Energy

If you missed Part-1 of our series on the “Theory Of MMT Falls Flat When Faced With Reality,” start there. In Part-2, we complete our analysis of the theory and the potential ramifications. The premise of our discussion was this recent explanation of “Modern Monetary Theory” by Stephanie Kelton. As discussed previously, economic theory always sounds much better than how it works out in reality.

This commentary has been updated to include Thursday morning's release of Nonfarm Employment. June's 4.8M increase in total nonfarm payrolls had revisions that resulted in 90K more jobs than previously reported. The Investing.com consensus was for 3M jobs gained and the unemployment rate to decrease to 12.3%.

American ingenuity is something to take pride in this weekend as we (safely) celebrate the Fourth of July.

In response to a standing request, here is an updated comparison of four major secular bear markets. The numbers are through the Tuesday, June 30 close.

Companies are coping with diverse challenges through the coronavirus crisis. Investors who integrate environmental, social and governance (ESG) factors into their research can gain important insights on how businesses are adapting—and how future return potential might be affected.

Some 2020 graduates are finding jobs, even in this economy. Luck plays a role, sure, but so does a willingness to compromise.

Many investors are looking for emerging signs of a return to normalcy from the coronavirus crisis. While there are many indicators to choose from, we’ve assembled a group of signals, with the help of big data, that may point the way.

In the municipal bond market, the issuance of green bonds has provided an attractive solution for investors interested in socially responsible investments while also receiving the tax-exempt income benefit municipal bonds offer. Franklin Templeton’s Municipal Bond team provides an overview of green bonds, including potential benefits and risk considerations.

The price of Regular and Premium are up four cents each from last week. According to GasBuddy.com, Hawaii has the highest average price for Regular at $3.14 and Mississippi has the cheapest at $1.81. The WTIC end of day spot price closed at 39.70, a decrease of 2.5% from last week.

With markets extremely difficult and volatile as we work through COVID-19, we thought it would be good to review important parts of our investment discipline. One way to do that is to consider stocks we found via our eight criteria for stock selection and did not keep long enough to get to their ultimate rewards.

A “perfect storm” of surging government debt levels, plunging real bond yields, rising coronavirus cases and deteriorating economic forecasts pushed the price of gold to an eight-year high this week, and some analysts now project the metal to top its all-time high within the next 12 months.

Personal Income (excluding Transfer Receipts) in May rose 1.56% and is down 5.5% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) MoM was up 1.46%. The real number is down 6.0% year-over-year.

For most US governors, June typically brings political fireworks when state legislatures hammer out final budgets for the next fiscal year.

Pundits, prognosticators, and even investment boards often make misleading declarations that an asset class is broken, that its prospects for earning investors a reasonable future return are very dim. These proclamations can lead to investors’ abandoning these assets to chase recent winners.

Even after the partial rebound from COVID-related losses, we think high-quality companies in certain developed and emerging markets remain compelling investments. High-quality companies outside the U.S. look especially attractive to us.

Carlyle Group is pushing ESG strategies throughout its $217 billion portfolio, even if these businesses aren’t easy to square with a commitment to the climate.

Automatic enrollment initiatives build on one of the most important findings in behavioral science.

President Trump, like many others along the political spectrum, has derided the persistent U.S. trade deficit – particularly with China – as a waste of capital leaving our country. The view that the U.S. would benefit by correcting this imbalance is taken up in a new book, with a message that should concern all financial market participants.

In her recent book, “The Deficit Myth,” Stephanie Kelton, a professor at Stony Brook University, writes about many of the common misperceptions surrounding government debt and deficits.

Get the ins and outs of green bonds in this two-part series. Let’s start with the basics.

In this latest survey, 68 leading bond and currency managers considered valuations, expectations and outlooks for the coming months.

Coronavirus cases and hospitalizations are spiking again in several countries, including the U.S. California had its biggest one-day jump in infections. Arizona, Florida and Texas are also turning into new hotspots.

Emily presents key takeaways on the exercise of green bond impact reporting.

Back in March, I predicted that the total U.S. economic response to the COVID-19 crisis would be at least $10 trillion.

As inflows soar and market dislocations vanish, America’s exchange-traded fund market is back to the boom times.

Month-over-month nominal sales in May increased by 17.7  (17.69% to two decimal points). Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 17.8% (17.75% to two decimal points).

The yield on the 10-year note ended June 15, 2020, at 0.71% the 2-year note ended at 0.19% and the 30-year at 1.45%.

The returns of the 2009-2020 bull market were nothing short of extraordinary. From the 2009 low in the S&P 500 to the 2020 high, stocks gained a massive 488%, or nearly 18% on an annualized basis.

Rick Rieder, Russ Brownback and Navin Saigal contend that if a negative monetary policy endgame is to be avoided, particularly in the face of recent economic declines, it will likely be technological advances of a profound kind that get us there.

The selloff this week was “perfectly normal,” according to the math. Find out why it makes sense to have a long-term investment horizon.

It will go down as the wildest of the shale wildcatters, the overreaching pioneer of fracking techniques that minted vast fortunes and, now, have left behind ruin.

Many consultants now offer portfolio-wide assessments of physical climate risks that companies face. Who should you rely on?

It may not feel like it, but West Texas Intermediate (WTI) oil just posted its best month on record. The American benchmark for crude soared more than 88 percent in May, from $18.84 per barrel to $35.50, as businesses cautiously began to reopen and people returned to work following the coronavirus lockdown.

Municipal bond defaults have been rare, making them a remarkably resilient investment over the years. The reasons range from the very services muni issuers provide to the fundamental characteristics of municipalities.

Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.

Call it crazy, but don’t call it dumb: Individual investors have been flocking to bankruptcy-protected companies in droves.

The Bureau of Labor Statistics released the May Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 0.12%, down from 0.33% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.22%, down from 1.43% the previous month and below the Fed's 2% PCE target.

The oddity of today’s stock market is exactly what any God-fearing value manager should pray for. There are very few scenarios in the last 50 years that can be used to model or forecast what is currently going on.

In our 2020 Global Market Outlook, we cited many indicators pointing to heightened risk of a recession; now we highlight increasing signs of a recovery from one.

Stock market participants remained optimistic about the economy, further encouraged by a surprisingly strong employment report for May. Bond yields moved above their recent range.

Between mid-February and late March 2020, we saw a “take no prisoners” market crash. Anything with a whiff of perceived risk crashed, in direct proportion to its perceived risk. The only assets that soared—because of tumbling interest rates—were long Treasury bonds, and with them, the net present value of pension obligations.

This week marked the 50th trading day since its March 23 low, with the S&P 500 rallying ~40% —the best 50 day rally since 1932. While the index has recovered ~85% of its virus-induced losses, there is still a distance to go, and if you are like me, the further the race goes, the more challenging it gets and the slower I advance. 

Warren Buffett “should have kept airline stocks because the airline stocks went through the roof today,” President Trump said this week. It’s a good thing that investors chose not to follow Buffett’s lead, as airline stocks are up 50% since his exit.

The price of silver soared in May, jumping more than 19 percent on safe haven demand as well as increased expectations of a swift economic recovery, given its many applications.

Many companies worry they’ll fall out of step with customers and employees if they don't take a public stand.

Investors have been eager to buy. In the past two months, investment-grade spreads have compressed nearly 200 basis points.

Here are five conversation starters to engage your clients during these challenging times.

U.S. equity growth has been led by companies benefiting from heavy exposure to technology and an increase in remote work.

As troubling as these developments are, it’s important not to lose sight of the good that appears to be taking place right now. Investors that focus only on the negative tend to miss out on the opportunities.

Today I’ll share some more insights from the Virtual Strategic Investment Conference. Frankly, I could go on for weeks like this, but this is going to be my last letter on the SIC. We had so much expertise and wisdom beamed in from all over the world. I’ll give you a few more highlights and then offer my own personal takeaway.

It may surprise some investors to learn that the leverage profile of emerging market (EM) corporations appears to be in better shape than that of their US counterparts. Maybe it’s a matter of “been there, done that.”

The European Commission has unveiled a sweeping new €750 billion coronavirus fiscal rescue package, including the issuance of new bonds. David Zahn, our Head of European Fixed Income, calls it groundbreaking.

They’re now luring more people than traditional conferences, but the popularity is even surprising people who organize them.

Great investment opportunities are lonely. History shows us the crowd behaviors to avoid and the investment market circumstances to capitalize on. We believe we are at one of the great junctures, where the crowd thinks they unequivocally know the future.

The stock market was choppy as investors bounced between hopes for a successful reopening of the economy and fears of a more prolonged slowdown.

Down equity markets plus low interest rates can make GRATs a tax saver for high-net-worth clients.

Against this backdrop of anything-goes spending, the idea of having a national currency backed by a real asset like gold seems less and less crazy to some. Doing so, it’s believed, would force lawmakers to practice fiscal discipline, reign in inflation and normalize international trade.

We finished the Virtual Strategic Investment Conference yesterday. I shared some highlights in last week’s letter, will tell you more today.

On April 9, Memphis-based Southeastern Asset Management announced that it was re-opening its Longleaf Partners Small-Cap Fund (LLSCX). It had closed the fund to new investors in August 1997. I interviewed two of the fund’s managers, Staley Cates and Ross Glotzbach.

If rates stay low, the returns on stocks will be better than for bonds, according to Leon (“Lee”) Cooperman. “Bonds are the high-risk investment,” he said.

The airline sector may be experiencing some turbulence now with COVID-19, but the industry has flown through storms before. After all, airlines stocks managed recoveries after the 9/11 attacks, the SARS outbreak in 2003 and the global financial crisis in 2008.

We're seeing that there are meaningful differences between the last downturn and this one.

The COVID-19 crisis is likely to accelerate many underlying, secular disruptive forces already affecting economies and financial markets. This may only increase the difference between those companies, sectors, and countries that are being disrupted, and those that are acting more like disruptors. Distinguishing between the two is becoming crucial.

An effort by investment giants including State Street, Vanguard, Fidelity and Invesco to redefine the $4 trillion U.S. exchange-traded fund universe has the industry’s smaller players bristling.

BlackRock Inc. added its contribution to a growing body of research showing that ESG portfolios outperformed traditional market benchmarks in the recent market downturn.

What to own, how to do so, and when are the most important questions investors face. In my article, I discuss how a framework of collateral, leverage, and volatility can be used to help answer them.

The bitcoin halving that occurred this past Monday is only the third such event in the cryptocurrency’s 11-year history. In the months following the first and second halvings, bitcoin prices surged as it became abundantly clear that at some point in the near future, new bitcoin issuances will come to a halt.

I knew this letter’s topic months ago. It was going to be a review of the Strategic Investment Conference, which would have just concluded fabulously in sunny Scottsdale.

April saw markets rebound from the recent lows set in March, as progress combating the spread of the coronavirus gave hope to investors. The S&P 500 gained 12.82 percent during the month, marking the best single month for the index since 1987.

The Fama–French value factor, and value investing in general, has suffered an extraordinarily long 13.3 years of underperformance relative to the growth investing style. The current drawdown has been by far the longest as well as the largest since July 1963. Arnott, Harvey, Kalesnik, and Linnainmaa examine the potential causes of value’s underperformance and provide estimates of value’s performance relative to growth’s performance under different revaluation scenarios over the next decade.

China is further along the coronavirus curve than much of the rest of the world. What does its path to normal look like, and what are the big unknowns?

Elon Musk isn’t known for playing by the rules. The 48-year-old tech billionaire got himself into hot water with regulators a couple of years ago by tweeting that he was “considering taking Tesla private at $420.

While energy investment retrenches in the wake of COVID-19’s historic impact on oil and gas markets, consumers will benefit as economies reopen. Selective and patient investors should too.

David Rogal and Bob Miller contend that the TIPS market dislocations witnessed in recent months have resulted in opportunities that investors would be remiss to ignore.

April was a strong month for the market with the S&P500 returning more than 12%. This came on the heels of an extremely volatile month that was March 2020 where the S&P500 corrected 12.50% when all was said and done. However, there was a ton of volatility to get there.