The Zoe Blog

The French Open is in full swing and what a tournament it has been so far! Rafa has sailed through to the semis and yesterday we saw Djokovic knocked out by 6^th seed Thiem. Today sees the second day of the Men’s Quarter Finals, which will decide the fate of both Murray and Wawrinka, and the Women’s Semi Finals are all set for tomorrow. Bring on a weekend of tennis!

In my blog, "Markets are stable because the world is in a better place", I got a fair bit of pushback from readers (which I love) on our research which explained that policy uncertainty matters less to the market in the medium term than you would think. "There's no way the market doesn't care about Trump! If his tax policy is implemented... it matters a lot!" and "Did you see his last Tweet? If he is losing his mind we are all doomed!". My personal favorite was "Republican leaning presidents who tend to be more "investor friendly" go hand-in-hand with bull stock markets... so if Trump doesn't deliver the market will crash".

I spent about 2 months trying to answer this question when I was a global strategist over at J.P. Morgan. My wife was sick and tired of me talking about this topic. The good news now that I run my own firm is that I get to share it with the world!

• US Household debt is nowhere near as high as it was in the last peak when you account for recent economic growth.
• The mix of household debt is changing as student and auto loans become a bigger piece of the pie.
• A hot auto loan market could be an early sign of an aging economic expansion.

After the NY Federal Reserve released their quarterly Household and Credit Report a few days back, a bunch of people have asked me if they should be worried by the fact that Americans' level of debt is back to what it was in 2008. After all, 2008 was pretty scary and household leverage was the root cause of the great recession back then. It also doesn't help that certain headlines read  Household debt tops 2008 peak ahead of financial crisis.

• Geopolitical uncertainty remains elevated, but it is not the most important driver of markets.
• Global Economic Growth momentum has picked up.
• Growth Estimates, right or wrong, have the most clarity than in the last 10 years.

Summary

• VIX level does not consistently predict future equity returns.
• High market volatility has been associated with strong future equity returns.
• Low market volatility periods, like today, do not have any predictive power for equity returns.

“If the world ends - and not even if the world ends, but if we have trouble - getting contacts or glasses is going to be a huge pain in the ass. Without them, I’m f**ked.” - Steve Huffman, the thirty-three-year-old co-founder and C.E.O. of Reddit, when explaining to Evan Osnos why he had laser eye surgery to correct this nearsightedness.

When I was 12 years old, my family moved to the states from Colombia (not Columbia.) Although I was super excited to move to the place where potentially this could happen, it was clear to my brothers and me that the main reason for my parents’ decision, was to provide us with the best higher education in the world. But is a college degree in the U.S. really worth the $100,000 - $250,000 investment? Generally, people would answer "yes" to this question. It must be... right? Here at Zoe we believe in questioning generalizations and try our best to develop our opinions using a data-centric approach. 

College Basketball’s Most Valuable Programs

With the Final Four on the horizon, we at Zoe were interested to see just how influential the tournament can be on the valuation of the participating basketball programs. The annual study by Ryan Brewer, an assistant professor of finance at Indiana University-Purdue University Columbus, analyzes each program’s revenues and expenses, with cash-flow adjustments and growth projections, to figure out the team’s market value.

The first week of March Madness has come and gone, taking top contenders Villanova and Duke along with it. Although the defending champs were among the favorites to win the title, it was sadly not to be, and we enter the Sweet 16 with North Carolina, Kansas and Arizona now taking up those spots. Or could it be Gonzaga? Kentucky? Who knows which team will get to cut down the nets this year, but as we spend hours in front of our TVs or refreshing the scores on our phones, one small consolation has surely been the outstanding performance of the SG, Josh Hart. Josh, although perhaps not the most talented in one particular area, is considered to be one of the best players in college basketball. His ability to drive the basket and finish strong at the rim, whilst at the same time playing an integral role in defense, have put him in a strong position ahead of the NBA draft in June.