A string of headlines over the last few months has thrust the issue of cash held by the foreign subsidiaries of US companies back into the spotlight. First was Apple Inc.’s announcement that the company was increasing its dividend and buying back more stock while at the same time issuing $12 billion in debt to…
Summary Observations: Fiscal Year 2014 US equities returned 24.6% in the fiscal year ended June 30, 2014, ranking 31st in 114 fiscal years of data. The health care, information technology, and materials sectors all returned above 30%. All developed markets ended the fiscal year in the black, with Europe ex UK the best-performing region and…
Stories about equity volatility plunging to “historical lows” have been ubiquitous in the financial press recently. When accompanied by references to above-average valuations and “over-heated” markets, the implication seems to be that investors should rush to buy protection via equity puts or volatility index options, presumably because some decline in equity markets (and thus increase…
While valuations continue to support a tactical overweight to emerging markets equities today, the rationale for a permanent or structural overweight is weaker Many of the classic arguments for a strategic overweight to emerging markets (potential for faster economic growth, underrepresentation in indices, diversification, and inefficiency of markets) lack convincing support or have diminished in…
We maintain our advice to overweight European equities and underweight European bonds Macro data in Europe are slowly improving, but growth outside the Eurozone has been much stronger; corporate profits have also been lackluster but growth and/or cheaper currencies would help. European equity valuations are reasonable and reflect these weaknesses; they are attractive relative to…
As US small-cap valuations have grown increasingly extreme, so has our conviction in underweighting them Small caps have benefited from the recovery in US economic conditions since 2009 and the perceived safe-haven status of domestic US assets. Investors have earned low single-digit nominal returns from historical valuation levels equivalent to those today, an unappetizing prospect…
On May 6, Chinese e-commerce giant Alibaba filed a registration statement in the United States, its first official step toward becoming a public company. In addition to its size and nationality, Alibaba’s plan to list under a dual-class voting structure is noteworthy. Multi-class share voting structures are frequently criticized for exacerbating the agency problem created…
Our views across equity markets have not changed given a quiet start to the year for both developed and emerging markets stocks. Given stretched valuations in markets like the United States it may take considerably better earnings and macro data to push stocks higher, while in comparison European earnings have been more lackluster (and growth…
The last few days have brought more seismic shocks to growth stocks, continuing a trend seen throughout the last two months. On Friday alone, Amazon.com shed $15 billion of market value and a popular social media exchange-traded fund dropped 5.3%. Since this particular brand of sell-off began on March 5, the hardest-hit stocks have been…
Michael Lewis’ new book Flash Boys has sparked a fierce debate on the practice known as high-frequency trading (HFT), with Lewis and his supporters claiming markets are “rigged” by high-frequency traders who front-run other market participants and engage in a number of other unsavory activities. Unfortunately the truth is more mundane. HFT—the name given to…