Matthew Lekushoff |
OPEC | December Blur | The Ubiquitous Mannequin Challenge
Well, happy December! Where has the year gone?
While most markets have been range-bound over the last couple of weeks, energy has been more volatile with investors attempting to read the tea leaves ahead of yesterday's OPEC meeting
And what a meeting it was! The 14-member group agreed to lower their production by an impressive 1.2 million barrels a day, with a limit of 32.5 million barrels a day. Perhaps even more impressive was the agreement also included a commitment from non-OPEC countries to cut their output by 600,000 barrels a day-----  with Russia accounting for roughly half of that. This unexpected agreement sent energy markets soaring by about 8% yesterday. As I write this a little before noon on Thursday, the price of oil is up another 4% with sweet crude over $51 and Brent a little over $54. These levels are almost double where they were earlier in the year.

Given this increase, I'll likely look to trim our energy positions in the near future. This is not because I believe oil isn't undervalued compared to historic levels, but rather because it's made us some nice profits and a rebalance will bring it back to within our model's parameters. Also, it's worth mentioning OPEC's mixed history of keeping promised cuts.
By most measures, December tends to be less volatile than other months , especially in its second half. Although never a guarantee, I suspect things will slow down considerably until mid-January. This time of year, then, allows me to do additional research and make adjustments to our portfolio models when necessary.

With emerging market indexes falling, and their superior long-term outlook compared to developed markets, I'm looking to expand our models to increase the current weighting materially. This surge in energy prices may have come at an opportune time... 

In the review queue
The Rosie Project  by Graeme Simsion: A story about a quirky genetics professor whose love of projects takes a number of expected and unexpected turns. I really enjoyed this book and couldn't put it down, partly due to my enjoyment of the story, and partly due to my ability to relate to the main character-----  albeit, on a subdued level.
The Clash of the Cultures: Investment vs. Speculation  by John Bogle: For many of us, John Bogle, the founder of mutual fund and ETF company, Vanguard , is a legend. Through his will, stubbornness, and integrity, he almost single-handedly changed the investment industry for the better. In his latest book, he rails against mutual fund companies and others because of their unwillingness to put the needs and goals of their clients first.


How Two Trailblazing Psychologists Turned the World of Decision Science Upside Down  by Michael Lewis: In my opinion, Michael Lewis is one of the best contemporary non-fiction writers. Everything I've read by him has been exceptional. This article, a teaser for his upcoming book  The Undoing Project  released December 6, focuses on the unlikely relationship between two bright and influential psychologists-----   Daniel Kahneman and Amos Tversky. I'm counting the days until the book comes out!
Philip Tetlock on Superforecasting  by EconTalk: I've recently started listening to EconTalk and it's quickly become one of my favourite podcasts! The breadth and depth of guests and topics span the big ideas of the day. In this episode, Philip Tetlock, author of the book  Superforecasting , is interviewed and discusses the methods his team has used to win a number of rigorous forecasting competitions. Although I'm highly skeptical of the accuracy of predictions, between this podcast and the several times I've come across Tetlock's work, I'm convinced his methodology can be useful in some realms.
Rebalancing Act: Estimating the value added through portfolio rebalancing  by Raymond Kerzérho: A good article, based on data and research on how rebalancing reduces risk and enhances long-term returns.
Just for fun 
  • From Michelle Obama to Paul McCartney to the New York Giants, the mannequin challenge basically took over November! Here's Time Magazine's Top 23. (Props to the "Most Mind Bending" challenge.) 

Matthew Lekushoff, CIMA

Financial Advisor 

Raymond James Ltd.


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