Carnegie Market Blog

Brent Luce

Brent Luce Senior Portfolio Manager Cleveland, OH. Brent serves Carnegie Investment Counsel as Senior Portfolio Manager. Brent manages custom portfolios for select clients and is an integral part of Carnegie’s investment selection and portfolio structuring processes. He is also author of the “Carnegie Market Blog”. Email Brent at bluce@carnegieinvest.com.

Higher Rates and the City of Champions

Posted by Brent Luce on Nov 2, 2016 4:31:34 PM

Mobile Internet Usage

For the first time ever, mobile internet usage has surpassed desktop internet usage. In my house, I think this happened about four years ago. The most interesting part of this chart to me is how fast things have changed. Just five years ago, almost all internet usage came from desktops. This rapid change means (among many other things) that every business should have a mobile-friendly website. In the U.S. at least, I bet that most work-related internet use still comes from desktops/laptops and that most personal use comes from mobile. MORE: Mobile vs. Desktop in the World of Millennials

Whiskey Bubbles and the Land of Champions

Posted by Brent Luce on Oct 18, 2016 4:21:38 PM

Whiskey ETF?

I have written on numerous occasions (Look Back at Blog about ETF Proliferation) about the proliferation of ETFs and the unintended consequences that might come along with this trend. Believe it or not, there is now a Whiskey ETF where investors invest in the so called “Bourbon and Whiskey Economy”. I am not sure if this is more indicative of a bubble in Whiskey or ETFs, but the answer is probably both. I wonder if all of those “passive” investors out there will have an appetite, or thirst if you will, in this latest ETF? Read More: Bottom's Up: There is Now a Whiskey ETF

Topics: Artificial Intelligence

Is "Low Beta" Really Low Beta?

Posted by Brent Luce on Oct 11, 2016 4:35:42 PM

Low Beta Underperforming

The chart below, from Strategas, highlights the fact that “low beta” stocks have dramatically underperformed “high beta” stocks over the past 65 days. I have talked about this before (Read: The Sleeping Dog has Woken), but the market has become quite comfortable with their allegedly low beta stocks over the last year or two. What they may not realize is that a massive amount of money has chased these stocks, not because they are safe, cheap or have good fundamentals, but because they pay high dividends. Dividends, of course, have become very attractive in such a low interest rate environment. This has potentially made the formerly low beta (remember, beta is a backward looking calculation) stocks into those that carry the most risk if the market begins to believe that interest rates are going higher. This has already happened to some extent. If you look at most staples, REITs, telecom or utilities stocks, which were big winners through July, they are all down measurablyfrom their highs and have been weaker than the general market.

Topics: Artificial Intelligence

Harvard Endowment Poor Performance and A.I.

Posted by Brent Luce on Sep 29, 2016 4:06:02 PM

A.I. Story of the Week

If I wrote the blog more than once a week or so, I would call this the story of the day. Every day, there are new stories about new developments and advancements in artificial intelligence and related technologies. One story that grabbed my attention this week (Click Here to Read It) discusses how Hanover, a Microsoft machine learning project, is using A.I. to help treat cancer. With hundreds of cancer drugs and new research being published constantly, along with the uniqueness of each patient and their likelihood to respond to a given therapy, it is impossible for doctors to know everything there is to know in order to best treat the patient. A.I. can come up with insights without being specifically programmed to do so by “reading through” research papers, clinical trials, medical records, radiology reports, etc. This is amazing technology, and we are just scratching the surface of its potential. RELATED: Why Deep Learning is Suddenly Changing your Life - this is a good intro to A.I. and deep learning.

Topics: Artificial Intelligence

Random Seasonality and more A.I.

Posted by Brent Luce on Sep 15, 2016 4:04:54 PM

A.I. This Week

One can hardly read Twitter (or the newspaper for those that still do that) anymore without seeing a new story of how A.I. technology is driving new innovation. You most likely heard that Uber driverless cars went online yesterday in Pittsburgh, but another interesting development this week was that Project Wing, a unit of Google, is experimenting with Chipotle burrito delivery via autonomous drones at Virginia Tech. Watch: Google Tests Burrito Delivery via Drone at Virginia Tech I can only image kids laying out in the quad ordering burritos, only to have a drone come and drop off a barbacoa burrito (no extra meat, though, since that might exceed the weight limit on the drone). Clearly this is partially a marketing stunt by tying in Chipotle; it would never make sense to deliver burritos by drone any time soon – are there going to be hundreds of drones flying around campus, each with one burrito on them?

Looking beyond the marketing aspect, Virginia Tech is an FAA approved test site and the experiments are being run by the some of the brightest technology minds in the world. Burritos aside, one application that comes into mind is healthcare and first responders. Imagine if as soon as a call comes in, a drone could be dispatched to deliver Narcan or an EpiPen. Or, in a pursuit, instead of a helicopter, there is just a drone following the assailant. Or maybe instead of people having to go to the pharmacy, important prescriptions will be “droned” directly to those in need. There are many applications beyond just the delivery of Amazon goods and such, and while still in its infancy, this technology may be coming sooner than most people realize. MORE: Will Drones be Delivering your Medicine?

The Sleeping Dog Has Woken

Posted by Brent Luce on Sep 9, 2016 4:47:25 PM

“Low Volatility” Stocks Versus the Market (Since Low in Interest Rates)

Low Volatility ETFs

As I have mentioned before, over the past couple of years, investors have flocked toward high-dividend paying stocks which are traditionally lower volatility stocks. Many of these stocks have been driven to all-time high valuations and the investor base has changed in that many holders are now there just for the yield. While these stocks have historically been lower volatility stocks, if interest rate expectations were to strongly reverse, it is quite possible that these allegedly safe stocks might in fact be more volatile than the market. As part of the proliferations of indices (read last blog post about this), investors can now invest in a wide variety of themes, including so called low volatility ETFs which invest in stocks that have exhibited lower volatility than the market over the past year. Today is the biggest down move since “Brexit”, and guess what? The low volatility index is down MORE than the market as a whole. I have not fully analyzed it, but my hunch is that the low volatility ETFs consist largely of dividend paying and therefore interest rate sensitive stocks. The chart below supports this case, illuminating the underperformance of “low volatility” versus the general market since the recent low in interest rates. This reminds me a bit of 2008 when investors trusted backward looking volatility data and were blind to the fact that certain correlations will change when market conditions change.

Topics: Interest Rates

Driverless Ubers and Whether Passive Investing is Worse than Marxism

Posted by Brent Luce on Aug 26, 2016 3:16:23 PM

The Proliferation of Indices

The chart below shows the growth in the number of indices over time. Just over the past couple of years, this measure has exploded. Why is this happening? In the past few years, there has been a push toward passive investing versus active investing. Investors are being sold on this idea by companies who provide so called “passive” investment strategies like ETFs. These ETF providers are always looking for more products to sell and, as a result, work with indexing companies to create new indices on which to base their ETFs. Now, there are over 5,000 indices – more than the number of stocks in the Russell 3000. RELATED: Passive Investing is Worse than Marxism.

How Good are Sell-Side Analysts?

Posted by Brent Luce on Aug 4, 2016 3:02:41 PM

Sell Side Darlings Underperforming this Year

Sell-Side Analysts

I have long been skeptical of sell-side analyst recommendations for a number of reasons. I thought it would be interesting to share the chart below, published earlier this week by Strategas. As you can see, year-to-date, investors would have been much better off actually buying the stocks that analysts hate and selling those that they love. Read more about how sell-side analyst projections are worse than some very simple measures: Bloomberg: Maybe It's Worth Underestimating Analysts

Pokemon and the New Bull Market

Posted by Brent Luce on Jul 20, 2016 3:58:00 PM

The New Bull Market?

As I type this, the major U.S. stock market indices, even if they are not perfect indicators like I alluded to above, are at all-time highs. While all of the headlines are negative, the market has been able to power to new highs; this is typically a bullish sign. Most bull markets top out after everyone is complacent and has bought into the idea of stocks going up to the moon – this is hardly the case right now. In a related note, the Dow Jones Industrial Average closed at a new high all five days of last week. This is the first time this has occurred in almost 20 years. MORE: Stock Market's New High -- A Record About Nothing

Brexit Stage Left

Posted by Brent Luce on Jul 8, 2016 4:54:03 PM

Brexit Stage Left

In the last blog, I asked whether this would mark the beginning of a major downturn or just be a blip. Just like many other emotional moments, very few investors would have guessed that it would be a blip. So far, at least as far as the U.S. market is concerned, it has been a blip. In fact, as I type this, the S&P 500 is at an all-time high. As the market crosses new highs, there is broad participation among sectors, sentiment is hardly exuberant and all the headlines are negative – historically, these are bullish signals. MORE: S&P 500 Heads for Record High

Brent Luce

Recent Posts

Higher Rates and the City of Champions

Mobile Internet Usage

Whiskey Bubbles and the Land of Champions

Whiskey ETF?

Is "Low Beta" Really Low Beta?

Low Beta Underperforming

Harvard Endowment Poor Performance and A.I.

A.I. Story of the Week

Random Seasonality and more A.I.

A.I. This Week

The Sleeping Dog Has Woken

Low Volatility ETFs

Driverless Ubers and Whether Passive Investing is Worse than Marxism

The Proliferation of Indices

How Good are Sell-Side Analysts?

Sell-Side Analysts

Pokemon and the New Bull Market

The New Bull Market?

Brexit Stage Left

Brexit Stage Left

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