Showing posts from October, 2019

Ten Thousand Words - October 2019

Apparently , Confucius didn’t say “One Picture is Worth Ten Thousand Words” after all. It was an advertisement in a 1920s trade journal for the use of images in advertisements on the sides of streetcars. Even without the credibility of Confucius behind it, we think this saying has merit. Each month we share a few charts or images we consider noteworthy. Starting with a sobering thought, businesses that have debt graded as speculative or that can't cover their interest bills - Interest Cover Ratios (ICRs) of less than 1 - are "almost 40 percent of total corporate debt in the economies we studied", the IMF noted (as reported by the Financial Times). On a more upbeat note, Bespoke tabulated how a 1% decline in the S&P 500 to start October has typically been followed by healthy returns; and the rise of software M&A was charted by PitchBook. One of our favourite themes - the far greater opportunity set in small and micro cap stocks - has been illustrated by Verdad A

Volatility & Uncertainty

Volatility across all the asset-class proxies deployed in Equitable Investors' Risk-Parity Core strategy increased over the past 12 months but - as set out in the chart below - volatility remains below its peak levels of the past five years. Figure 1: Annualised Standard Deviation (trailing 12 months) Source: Sentieo, Equitable Investors Similarly, the S&P/ASX 200 VIX Index, a domestic equities volatility measure, has increased over the same period but remains well below the peaks of recent history. Rising volatility in risk assets (equities, commodities, real estate etc) is consistent with increased levels of uncertainty in the world as illustrated by the World Uncertainty Index (based on counts of the word “uncertainty” and variations in quarterly Economist Intelligence Unit country reports).   Figure 2: World Uncertainty Index Source: Ahir, H, N Bloom, and D Furceri (2018), “World Uncertainty Index”, Stanford mimeo (via This text has be


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