Barron's: Milk Prices Could Head Higher

By SIMON CONSTABLE

After years of decline, milk prices look ready to rally. More frigid winters, lower production in some parts of the world, and more Chinese demand will lead to higher prices.

“People are starting to see that milk isn’t as available as they thought it would be,” says Shawn Hackett, of Hackett Financial Advisors. He sees prices soaring as high as $20 per hundredweight within a year, up from Friday’s closing price of $14.34 for May-dated Class III milk contracts on the CME. Some of this increase is likely to show up in higher milk prices at your neighborhood grocery store. (A hundredweight of milk, depending on whether it’s whole or reduced-fat or skim, is roughly equal to 11.5 gallons.) Read more here.

Photo by Mehrshad Rajabi on Unsplash

John Batchelor Show: The Exotic Risk Parity Trade Inside the Market Turbulence

By SIMON CONSTABLE

Forbes: How Trillions In Risk-Parity/Volatility Trades Could Sink The Market

By SIMON CONSTABLE

There's a problem lurking in the stock market known as the "risk-parity" trade.

The strategy, which involves investors switching between different assets based on changes in market volatility, has now grown so big that it threatens to sink the market.

How big? Some estimates peg the amount of money pursuing this type of strategy at as high as half a trillion dollars. Trades designed to profit from changes in volatility, which are inextricably linked to risk-parity, add as much as a further $2 trillion.

The issue is not the strategy itself, it is when investors decide that it is no longer useful and decide to exit their positions. In other words, when all at once they dump their positions the market will likely tank.

Here's what you need to know.

PJ Media: Roller Coaster Reflects Change in How Investors are Viewing Stock Market

By SIMON CONSTABLE

One day the stock market is up, the next day it is down.

It’s as if investors just can’t make up their minds. There's good reason for that. There are almost too many variables for Wall Street to absorb quickly.

The stock market has been like a roller coaster all week, a far cry from the solid gain-after-gain in the market we have seen for much of the past few months. The Dow Jones Industrial Average advanced by almost 18 percent in the year through Thursday, an exceptional rally by most standards. Read more here.

Forbes: Five VIX Fund Questions That Need To Be Answered

By SIMON CONSTABLE

Some people may have some 'splaining to do.

The matter at hand concerns two exchange-traded securities that were designed to profit from falls in the VIX, or volatility index, which roughly tracks the volatility of the S&P 500. Read more here.

PJ Media: The EU's Banking Ruse to Create a United States of Europe

By SIMON CONSTABLE

Is the EU trying to pull a ‘fast one’ on its citizens? Maybe so.

Some recent efforts aimed at saving Europe’s banks from another financial crisis may be a Trojan horse aimed at abolishing the nation states of the European Union.

Of course, the EU isn't portraying its efforts that way. Instead, eurocrats (a.k.a. European bureaucrats) are disguising their work as an effort to save the public from a repeat of the 2008-09 taxpayer-funded banking bailouts. Read more here.

Joe Piscopo Show: Talking Markets

By SIMON CONSTABLE

Forbes: Bitcoin Trips at Its First Major Test

By SIMON CONSTABLE

It looks like Bitcoin didn't do that well in its first major test as a substitute for gold.

While the S&P 500 and the Dow Jones Industrial Average plummeted Monday, so did the price of bitcoin, which is the best known of all the so-called Crypto-currencies. Gold prices remained remarkably steady. Read more here.

John Batchelor Show: The missing volatility is back.

By SIMON CONSTABLE

WSJ: The Benefits of Buying Both the Best- and Worst-Performing Funds

By SIMON CONSTABLE

Should you invest in last year’s underperformers or continue with last year’s winners? The answer is yes, according to a recent analysis. Read more here.

WSJ: What Is Hot Money?

By SIMON CONSTABLE

Investors in some emerging markets may hear warnings about hot money. So, what is it and why does it matter? Read more here.

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P.J. Media: The Government’s Inflation Data Caught 'Percentile Dysfunction'

By SIMON CONSTABLE

As if we didn’t already know something was wrong with the government’s inflation data, now up pops what looks like a confession. It’s part of a broader issue with government metrics that one economist dubs “percentile dysfunction.”

New research shows there’s a problem in how the prescription drug portion of the consumer price index gets calculated. Another, perhaps more realistic, index of drug prices far outgrew the CPI's drug metric over a recent five-year sample period, with one part of the alternative metric increasing 59 percent more. Read more here.

P.J. Media: Bad Monetary Move-- A Weak Dollar Is an America-Last Policy

By SIMON CONSTABLE

A weak dollar is not an America-first dollar. It is an America-last strategy.

Of course, it isn’t at all clear whether pushing the value of the greenback down is the goal of the administration.  Wall Street seems divided on the matter.

For instance, a recent report from Brown Brothers Harriman states the following: “Did U.S. Treasury Secretary Mnuchin signal a change in the U.S. dollar policy?  Probably not.” The reason, BBH says, is partly because of the Treasury’s urgent need to sell a lot of debt securities, possibly more than a trillion dollars. “It beggars belief that Mnuchin was talking the dollar down, introducing new currency risk, ahead of the quarterly refunding and a significant increase in the supply of Treasuries in the months ahead,” BBH continues. Read more here.

Briefings: A World of Doubts

By SIMON CONSTABLE

It was 2013, and the decision in China hardly raised any eyebrows in the global investment community—at least at first. Concerned about rogue financing, the government said it would crack down on so-called “shadow banking” firms, which are financial institutions that operate with little or no regulation. Too much bad lending, China’s leaders said, could mean a repeat of 2008.

Which appeared to make sense, except that over time, the move exposed a major weakness in China: its inability to attract enough investment and to switch to a US-style consumer-led economy at the same time. The crackdown would squeeze lending too much, and China’s economy slowed. But most importantly, it created new doubts about the nation’s policies—and ultimately a dramatic exodus of international investment.

All of which raises a curious question: How do you anticipate and measure investor confidence on a large scale? Read more here.

Briefings: Fishing's Power of Zen

By SIMON CONSTABLE

Most of Will Gardenswartz’s days are so consumed with games it stresses him out. As the CEO of the gamification consulting firm Life Carrot, Gardenswartz is always hustling to television executives and other entertainment producers to incorporate online games to increase audience size and engage viewers. It’s exhausting work.

But there’s one activity that’s anything but a game to Gardenswartz: fishing. He’s been doing it since he was a child. He even chose to live near Sun Valley, Idaho, to be close to some of the world’s best fishing spots. “In business, I’m easily distracted by things that don’t matter,” he says. But when he’s out on the water, he can devote his entire mind to the narrow matter of catching fish. Read more here.

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U.S. News: What Really Worries Wall Street Analysts?

By SIMON CONSTABLE

Investing professionals are paid to worry – not necessarily about whether they left the stove on or whether the boss will like their new shoes, but what's happening on Wall Street. In the world of stocks and bonds, successful pros need to be concerned about what could go wrong with their investment decisions.

And there's a lot to think about. Here are the biggest things that investment professionals lose sleep over today: Read more here.

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P.J. Media: Bundle Up the Economy and Brace for Colder Winters

By SIMON CONSTABLE

You’re gonna need a thicker sweater.

Either that, or a fatter bank balance.

Why? For the foreseeable future, we are likely to see the nasty combination of higher fuel costs and colder winter weather.

There are three reasons: Oil supplies look set to get interrupted this year, the dollar is weaker, and activity on the surface of the sun portends a period of frigid winters. Read more here.

Photo by Tijana Drndarski on Unsplash

Middle East Eye: Egypt set to continue economic 'reforms'

By SIMON CONSTABLE

Egypt looks set to buck a trend this year.

While other countries in the Middle East will likely slow down their economic reforms, Egypt will power forward with its own after March elections, according to analysts.

“There is a genuine commitment to reform by the president,” said Riccardo Fabiani, senior analyst for the Middle East and North Africa at Eurasia Group in London. “For him [President Abdel Fattah el-Sisi] it isn’t just about doing the minimum to avoid being punished by international creditors.” Read more here.

U.S. News: Why Oil and Telecom Stocks Are a Good Bet

By SIMON CONSTABLE

Will this be the year to invest in oil and telecom stocks? A BMO Private Bank report says oil and telecom could be "surprising market leaders" in the U.S. stock market in 2018.

Both sectors were losers in last year's bull market, but history shows that such laggards tend to bounce back – and for that reason, oil and telecom stocks could be winners in 2018. Read more here.

Forbes: The Fed Needs To Read This Economics Book

By SIMON CONSTABLE

The problem with economics is that even the leadership of the Federal Reserve seem to get confused.

Luckily, a soon-to-be-published book will help sort out the situation. It's titled "The Growth Delusion: Wealth, Poverty, and the Well-Being of Nations," by David Pilling, and is set to hit bookstores on January 30. Read more here.

P.J. Media: A Nation of Junkies? Study Eschews Economic Despair Opioid Theory

By SIMON CONSTABLE

Why are so many Americans dying of drug overdoses? Maybe it’s because we’re a nation of junkies.

At least that seems to be the finding from a new study that flies in the face of the more widespread view that the opioid crisis is the result of a weak economy.

“The fatal overdose epidemic is likely to primarily reflect drug problems rather than the deaths of despair,” states a report published this month by the National Bureau of Economic Research. Read more here.

P.J. Media: Russia Reaps What Privatization Sows in Great Grain Revolution

By SIMON CONSTABLE

While few have noticed, Russia has quietly grown into a new role: Top dog in the global wheat trade.

An astonishing rise in productivity, which has seen the country's wheat output more than double in size since the late 1980s, comes primarily as a result of privatization of the agricultural sector. A potential bonus for the former Soviet economy is that if, as some analysts expect, prices for the grain jump the country could see a bump in export earnings. Read more here.

Forbes: Iran Could Be One Of The Sexiest Places For Investment, Says Exiled Crown Prince

By SIMON CONSTABLE

There are tremendous possibilities for Iran's economy that go way beyond oil.

The problem is that at best the resources haven't been managed well, at worst they have been squandered. That's according to exiled Crown Prince Reza Pahlavi, who spoke with me recently. Read more here.

Forbes: Iranians Have Endured Zero Legal Protections For Years, says Exiled Crown Prince, Reza Pahlavi

By SIMON CONSTABLE

Protestors massing on the streets across Iran want something different from their government. That is for sure. But is also true that the current theocratic system ruled by the Mullahs may not allow for what the people want.

So what should a new government look like in a possible future Iran? One that protects liberties for people equally under the law says exiled Crown Prince, Reza Pahlavi.  Read more here.

Reza Pahlavi

Gage Skidmore, CC BY-SA 3.0, 

via Wikimedia Commons

Forbes: Blame Tyrannical Rule For Iran's Dismal Economy, Says Shah-In-Waiting

By SIMON CONSTABLE

Over the past few months, increasing numbers of Iranians have taken to the streets to demonstrate. Initially, the protests were over missing bank deposits, but recently the concerns of the participants have included worries about high inflation, lack of jobs, and unpaid wages. As so often happens, the mass protests seem to have been prompted by lack of economic fundamentals.

What, if anything, can be done about the dire economic situation?  To gain some insight, I spoke with the former Shah's son Reza Pahlavi, who is a possible Shah-In-Waiting for a new regime in the country, about the plight of Iran and the Iranian people. Read more here.

Reza Pahlavi

Gage Skidmore, CC BY-SA 3.0,

 via Wikimedia Commons

Featured in How Stuff Works: Bitcoin Futures Trading Isn't Blowing Up — Yet

In a surprising move in November 2017, the U.S. Commodities Futures Trading Commission (CFTC) gave its blessing for bitcoin futures to be traded on two major U.S.-based exchanges: the Chicago Mercantile Exchange (CME) and the CBOE Global Markets Exchange. And just a few short weeks later, on Dec. 11, bitcoin futures trading opened for business, with investors making bets on the future price of the controversial cryptocurrency alongside conventional commodities like oil, corn and pork bellies. Read more here.

U.S. News: When Are Small Companies Worth Your Investment?

By SIMON CONSTABLE

Don’t you love it when the little guy wins against the giant? It goes back thousands of years to the biblical story of David, the boy who used a slingshot to defeat the Philistine giant Goliath.

The stock market may be about to do similar, with small-capitalization stocks outperforming large-cap stocks. Read more here.

WSJ: What Is Alternative Risk Premium?

By SIMON CONSTABLE
It used to be an obscure technical term: alternative risk premium. But you are going to hear a lot more about it soon. Read more here.

WSJ: Why Fund-Flow Stats Aren’t the Indicator They Used to Be

By SIMON CONSTABLE 

Smart investors used to be able to identify market tops and bottoms by watching the weekly flows of money into and out of mutual funds. Then came ETFs and everything changed. Read more here.

Julie Jason: Keeping tabs on economic trends

If you are an investor, do you watch economic trends? Some economists believe that being aware of economic trends gives investors an edge. I spoke with economist Simon Constable a few weeks ago to discern how his work might provide some insights and guidance to today’s investors. Constable is co-author of “The Wall Street Journal Guide to the 50 Economic Indicators That Really Matter: From Big Macs to ‘Zombie Banks,’ the Indicators Smart Investors Watch to Beat the Market.” Read more here.

PJ Media: How Income Taxes Increase Economic Inequality

By SIMON CONSTABLE

New research suggests that some politicians may have been barking up the wrong tree when it comes to battling income inequality.

Take for instance, Bernie Sanders, the former left-wing candidate for U.S. president who in 2015 said that a 90 percent top income tax rate on the wealthy would not be too high. His idea was to reduce income inequality and he cited the eye-watering tax rates as the right way to do it. Plenty in the media rushed to his defense.

The problem is that the evidence from the real world doesn’t support such assertions. Read more here.

U.S. News: Why an Inverted Yield Curve Signals Financial Disaster

By SIMON CONSTABLE

If the bond market inverts, will your portfolio get upended?

Increasingly market pros today are talking about a flatter yield curve in the bond market. And as the curve flattens we come closer to a dreaded inverted yield curve and a likely recession, which would not be good for stocks or riskier bonds. Read more here.

John Batchelor Show: Copper bullishness 2018 & What is to be done?

By SIMON CONSTABLE

Forbes: Why Prince Harry Should Nix Obama Royal Wedding Invite

By SIMON CONSTABLE

There's a diplomatic spat waiting to happen between the U.S. and U.K., and it involves none other than former president Barrack Obama.

The out-of-office politician is known to be good friends with Prince Harry, and there is now talk of the former getting an invite to the forthcoming royal wedding, according to a report in Metro.

That invite shouldn't happen, and the matter comes down to economics. Read more here.

Barron's: Lead Looks Dead

By SIMON CONSTABLE

The market for lead is about to get an electric shock. And It’s unlikely to recover. It won’t be just falling prices; futures markets trading volumes will probably drop to levels that make transactions very tough to complete. Read more here.

Barron's: How Investors Can Ride a Rally in Commodities

By SIMON CONSTABLE

If inflation looks set for a comeback, a larger-than-average helping of materials, energy, and foodstuffs could help investment returns. 

“Energy, food, and materials are all key inputs into the inflation numbers,” says Will Rhind, CEO of exchange-traded fund firm GraniteShares in New York.

When inflation quickens, prices for those items will rally. But there are nuances that investors need to understand. Read more here.

Barron's: Lumber Rally Will Be Felled

By SIMON CONSTABLE

It’s time to flee the trees. Lumber prices have rallied mainly for reasons that don’t seem sustainable for much longer. 

Active-month futures contracts for random-length lumber were recently trading at $435 per 1,000 board feet, up nearly 30% from $337 early last spring. Investors holding lumber-related futures should take profits. Those wanting to profit from a likely retreat in prices should sell May-dated contracts. Alternatively, they could write out-of-the-money call options with the hope that they expire worthless. Read more here.

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U.S. News: U.K. Deal With the EU May Help British Stocks

BY SIMON CONSTABLE

The U.K. is making real progress in its negotiations to exit the European Union, and its progress toward a successful Brexit presents an opportunity for savvy investors to get in on the action.

U.K. Prime Minister Theresa May struck a deal with the European Union that allows the country to start the next stage of talks about future post-Brexit trade deals. It comes after a year and a half of tough talk from both sides. Read more here.

Joe Piscopo Show: Bitcoin, Taxes...

By SIMON CONSTABLE

P.J. Media: Brexit-Lite Comes with Economic Pitfalls for Britain

By SIMON CONSTABLE

The UK could be about to take a wrong turn on international trade.

The problem is that a recent agreement struck surrounding the country’s exit from the European Union leaves a choice between an easy decision and a hard one. Unfortunately, making the hard decision will be best for long-term economic growth. Read more here.

Forbes: Why Business Leaders Shouldn't Mimic USA Today Editorial

By SIMON CONSTABLE

Earlier this week a USA Today published a blunt attack on President Donald Trump which does a great job of declaring how the paper feels.

The phrase catching most attention is the following:

[The president] is not fit to clean the toilets in the Barack Obama Presidential Library or to shine the shoes of George W. Bush.

However, I'd caution business leaders not to follow suit with broad generalizations about people and the paying jobs that they hold. Read more here.

Forbes: Even Leftist Scots Understand Low Tax Rates Are Better

By SIMON CONSTABLE

Scottish income taxes are going up, but not by much.

While any increase in what people must pay their government isn't genuinely welcome, there is some promising news hidden inside the announcement. Read more here.

U.S. News: Trading Bitcoin Is a Bad Way to Invest

By SIMON CONSTABLE

The surge in bitcoin prices is causing a buzz that likely won't end well for many. But what's happening serves as a useful and cautionary lesson for long-term investors.

In short, fun and investing don't mix well. Read more here.

Middle East Eye: Middle East economies trend upward as war against ISIS winds down

By SIMON CONSTABLE

Things are looking up in the Middle East.

Despite the long war against the so-called Islamic State (IS) group, the outlook for much of the region looks brighter.

Three broad factors are behind it: a rise in the price of oil to sustainable levels, a victory in the war against IS itself and improvements in credit availability, analysts say. There are some factors that are specific to individual countries as well. Read more here.

Forbes: Make Your Life Better Reading Howard Bloom

By SIMON CONSTABLE

By any standards, Howard Bloom has achieved great things. Scientist, publicist, and author barely begin to describe it. His latest book, How I Accidentally Started The Sixties, adds mightily to the oeuvre. It also has some lessons for the rest of us. Read more here.

Forbes: Why Bitcoin Still Isn't Money

By SIMON CONSTABLE

When Bitcoin futures started trading on the CBOE options exchange late Sunday, the crypto-currency joined the big leagues of financial instruments.

But, despite its name, it still isn't money. Read more here.

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U.S. News: How Rising Interest Rates Will Hurt the Stock Market

By SIMON CONSTABLE

It's all but certain that the Federal Reserve will increase interest rates, perhaps as early as this month and several times in 2018. And that will likely change the dynamics of investing in the stock market.

It may mean that investors should think about changing how much of their portfolio they should allocate to equities, and how much they have invested in bonds. Read more here.

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Forbes: 6 Reasons Bitcoin Futures Are Better Than Bitcoin

By SIMON CONSTABLE

Great news for Bitcoin fans, you'll soon be able to trade futures contracts in the cryptocurrency on the Cboe Options Exchange and also on the CME. Trading will start on December 11 and 18, respectively.

Even better news, they could be a better instrument than Bitcoin itself. Here's why:

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WSJ: What Are Donor-Advised Funds?

By SIMON CONSTABLE

Some individual investors may not be familiar with donor-advised funds, which have certain advantages and are fast becoming a force within philanthropy.

“A donor-advised fund is a way for people to save money to give to a charity in the future but to get the tax deduction immediately,” says James Andreoni, professor of economics at University of California, San Diego. “It breaks the connection between when you donate and the timing of when the money goes to the charity.” Read more here.

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WSJ: Give to Get: What Motivates Some Hedge Funds’ Charity

By SIMON CONSTABLE

What motivates hedge-fund managers to make charitable donations? 

A new study suggests that in many cases, the gifts appear to be more about business strategy than benevolence. Read more here.

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