Quarterly Newsletter – The Advisor

In the field of chaos mathematics, a sudden, critical change is known as bifurcation – the point at which a small change causes an entire system to shift from stable to unstable.

That’s what happened with America’s Silicon Valley Bank (SIVB) in March. The global financial system was relatively stable until SIVB made a minor announcement that they had sold some government Treasury bonds at a loss. Suddenly markets shifted into chaos. The banking turmoil spread across America with the loss of two other regional banks and over to Europe with the “take under” of the 167 year-old Credit Suisse, a “systemically important financial institution”, and with the share price woes of another SIFI, Deutsche Bank. Governments around the world pumped liquidity into their banking systems in the hopes of stabilizing an increasingly chaotic situation. That small change starting with SIVB led to significant instability.

Read the Spring 2023 Advisor

Welcome to the age of dearer money.

Thanks to resurgent inflation, the US Federal Reserve has raised interest rates more aggressively than at any time since the 1980s, dragging along other central banks in its wake.

Investors must transition this regime change to one of higher interest rates and scarcer capital. Adaptation may not be easy, but taking the long view could help. The new regime has history on its side; it was the era of cheap money that was so out of the ordinary.

Read the Winter 2022 Advisor

Weather forecasters have a thankless job: it is often difficult to get an accurate prognosis even two days hence, and then they get blamed for being wrong. Yet some climate alarmists, rightly or not, predict with certainty what global temperatures will be one hundred years from now. But there is an awful lot of uncertainty between now and then.

The trouble with the future is that it’s unknowable. And investing is all about the future.

Read the Autumn 2022 Advisor

What a first half it’s been for capital markets! Global equity and debt capital markets have lost a cumulative $31 trillion. The main American index, the S&P500, is down 20% from its high, the Nasdaq, where tech darlings are listed, is down 30%, and bonds have experienced their worst episode since 1994. Many investors are wondering if the worst is over.

Markets deal with the allocation of capital. When the markets are function-ing effectively, they allocate capital efficiently based on the associated risks at the right price. When they don’t work – because of crises, shocks, or distortions – there are consequences.

Read the Summer 2022 Advisor