Author Archive | Michael Rosen

yellen

Janet Yellen Is Your Friend

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I have not met Janet Yellen, but she seems like a perfectly friendly person. Yet, for some reason, investors seem to panic whenever she hints that the Fed is discussing whether and when to lift interest rates from close-to-zero to a smidgen above zero. That instinctive panic is not rational. Part of the problem is that it appears there are so few people with a grasp of how monetary policy works, and certainly none who work in Congress or the media. So here’s a quick primer. The Fed does not set interest rates. The Fed adds or withdraws reserves to Read More


blog-liberty

Give Us Your Poor

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A large percentage of energy expended at Angeles is in evaluating, analyzing and judging investment managers. It is a core competency at Angeles, and we think we’re pretty good at it. In doing this work, we crunch a lot of numbers, talk to a lot of people, and argue incessantly (and occasionally, productively) among ourselves. Success in selecting superior managers comes mostly from employing very smart, experienced people in this pursuit, and by having them interact in a structure and culture that seeks to discard the mediocrity and lowest common denominator settled by consensus, in favor of the truly outstanding, and Read More


height

Falling Behind

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It’s good to be tall. Tall people tend to be more highly educated, earn more over their careers, are higher in the social pecking order, and live longer with better health. [Please don’t complain to me that these statement are untrue or unfair: these are true as generalizations, and I can cite the studies if you insist; these are fair because, well, maybe they’re not fair. But that’s not my department.] By better health, I mean a lower risk of cardiovascular and respiratory diseases and less risk of adverse pregnancy outcomes, although there is a greater risk of some cancers. Read More


neg-equity

Negative Negative is Positive

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Housing is a small part of the larger economic picture, contributing only about 5% to GDP (although including all the ancillary and related services probably triples that number). Still, for most people, equity in their homes represents the single biggest investment they have, and for many, maybe the only investment they own. Many statistics about this economic recovery are disappointing, especially the very sluggish growth rate, averaging just over 2% p.a. since 2010. Other data are more encouraging, such as the halving of the unemployment rate from 10% to under 5%. One of the more impressive markers of recovery is found in Read More


angeles-blog

Rupture

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[nota bene: this is a long one; if you don’t have time, just skip to the summary at the end. I promise, no hard feelings.] The political experts were remarkably accurate in last week’s UK referendum on continuing to remain in the European Union, projecting a vote of 52%/48%. The actual final tally was 51.9% to 48.1%, so chalk one up to the pundits. Well, the numbers were spot on, but the sign was the wrong way: instead of a narrow victory to remain, the voters chose to exit. The Bloomsbury Crowd [a group of Cambridge-educated intellectuals who gathered in Read More


blog-image-replace

La Justice?

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I’m not French, and I’m not a lawyer. So I am certainly not a French lawyer. These facts may be obvious, but I state them as a possible explanation for my lack of understanding the (tortured) logic in a Paris courthouse today. A long time ago, in another time and place (2007 Paris, to be precise), there was a junior trader at a venerable bank (Société Générale, founded 1864 under charter granted by Napoléon III) who was supposed to be arbitraging the spread between equity cash and futures. Not a very sexy job, and one better suited to computers than humans Read More


floating-oil

Floating Oil

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Oil has had a nice recovery this year (see graph for Brent, YTD), up about 18% to over $48/barrel today. Of course, this is still well below the +$100/barrel we saw from 2011 through most of 2014, so will oil continue its climb higher? Um….no. I don’t see any oil tankers in Santa Monica Bay today, but if I looked out my window in Singapore, it would be a very different story. Through the Straits of Malacca, between Malaysia and Indonesia, one of the most strategically important shipping lanes in the world, flows more than 15 million barrels of oil Read More


housing-has-legs

Housing Has Legs

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Surprisingly strong housing numbers out this morning: new single-family homes rose 16.6% in April to an annual pace of 616,000 (see chart below), well above expectations, and up 23.8% over the past year. Supply of new homes fell to just 4.7 months, all due to faster sales (inventories were flat). Sales are up strongly in the Northeast, solidly in the South and West, although down in the Midwest. The median ($321,100) and average ($379,800) prices jumped 9.7% and 13.5%, respectively, the last year. There is more to come. The graph below shows the data from 1963. We may never reach the Read More


blog-1

Inside the Triangle

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Complexity makes investing so challenging. Unlike the pure sciences, there are no hard truths in investing, no discoverable axioms that determine outcomes with 100% confidence. At best, we can speak in probabilities, but even these probabilities come with large standard errors. Investing demands humility, even from the best of us. This complexity comes from the infinite number of variables that affect investments. These variables are not just economic and financial, but also political, social and emotional. Investing cannot be reduced to a formula or an algorithm, however many Greek letters they may contain. It’s not just the sheer number of Read More


vix

Still in Neutral

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The first quarter began with a bang and ended with a whimper. At least, that’s the message from the VIX (volatility index—see below). Bouncing around an elevated level of around 28 for much of January and February, the VIX fell 50% to 14 by the end of March. At a high level, we have maintained a pretty neutral stance in our portfolios. I didn’t think the sell-off in the beginning of the year was the beginning of a new bear market, so we held our ground. The March rally brought global equities all the way back to flat for the Read More