I’ve collected 29 charts over the last several days that I think are worth your attention. But before you skim them you should really read the next three paragraphs.
There are some major analytical errors that you can make if you use charts the wrong way. Seriously. For one, it’s always necessary to actually source the data yourself. These are images on the Internet, and so even though I think they’re credible and want to believe they’re true, you have to be an enterprising investor and verify them yourself. After all, I want to believe this image is real, too.
So you should look at these charts, think about and corroborate them, but you should also study the excellent work my colleague Jason Voss, CFA, has done highlighting the subtleties of analyzing charts well. His r-squared chart taxonomy would be required reading if I ran the world.
Anyway, we’re coming to the end of the previously specified three paragraphs of text, so I will suggest you subscribe to the Enterprising Investor if you like this sort of thing.
Fascinating chart of comparative currency crises of past 20 years. Ruble crash now looks just like Asia crash in 1998 pic.twitter.com/mp8WuNaiJw
— Jim Rickards (@JamesGRickards) January 7, 2015
One of the things that’s intriguing about this chart is the repeat appearances on it. I sometimes hear from market participants that a country or issuer wouldn’t default/devalue because then markets “would never” lend to them or trust their currency again. Oh really? Seems a lot more like the markets have pretty short memories.
This one is remarkable because it shows that central banks have been printing money more or less in a straight line since since even before the financial crisis is officially demarcated. I don’t think anybody has argued seriously that they are printing money only to address the financial crisis — there is a broader economic malaise it caused as well — but it’s noteworthy both how constant the growth is and how small a trillion dollars looks on this chart.
— Climate News (@ClimateNewsCA) December 28, 2014
One of my favorite mental models comes from the excellent Todd Harrison, who coined the phrase “the path of maximum frustration.” An unexpectedly cold Arctic winter which leads to the expansion of the polar ice caps at an unusually fast clip seems like exactly that, since climate scientists must convince a scientifically illiterate population that action is needed to put the breaks on climate change. This data point may make an appearance in domestic political conversations in the coming year as environmental legislation is debated again.
— MacroPru (@MacroPru) January 7, 2015
Almost as compelling as the stated point of this chart — asset bubbles, indeed, are difficult to identify — is the transformation that’s taken place in the S&P 500 over the last 40 years. If I had made this chart, I might have titled it “The Amazing Disappearing Telecom, Materials, and Utilities Industries.” Watching them vanish from large cap indices is a provocative look at how domestic markets have evolved.
— Nick Timiraos (@NickTimiraos) January 7, 2015
Any change in a long-term trend is worth paying attention to, and here we have a particularly important one. Almost exactly 10 years ago, the housing industry was so hot that it seemed like an engine for obvious, permanent wealth creation. It’s interesting that the vacancy rate has been flat for so long. Is it really possible that household balance sheets are healthy enough that people are choosing to buy instead of rent? I hope so.
— Mother Jones (@MotherJones) January 7, 2015
The $8-trillion figure given in this study is a specific number attached to a forecast, and as such is guaranteed to be wrong, but it’s important to note our susceptibility to the decline in effectiveness of our antibiotics. A new drug has just been uncovered that has a lot of promise, but it’s always worth remembering that we’re in an arms race with evolution.
After years of flat-screen televisions being the epitome of cool, it’s kind of wonderful that curved screens are the new hot thing . . . at least according to the television manufacturers trying desperately to upsell us on them. To me, it seems like it’s getting cheaper and more competitive to produce television screens that are larger and better than ever before. I have a seven-year-old HDTV that cost more than $1500 but could be replaced for $399. It seems like low-end televisions are awesome enough that most consumers are wondering why they would ever shell out money for the new hotness, unless they like setting money on fire . . .
— William C.G. Ortel (@wcgortel) January 7, 2015
The new JP Morgan Guide to the Markets is out, and it’s worth a read. I should have said “since mid 2009” in my tweet above, but it’s remarkable how consistently S&P 500 companies have favored buybacks over dividends. It’s also remarkable that companies are now returning ~$176 billion to shareholders per quarter, versus ~$140 billion in 2007–2008. Measured from there, it’s a pathetic compound growth rate. Measured from the next year — when it grew from ~$80 billion — it’s amazing.
An inflection point in real estate loans? pic.twitter.com/QdfFwrzVtV
— William C.G. Ortel (@wcgortel) January 7, 2015
It looks like banks have been wary of real estate loans ever since almost being ruined by them during the financial crisis. Maybe that ends now? It’s a bit worrisome that commercial and industrial loans have been so far above the median for so long, and real estate loans are only just catching up. Does this speak more to changing risk appetites on the lending side or changes in the demand equation for housing? Tell me what you think in the comments section.
— Holger Zschaepitz (@Schuldensuehner) January 7, 2015
It’s not my job to make stock picks, but rather to filter the world’s investment information and provide helpful perspective. Last year, I published a series of conversations I had with prominent investors in India, and one of them cautioned that one of the more significant mistakes foreign investors make in allocating to India is buying into mega-cap names . . . like those in the SENSEX. Enterprising investors who believe the bullish argument on India are likely best served investigating the names that aren’t as widely followed.
US investments: software vs hardware pic.twitter.com/F7L4OGluzE
— Eurofaultlines (@Eurofaultlines) January 7, 2015
This chart speaks for itself. Software is a real thing, and we need to stop pretending software companies are just a bunch of kids in hoodies.
Our New York City office is about two blocks from the Rockefeller Center Christmas tree, otherwise known as the Mecca of selfies. I have had the distinct pleasure of observing couple after couple taking their picture in front of the tree with a selfie stick, and I have to say there’s something endearing about it . . . even if it’s intrinsically ridiculous. The selfie stick serves as a reminder that it is just as difficult to predict the values underlying technological progress as its course and application. I hope this is just a fad (because . . . come on), but I can’t really get that bent out of shape about something that makes it easier for people to commemorate moments together.
My understanding of the oil and gas business is that “typical” wells are about as easy to find as “normal market conditions.” But that said, wells that have been fracked experience a substantial drop-off in production that isn’t talked about enough.
It’s also worth noting that although these rigs decline in production over time, we have also been getting better at extraction. Those declines may come from a higher base.
https://twitter.com/Callum_Thomas/status/549309468794568706 It’s also important to remember that a lot of people talk about commodities — and particularly oil prices — as trading very cyclically. We can only learn a limited amount by comparing such a long time series to the present — oil markets before the invention of the telephone bear little resemblance to those of today in terms of supply, demand, or even location — but the chart is provocative, as Callum observes.
There will almost certainly be a time in my investment career when Africa is hailed as the engine of global growth. Will that era begin this year?
Our members certainly aren’t all that bullish on South Africa, France, and Brazil.
Last year they were pretty bullish on the world economy though. If I were you, I’d read this year’s Global Market Sentiment Survey.
If you read it last year, you probably would have noticed a decent shift in sentiment about Japan.
And the significant concerns about a real estate bubble among members in the Asia-Pacific region.
I’m consistently amazed at people’s willingness to confuse bitcoin the technology with bitcoin the asset. The technology and its core innovations — lower authentication fees, peer-to-peer transactions, and so on — are amazing, but the asset itself is confusing to value and not necessarily tied to the adoption of the technology.
Following up on the preceding chart, can you believe that bitcoin performed even worse than the Russian ruble in 2014?
And it’s worth remembering what the long-term trend in the US dollar looks like as we close out a year in which the US Dollar Index has rallied in almost a straight line since mid-summer.
This is a gorgeous piece of analysis. It might be natural to think that the Russian market would be categorically “cheap” right now, especially considering the troubles they’ve had recently. If you factor in the market’s assessment of the credit risk, not so much. Turkey jumps off the page as being worth consideration here, but if this chart serves any purpose it is as a reminder that any one factor is never dispositive in investment research. Enterprising investors should always look for harmony in a series of statistics, sensations, and sentiments, rather than a “smoking gun” number.
Gender parity is more than just an important thing to me, it’s a UN Millennium Development Goal and is increasingly real. Nothing happens in a straight line though. This chart, which shows what men want from prospective wives, shows gender relations that are more aspirational (look at the increase in the desirability of love) and more materialistic (good looks sure jumped up a lot). One only wonders how this ranking will look 70 years from now, and whether the vanity-fueling effects of social media will accelerate or dissipate by then.
I was in Times Square last Thursday night to see a show and had planned on meeting friends at Shake Shack for a burger and a beer beforehand. I was shocked to find there was a line outside the door in sub-freezing temperatures. Humorously, across the street there was an empty McDonald’s with hundreds of unwanted Big Mac coupons littering the ground outside. It’s tough to imagine a more succinct encapsulation of the relative demand for the two restaurants.
Trade flows are important to analyze, but how often do you look at information flows? This chart highlights the regional power of South Africa and Nigeria, as well as the impressive regional dominance of China. Seen this way, India seems like an international power but not a regional one, and the United Arab Emirates may have just barely eclipsed Saudi Arabia in regional influence.
Austria is attracting an impressive proportion of skilled immigrants, which surprised me. It’s also interesting to note the relative levels of brain drain among the PIIGS countries — Portugal, Ireland, Italy, Greece, and Spain — which have long been considered the chief exporters of economic woes to their co-members of the European Union. Ireland seems to be attracting far more skilled laborers than one might expect for an economic basket case.
— Mars Weather (@MarsWxReport) January 8, 2015
In closing, cheers from the northeastern United States, where it has recently been colder than Mars. Stay warm!
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
Image credit: ©iStockPhoto.com/FrankRamspott