👋🏼 Hello friends,
Greetings from Saratoga Springs, NY.
It’s Belmont Stakes weekend and this place is JUMPIN’! 🐎
Now, let’s enjoy a leisurely Sunday Drive around the Internet.
🎶 Vibin'
The vibe in Saratoga Springs this week, and especially this weekend has been electric. So this week, I’m vibin’ to Zoot Suit Riot ‘cuz that’s pretty much the mood around here.
💭 Quote of the Week
“Manners are a sensitive awareness of the feelings of others. If you have that awareness, you have good manners, no matter what fork you use.”
– Emily Post
📈 Chart of the Week
ROLLING STOCK/BOND CORRELATIONS
This week’s Chart highlights the correlation between stocks and bonds. Many investors take as an article of faith that these asset classes are consistently negatively correlated and that a diversified portfolio consisting of stocks and bonds offers better risk-adjusted returns than either asset class alone.
However, the data actually shows this not to be the case at all. There are just as many periods when stocks and bonds move in the same direction as when they move in opposite directions.
In fact, currently (at least as of the end of April), stocks and bonds are at a historical high in terms of positive correlation.
I contend that over time, the only asset class that is reliably uncorrelated to stocks is cash, and the only reliably negatively correlated asset class is volatility (as generally expressed through options positions).
Some may argue that non-traditional assets such as private equity or private credit are also diversifying for stocks. This is likely true during normal well-functioning market conditions with ample liquidity.
However, it has been my experience that in stressed, highly volatile, and illiquid markets, correlations across most all asset classes spike higher. During periods like this, there are few places to hide other than in cash and monetized volatility.
The late, legendary strategist for Morgan Stanley, Barton Biggs once wrote, “There are no cabs in the rain.”
In other words, the time to de-risk one’s portfolio is before it starts raining.
🚙 Interesting Drive-By's
🤔 Investing - Is Alpha a Mirage in a Sea of Beta? - from Michael Kao [Link]
💡 How to Train Your Brain to be More Optimistic - from Fast Company [Link]
📈 Texas Might Get Its Own Stock Exchange - from Sherwood News [Link]
📈 The Art of Scaling Taste - from Evan Armstrong [Link]
🤓 AI Integration and Modularization - from Ben Thompson [Link]
🙏🏻 A Wisdom Bomb - from Matthew McConaughey [Link]
👋🏼 Parting Thought
If you have any cool articles or ideas that might be interesting for future Sunday Drive-by's, please send them along or tweet 'em (X ‘em?) at me.
Please note that the content in The Sunday Drive is intended for informational purposes only, and is in no way intended to be financial, legal, tax, marital, or even cooking advice. Consult your own professionals as needed. The views expressed in The Sunday Drive are mine alone, and are not necessarily the views of Investment Research Partners or Cache Financials.
I hope you have a relaxing weekend and a great week ahead. See you next Sunday...
Your faithful financial provocateur,
-Mike
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