Financial Statement Analysis

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Weekend Reads for Investors: Montier, Musk, and Mauboussin

Weekend Reads for Investors: Montier, Musk, and Mauboussin

Central bankers in the US have long fixated on the equilibrium real interest rate (ERIR) as their lodestar, an obsession that GMO’s James Montier, in The Idolatry of Interest Rates, bemoans as “a massive exercise in navel gazing.” According to Montier, the broad acceptance of the theoretically dubious ERIR — the real interest rate consistent with full employment of labor and capital resources—is not an example of the wisdom of crowds, but rather “groupthink extraordinaire.” Further, investors’ collective preoccupation with interest rates as an economic “cure-all” and their “deification of central bankers” are equally misguided, says Montier. Read more

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Turning Points: The Status Quo Is Changing

Turning Points: The Status Quo Is Changing

The status quo is changing markedly. Oil prices are heading south as the United States ramps up production and OPEC refuses to cut to compensate. Moreover, global demand is looking sluggish with weakening growth in Europe, Japan, and China. The weakening of Chinese demand suggests that there could be a regime change taking place whereby the global driver of commodity demand is declining at precisely the moment when the expansion of global supplies is finally arriving. Read more

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