2 Year Greek Sovereign Debt Yields Less Than United States 2 Year Treasury Note

1. The Absurdity Of Quantitative Easing.
2. Ratings Agencies’ Evaluations Ignored By “Omnipotent” Central Bankers.


The 2 Year Greek Government Bond Currently Yields 100 Basis Points Lower Than The 2 Year U.S. Treasury.

Greece Is Rated Junk [B-] by Fitch While The U.S. Is Rated Highest Investment Grade [AAA] By The Same Agency.


Contact The Author: Dominate@GlobalSlant.com

Biggest Risk For Stock Market = Urgency To Buy Simultaneously Increasing With “Sky High” Sharpe Ratio

Sharpe Ratio = Reflects Equity Nirvana


There Is Plenty Of Chatter About The U.S. Equities Markets & How Extended They May Be.

So Often I Am Asked About A Catalyst To Initiate A Downward + Meaningful Price Reversal. I Wish I Had An Easy Answer. It Could Be Many Things…Almost Anything. But Actually The Catalyst = Almost Irrelevant.

What Resonates With Me The Most, Though, Is The Multi-Year URGENCY To Buy Equities…As Measured By A Lack Of Any Meaningful, Peak To Trough, Capital “Draw-Down” Since February 2016.

The BTFD/FOMO Mentality Continues To Prevail And Is Increasingly Acute…As The Price Dips Are Less Frequent + Increasingly Brief + Shallow.

Meanwhile…Stock Prices Regularly Reach New All-Time Heights While Scores Of Technical + Sentimental Metrics Shoot Beyond Historical Summits.


The Market’s Elasticity Seems Stretched Very Close To Its Limits…But Still…Prices Continue To Surge At A Steepening Rate…Thanks, Primarily, To The Seemingly Open-Ended/Massive Liquidity Measures [QE, ZIRP, NIRP & IOER In The U.S.] Offered By Global Central Banks.

That These Liquidity Measures Also Dilute The Currencies, In Which Equities Are Specifically Denominated, Further Confounds The Parabolic Equity Advance.


The Monthly Chart Of The SPX [see above] Visually Demonstrates The Relentless Price Thrust Higher.

Furthermore, That The S&P 500’s Total Return Was Positive For Every Month Of Calendar 2017 = Simply Stunning…Resulting in 19.38% Return [ex: dividends].

Even More…Since March 2016…20/22 Months Have Yielded Positive Returns. And The Absolute Returns = Awesome = 41.25% [ex: dividends].

Fundamentally…Earnings Per/Share For The S&P 500 Constituents Have Improved But, More Importantly, The EV/EBITDA Multiples Have Also Strongly Advanced…Offering Much More Fuel To Prices Than The Decent Earnings Increases.


But What Makes The Market Return Profile Especially Remarkable…Is Not The Impressive Percentage Gains [bull markets have yielded many similar results over the past century]…But The Lack Of Volatility…As Measured By The Standard Deviation Of Prices Associated With These Returns.

It Is The Before Mentioned BTFD’ers/FOMO’ers That Perpetuate The Lack Of Standard Deviation/Volatility.

Of Course The BTFD/FOMO Behavior Is Shaped By Central Banker Behavior…That Encourages Massive Risk-Taking…Despite The Unprecedented Price Climb.


So How Best To Measure/Quantify Any Of This?

The Sharpe Ratio Is The Calibrating Gold Standard As It’s Quotient Incorporates Standard Deviation Of Returns In Its Denominator.


It Essentially Communicates The Mathematical Pathway To Returns…How Much Capital “Draw-Down”/Pain Was Endured To Achieve Returns.

And Historically…There Is Usually A Fair Amount Of Pain On This Path…Despite Monumental Efforts To Avoid Such Pain.


The Higher The Value Of The Sharpe Ratio = The Better The “Risk-Adjusted” Return Profile.

Be Advised, Though, That A Higher Sharpe Ratio Does Not Necessarily = Higher Absolute Returns.

To The Contrary…A Higher Sharpe Ratio [especially valued at hedge funds] Typically Equates To Lower Absolute Returns…As The Pursuit Of Pain Avoidance Consequently Results In Dampened Total Returns.


On The Other Hand “Long-Only” Mutual Funds + Passive Indexed Strategies Usually, Over Longer Time Frames, Cannot Avoid A More Muted Sharpe Ratio [versus hedge funds] As They Are Wholly Exposed To Downside Volatility [fully invested mandate]…That Is…UNTIL RECENTLY…As The Data Set Below Demonstrates.

S&P 500
Ending 12.17

Sharpe Ratio
1-Yr 4.36
3-Yr .88
5-Yr 1.35
10-Yr .45
15-Yr .53

Standard Deviation
1-Yr 3.89
3-Yr 10.04
5-Yr 9.46
10-Yr 15.08
15-Yr 13.26


The 1 Year Data = STAGGERING…Not Only Because Of The Stratospherically High Sharpe Ratio of 4.36 [driven by both a strong numerator + puny denominator] But Because It Is Associated With A Long Only, Non-Levered Passive Strategy…Producing Close To 20% Returns.

Remember…Higher Sharpe Ratios Are Typically Linked To Lower [Not Higher] Absolute Returns.

Plus, These Recent Results Stand On The Shoulders Of A Market Low Achieved Almost 9 Years Ago.


So…Is The Sharpe Ratio Just Another Indicator Rendered Useless By Money Printing Central Bankers?

I Think Not.

What The Current Sharpe Ratio Actually Indicates = The BTFD’ers/FOMO’ers Are Recklessly Sprinting Into A Very Mature Bull Market…Blatantly Ignoring The Increasing Probability Of A Material Price Decline.


Contact The Author: Dominate@GlobalSlant.com