Not surprisingly, I received more than a few emails chastising me for “bailing on the bull market, which is going higher.” 

Such is hardly the case. We reduced our weighting in some of the companies which have had substantial gains over the last year. We remain primarily long-biased in our portfolios, but given the extreme technical overbought and deviated conditions; it was prudent to raise some cash and protect our gains.

Interestingly, such was also a point made in this past weekend’s newsletter:

When people believe that they need to take ‘a little more risk’ to generate greater returns, they may be making a very BIG mistake if they underestimate what ‘risk’ really means to them.”

As we noted in “Moral Hazard,” the Federal Reserve believes that insuring people against investment losses is a dangerous one. While investors are encouraged to take more risk currently, as prices rise, they begin to disregard risk for what it is.

When people take “a little risk” and get rewarded for it, they are then encouraged to take “a little more risk.”

“People in the ‘crowd’ don’t appreciate the risks they are taking because they’re surrounded by people who believe the market will keep going up.

 

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There have been few significant changes in the cleanliness of nuclear reactors since the first electricity generating reactor was brought onto the power grid in Obninsk, USSR, in 1954. The low carbon emissions from nuclear reactors make them one of the greener methods for generating electricity, and a good fit with the “green” initiatives envisioned for addressing climate change. Reducing carbon emissions and greenhouse gases are important parts of many comprehensive plans to mitigate human-caused climate change. Such plans include a broad range of “green” ways to generate electricity, such as solar panels, wind turbines, hydro electric dams, underwater tidal kites, ocean wave generators, and several other innovative…Click for full article.

Frequent the business section of your favorite newspaper long enough, and you’ll see mentions of private equity (PE).

Maybe it’s because a struggling company got bought out and taken private, just as Toys “R” Us did in 2005 for $6.6 billion.

Otherwise, it’s likely a mention of a major investment (or payout) that a PE firm scored through venture or growth capital. For example, after Airbnb had to postpone its original plans for a 2020 initial public offering (IPO) in light of the pandemic, the company raised more than $1 billion in PE funding to plan for a new listing later this year.

Yet many people don’t fully understand the size and scope of private equity. To demonstrate the impact of PE, we break down the funds raised by the top 25 firms over the last five years…CLICK for complete article

The coming week will be the busiest and most important 5 days of the year, if not decade. It is a “huge week” for investors with the election, a Fed decision, 128 S&P earnings, October payrolls, ongoing pandemic lockdowns and a ton of economic data all due.

“Whichever way you look at it, this coming week will be huge for U.S. and global markets,” said Simon Ballard, chief economist at First Abu Dhabi Bank PJSC. “We see the potential for a sharp rise in volatility around these events — and all in the context of a still deteriorating Covid-19 situation across much of the U.S., Europe and elsewhere.”

Starting with the pandemic, as DB’s Jim Reid writes this morning, Europe is facing up to a harsh winter ahead. The question to be asked to all the European countries is can they come out of these measures in some form towards the end of November/early December as is hoped or will they be extended further. The hit to the U.K. economy which just announced a new round of lockdowns will be softened by an extension of the furlough scheme but that will only add more to the debt. The hope everywhere is that well before the winter/spring peak virus season is over we’ll have the start of a vaccine program or more realistically in the near term a huge advance in rapid result testing. The latter has to be the greatest hope of restrictions being eased before a vaccine has mass rollout. Meanwhile, overnight Bloomberg reported that Italy might tighten restrictions further today with PM Conte wanting more localised curbs depending on virus transmissions – something some regional authorities are resisting.

Covid aside, of course the top event this week be tomorrow’s US election off the front pages for the next few days: 93.29 million have already voted so far, which is 67.7% of 2016’s total, and as Reid notes, “It’s fair to say markets could look very different on Wednesday morning as a “Blue Wave”, if it happens, should get the stimulus junkies hungry to buy and a divided government could remind people of the long winter ahead. So a very big week.”

By and large, the US Election, the Pandemic and the Brexit game of chicken are all distractions.

Real issues like growth, employment and markets remain bound up in surging sovereign and corporate debt fuelled by ultra-low and negative interest rates.  Global markets remain utterly distorted.  Financial Asset Stagflation – bonds and equities getting more and more expensive as the economy deflates is a consequence of the monetary policy decisions of the last few years.

Are we looking the wrong way?   Full Story

The global economy can seem like an abstract concept, yet it influences our everyday lives in both obvious and subtle ways. Nowhere is this clearer than in the current economic state amid the throes of the pandemic.

This voronoi-style visualization from HowMuch relies on gross domestic product (GDP) data from the World Bank to paint a picture of the global economy—which crested $87.8 trillion in 2019.

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