Tariff Man is Back!
grab a bucket of popcorn
The second tranche of our trend-following series is now up on Zerodha Varsity: Could Trend-Following Be A Successful Trading Strategy? (Part II). We show how equities and gold together are stronger than they are individually.
Markets this Week
FIIs continued their selling spree…
… and the market sold off any stock that didn’t beat and raise.
US stocks celebrated the Trump win hitting all-time-highs.
The Dollar shot off like a rocket…
… and so did crypto.
More here: country ETFs, fixed income, currencies and commodities.
Links
Research
Did Tariffs Make American Manufacturing Great? (NBER)
We study the relationship between tariffs and labor productivity in US manufacturing between 1870 and 1909. We conclude that tariffs may have reduced labor productivity in manufacturing by weakening import competition and by inducing entry of smaller, less productive domestic firms. The era’s high tariffs are unlikely to have helped the US become a globally competitive manufacturer.
Low-Risk Alpha Without Low Beta (SSRN)
We propose a risk-managed approach to capturing the low-volatility anomaly. Leveraging multifactor low-risk portfolios to a beta of 1.0 while controlling tracking error amplifies strategy returns and information ratios. Our results suggest that investors who are able to overcome leverage constraints are able to harvest the low-volatility anomaly more efficiently.
Enhancing the High-Volume Return Premium (SSRN)
We suggest a novel trading strategy that can enhance the high-volume return premium (HVRP) in the US stock market.
Sports Betting’s Impact on Vulnerable Households (NBER)
Following legalization, sports betting spreads quickly, with both the number of participants and frequency of bets increasing over time. This increase does not displace other gambling or consumption but significantly reduces savings, as risky bets crowd out positive expected value investments. These effects concentrate among financially constrained households, as credit card debt increases, available credit decreases, and overdraft frequency rises. Our findings highlight the potential adverse effects of online sports betting on vulnerable households.
How to Use Martingale Betting Systems to Fool People (SSRN)
We undertake a comprehensive exploration of the financial scam landscape, focusing particularly on the use of Martingale betting systems and their role in artificially inflating the perceived short-term profitability of trading strategies. A significant contribution of this paper is the demonstration, through statistical analysis and historical simulations, of how a trading system can seemingly generate a 20% annual return with nearly 80% probability, despite its reliance on randomly generated trading signals.
Investing & Economy
Goldman Sachs’ chief US equity strategist David Kostin and his team have taken a look at a few of the more common scary arguments on how passive investing is wrecking markets, and came away . . . unconvinced. (ft)
India
How NPCI's Bharat Connect aims to streamline B2B payments for small businesses (livemint)
India proposes merging regional rural banks to help them shore up capital (reuters)
The Supreme Court held by a majority of 7:2 that all private properties cannot form part of the 'material resources of the community' which the State is obliged to equitably redistribute (livelaw)
The Supreme Court revived Directorate of Revenue Intelligence's (DRI) tax notices seeking as much as ₹20,000-23,000 crore, pending against leading companies including Vedanta Ltd, Vodafone Idea Ltd, Adani Enterprises and the Indian units of Sony, Samsung and Canon since 2006. (livemint)
Fiscal fragility & faustian fracas on freebies (newindianexpress)
After stopping the Sovereign Gold Bond scheme, the government has now screwed investors in the National Savings Scheme: The government said it would stop paying interest on NSS accounts from October 1. (livemint)
Lead in turmeric more than 200 times the limit in parts of India (downtoearth)
row
Trump threatens up to 100 percent tariffs on Mexico over immigration (washingtonpost)
Federal Reserve cuts interest rates by a quarter point (cnbc). Fed funds traders are now pricing in a 60% chance of a December rate cut, down from a 94% chance at the end of October.
Is Germany’s business model broken? (ft)
President Xi Jinping’s campaigns to crack down on corrupt government officials and promote a more equal distribution of income have made displays of wealth not just passe, but potentially dangerous. Meanwhile, younger Chinese consumers are increasingly spending their money on experiences like travel rather than status symbols. (bloomberg)
Chinese hackers, who the United States believes are linked to Beijing’s Ministry of State Security, have burrowed inside the private wiretapping and surveillance system that American telecom companies built for the exclusive use of U.S. federal law enforcement agencies — and the U.S. government believes they likely continue to have access to the system. Millions of mobile-phone users on the networks of at least three major U.S. carriers could thus be ongoingly vulnerable to Chinese government surveillance. (washingtonpost).
Chinese hackers gained access to huge trove of Americans’ cell records (politico)
Odds & Ends
Highly competitive women are more likely to recommend shorter haircuts to other women, potentially to diminish the physical attractiveness of their romantic rivals. This phenomenon occurs even among women who are unfamiliar with one another, suggesting an innate tendency among some women to sabotage potential rivals even without a direct threat. (psypost)
Meme of the Week
