The Chart Room

After 150 years of British rule, Hong Kong was returned to China in 1997. Hong Kong (as well as Macau and Taiwan) has operated semi-autonomously under what’s known as “one China, two systems”, with the promise of fully democratic elections in 2017. Earlier this summer, China mandated that a committee from Beijing would select the candidates for the vote. This has sparked a large outcry of protest from demonstrators demanding fair and free elections. Andy Rothman of Matthews Asia addresses his observations on the concerns and opportunities in this article.

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Perspective is everything. David Brooks of the New York Times puts together this well written Op-Ed which reminds us that despite what we may be told in the headlines, we are at at time when the world is becoming an increasingly better place to live. He argues that, “Instead of sliding into fatalism, it might be a good idea to address our problems without exaggerating our plight.”

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Stronger job growth along with a pickup in consumer and business spending have many economists projecting third-quarter growth to clock in between 3% and 4%. Forecasting firm Macroeconomic Advisers predicts 3.6% annual growth from July through September. If that materializes, the economy will have grown at a pace of at least 3.5% for four of the past five quarters. That hasn’t happened since the late 1990s.

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When it comes to Fixed Income, investors tend to expect low volatility and general certainty regarding their investments. As is the case with the recent rally in the Treasury market, sometimes everyone’s expectations can be wrong. Jim Parker of DFA shares his insights into how to deal with the uncertainty of interest rates.

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FTSE, one of the major index providers has recently dropped Argentina from its Frontier Market index and reclassified Morocco from an Emerging Market to a Frontier Market. The decision to drop Argentina from the Frontier Markets index was prompted by their recent restrictions on foreign investors while in Morocco, liquidity issues have plagued the market, leading to the reclassification to Frontier Market.

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The influential John Maynard Keyes helped shape the principles of investors such as Warren Buffet, John Bogle and Benjamin Graham. A new book explores Keynes’s approach to money management, which includes the mantra “Don’t be fooled by “trends” in the market. Buy when everyone is selling. Hold on until you need to sell.”

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Is the economy really improving? The unemployment rate has dropped, but so have real wages and purchasing power. This Bloomberg article breaks down the issues the Fed must consider as it sets new policies.

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Weston Wellington of DFA has put together a great summary of the CAPE (Cyclically Adjusted Price-to-Earnings) ratio, one of the more popular methods of valuing the market. He warns that it is not necessarily a great device for market timing.

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A recent Gallup poll with surprising data.

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“Watch the fees and don’t look back.” This quote is the take away from an article in the New York Times which details the findings of a recent Morningstar study that shows how low-cost funds are more likely to succeed.
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