12 Jul 2016

Currency Hedging after Brexit

After Andrea Leadsom withdrew herself from consideration and cleared the way for Theresa May to replace David Cameron as Great Britain’s Prime Minister, I was interested to see how British stocks were faring there after the Brexit. When I looked at the chart, I realized that I hadn’t been paying close enough attention because I was surprised that British stocks are actually up sharply this year – the chart shows a 7.9… Read More

1 Jul 2016

The Market Hates Uncertainty

One of the phrases that I hear over and over, but simply don’t like, is that ‘markets hate uncertainty.’  Forget the fact that markets are just made up of people and don’t have independent emotions, I’m talking about hating uncertainty. From a theoretical standpoint, let’s think about how uncertainty affects markets.  Let’s start with the idea that the value of an investment is the present value of its future cash… Read More

30 Jun 2016

Mr. Market Trades the Brexit

Legendary investor Benjamin Graham wrote in his 1940 classic book, The Intelligent Investor, about a fictional character named Mr. Market. Graham asks you to imagine jointly owning a business with Mr. Market, who frequently offers to buy or sell your shares.  The trouble with Mr. Market is that he’s manic depressive and the prices that he offers swing wildly over short periods. Even though the true value of the business… Read More

29 Jun 2016

EU Article 50

Brexit backlash has continued to build in various forms. There has been a growing chorus of calls for Britain to hold another referendum, or to opt not to invoke Article 50 and instead push for fresh concessions. Article 50 refers to five short paragraphs of the Lisbon Treaty, which was signed in 2007 and updated past agreements including the Maastricht Treaty in 1993 and the Treaty of Rome in 1958…. Read More

28 Jun 2016

Currency Prices are Efficient Too (and sometimes wrong)

The Brexit has caused legions of analysts, economists, strategists and other pontificators to busily rework their assumptions about the world economy incorporating what seemed like an outside possibility last week to the new lay of the land. Markets fiercely incorporated their new assumptions into prices almost instantaneously – looking a chart of the British pound, you can see when the polls started to show that the Remain camp wasn’t a… Read More

27 Jun 2016

Friday Could Have Been Worse

While markets were obviously down, one piece of good news is that they weren’t chaotic.  You may think I’m grasping at straws here for a silver lining, but wild macro events can cause markets to get sloppy and that didn’t happen Friday. Last August, when markets were selling off, the heavy trading volume caused a number of stocks and ETFs to behave erratically in what some people described as a… Read More

24 Jun 2016

Britain to Leave EU: Keep Calm and Carry On

I stayed up later than usual last night to see how the vote would turn out and by the time I turned out the lights, it looked like the Leave camp was going to win. Personally, I thought that they would vote to Remain, partly because of the polls, partly because I thought it was in their best economic interests and partly because voters in Scotland and Quebec stayed in their… Read More

28 Mar 2016

Brexit Basics

The European Union (EU) is a political and economic union comprised of 28 countries from the tiny island of Malta with a population of 429,000 situated on 122 square miles to the obvious world powers like Germany, France and Britain. When combined, the EU represents seven percent of the worlds population and 24 percent of global gross domestic product (GDP, measured in purchasing power parity).  The idea behind the union,… Read More