but also ethically, as the seemingly never-ending fallout of scandals from that period come to light on a regular basis. We are excited about the possibilities that the Third Growth Era may bring, and we would like nothing more than to see our clients benefit from these possibilities.