Investing

Catalysts

The market continues to defy expert expectations. The economy is in dire straits and will likely get worse before it gets better seems to be the view. While the stock market is not the economy, it tends to reflect the economy in many ways, especially growth and growth expectations. With today’s astonishing GDP print, nobody …

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Investing

The Convexity of a Crash

Convexity can be a confusing topic and I’m by no means a fixed income, let alone a convexity expert. In a nutshell, convexity is a property that results in an investment (i.e., a US government bond) having higher returns during favorable conditions (i.e., declining interest rates) than it has losses during unfavorable conditions (i.e., rising …

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Investing

Rethinking Bond Allocations

In my last post, I discussed the relative unattractiveness of bonds over the medium to long-term. Specifically, I questioned the ongoing diversification benefits of bonds given current interest rate levels. One counterpoint I failed to acknowledge was convexity. Convexity is a more advanced bond concept having to do with how bond prices react to changes …

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