Monday, May 18, 2015

Thoughts and Ideas Going Into a New Week

*  Interest rate volatility has not been friendly to the stock market over the last few years.  Since 2012, when 20-day realized volatility in TLT has been in its highest quartile, the next 20 days in SPY have averaged a gain of +.35%.  That contrasts with an average 20-day gain of +1.35% for the remainder of the sample.  A weaker dollar, rising gold prices, a steepening of the yield curve, disappointing economic data releases:  are we seeing beginning concerns over stagflation?

*  We are all in the business of living; our success hinges on our self-management and leadership.

*  Ivanhoff Capital on the role of luck in success.  I would say that success is the result of putting yourself in enough promising situations where good luck can eventually come your way and staying out of enough unpromising situations that you can avoid bad luck.  This is why holding losers and selling winners quickly is so damaging:  it minimizes the odds of good luck and maximizes the odds of bad luck.   

*  Good book recommendations from Abnormal Returns.  I particularly like Ratey's book on exercise and the brain.

*  On the topic of books, I was pleased to host a craft beer gathering of portfolio managers last week with Maria Konnikova.  I will be posting on important topics from her excellent book Mastermind: How to Think Like Sherlock Holmes.  She also spoke about her upcoming book, The Confidence Game, which takes us inside the heads of con artists and their victims.  A worthwhile related topic: how we can con ourselves.       

*  Concerns over demographics in China and questions over its true growth rate;

*  The consensus for a Fed rate hike has shifted from June to September.  Interesting that 70% of economists think the Fed will wait too long to raise rates, not raise them too soon.  Is the rise of rates on the long end expressing that fear?

We're nearing a critical period for Greece and the possibility of default on its debt; some worthwhile tweets from @MrTopStep.   

Have a great start to the week!