| From: skinowski | 9/3/2020 10:47:56 AM | | | | | | of the table.
 Below I have listed the performance of exchange-traded funds that replicate these factor indices. Given the more recent inception dates of these funds, we do not have the full histories that we have for the underlying indices above, which is why I continue to show both in this series. These are certainly not the only ways to get exposure to these factors, and increasing competition in the realm of smart beta is likely to continue to further push down expense ratios in the industry going forward. Value ( RPV), Low Volatility ( SPLV), Dividend Growth ( NOBL), Equal-Weighting ( RSP), and Quality ( SPHQ) draw from the S&P 500 ( SPY) - they are simply alternative weightings to that traditional capitalization-weighted index. Size ( IJR) draws from a separate Standard and Poor's index, the S&P Small Cap 600 index. Momentum ( MTUM) draws from the broader MSCI USA Index.
For these seven factors and the S&P 500, I have also calculated the standard deviation of monthly returns. In this series, I am using this volatility measure as a risk proxy. While some buy-and-hold investors may counter that they have a long-term view and are not impacted by market volatility, unfortunately, many individual investors all too often can be whipsawed by market swings.
Some investors may prefer strategies with less variability of returns like Low Volatility and Dividend Growth. I think these calculations give readers a feel for the volatility differences in the various strategies. We will also track this measure to ensure that these strategies are delivering on their promise of a smoother return profile. Dividend Growth, a strategy that has delivered its historical outperformance in down markets, is lagging in 2020 without meaningfully lower realized volatility, a historical anomaly. Low Volatility, August's laggard, has still delivered negative returns year-to-date, meaning its low realized volatility offers cold comfort to investors like me. Momentum and Quality, the outperformers in 2020, have also delivered slightly lower volatility over the last year. Size and Value, the underperformers in through 2020, have produced lower returns with higher realized volatility.
As mentioned in the lede, Momentum ( MTUM) outperformed again in August with nearly a 10% total return on the month. Unlike many of the factor tilt indices that replicate the S&P 500, the iShares Edge MSCI USA Momentum Factor ETF replicates the broad MSCI U.S. Index. In August, the inclusion of Tesla ( TSLA), which is not owned in the S&P 500, contributed a positive 267bp of the return differential as the electric vehicle maker soared 74%. The Momentum strategy's ownership of Tesla, contributed the entire difference in monthly return between the Momentum Index and the S&P 500. Elon Musk's company is now worth roughly the combined market capitalization of the developed world's entire auto industry, excluding Toyota - a stunning valuation figure for which I am skeptical.
Quality ( SPHQ), which has ridden the relative Tech gains to market-beating returns on the year, outperformed again in August. The strategy, which is 41% allocated to the Tech sector, also benefited from no ownership of underperforming utilities and a limited weight to financials in August.
While August was another month in the win column for Growth stocks, Value( RPV) did notch a 4.9% total return. While certain Consumer Discretionary and Industrial names did well for the value-based strategy, overweights to Energy and Financials and that tech underweight continued to drag down relative performance.
Equal-Weighting ( RSP) also lagged as the tech-focused megacaps again outperformed. From a pure sector perspective, equal-weighting is most underweight Information Technology (-14%) and Communications (-6%), which were the two best performing sectors on the month for the S&P 500.
Dividend Growth ( NOBL) returned 4.0%, lagging the S&P 500 as the tech giants it is underweight rallied on the month. While 54 of the 66 Dividend Aristocrats posted positive returns on the month, their gains were not able to keep pace with the red-hot tech sector.
Size ( IJR) also underperformed in August as underweights to Tech and Communications and overweights to Financials and REITs weighed on performance. While small caps tend to lead in market recoveries, the Size factor is lagging the tech-influenced large caps since the market bottom in March.
Low Volatility ( SPLV) was the laggard in August as higher interest rates weighed on the defensive equity allocation, which returned just 2.9% on the month. An underweight to Tech, a security selection miss in Health Care, and an overweight to lagging Consumer Staples all hurt the strategy in August.
Tech was the story in August... as it was in July. The best performing strategies - Momentum and Quality - were overweight. Strategies that are naturally underweight like Dividend Growth, Equal-Weighting, and Value lagged. While Tech can continue to ride this momentum in the short-run, it feels like the relative rally for this component of the market is increasingly stretched. Investors looking at just the S&P 500's returns should realize that all of the return has come from Tech and tech-like stocks outside of that sector like Consumer Discretionary's Amazon and Communications' Facebook ( FB). Ultimately, lagging sectors and strategies will play catch ......
Disclaimer: My articles may contain statements and projections that are forward-look
FROM seekingalpha.com |
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| From: skinowski | 7/2/2021 8:43:56 AM | | | | | | First Day Performance of Each Month
Posted on July 1, 2021 by Rob Hanna
Since the late 80s there has been a tendency for the market to rally on the first day of the month. One theory on why this occurs is that there are often 401k inflows that are put to work on the 1st of the month. I examined this tendency and broke it down by month here on the blog a few times over the years. I decided to update the study again today.
 The only month that comes even close to July from a Win % and Avg Trade standpoint is February. I’ll also note that August is the worst performer of any month.
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| From: skinowski | 9/7/2021 6:40:02 PM | | | | | |
Goldman: The Dr. Frankensteins of Foreign Policy
David P. GoldmanAug 22, 2021 11:16 AM ET
Over dinner, in 2015, Admiral Luo Yuan told me that “General Petraeus created ISIS in order to destabilize China.”
“That’s ridiculous,” I said.
“It is not ridiculous in the least,” Luo continued, in the benevolent tone in which one instructs especially slow students. “There are ISIS leaders whom we have identified and tracked, who were trained by Petraeus during the ‘Surge,’” the counter-insurgency campaign that Petraeus conducted in 2008–2009 to contain a Sunni rebellion against the majority Shi’ite government that the United States had helped bring to power in 2007.
I took a deep breath and explained: “This was a comedy of errors. The neo-conservatives in the Bush administration believed in majority rule as a matter of dogma, so the US held elections in 2007 and the Shi’ite minority won. Then the Sunnis who used to run Iraq under Saddam Hussein resisted with guerilla war and terrorist attacks. Petraeus was just a careerist looking for another star, and he told the Bush Administration that he could fix the Sunni problem by paying off the Sunni tribal leaders. He handed out hundreds of millions of dollars to the Sunnis and gave them weapons and training through the ‘Sons of Iraq’ and the ‘Sunni Awakening.’” When Obama took US forces out of Iraq, a lot of the same Sunnis who took money from Petraeus faced the same Shi’ite state, and became non-state actors, that is ISIS. And the CIA’s support for Sunni jihadist opponents of the Assad government in Syria made matters worse, as the Defense Intelligence Agency warned in a notorious 2012 report.”
Of course, I wasn’t quite that coherent, but that was the gist of my reply.
My Chinese interlocutor was not impressed. “You’re trying to tell me that the people who run the world’s great superpower are complete idiots who don’t think about the consequences of their actions?”
Memo to heads of state: beware the clever general who turns up at a tough moment, and says “Leave it to me: I can fix it for you.” Two examples come to mind. The great field marshal of the Thirty Years War of 1618-1648, Albrecht von Wallenstein, taught armies to live off the land, and succeeded so well that nearly half the people of Central Europe starved to death during the conflict.
General David Petraeus, who heads America’s Central Command (CENTCOM), taught the land to live off him. Petraeus’ putative success in the Iraq “surge” of 2007-2008 is one of the weirder cases of Karl Marx’s quip of history repeating itself first as tragedy second as farce. The consequences will be similar, that is, hideous.
Wallenstein put 100,000 men into the field, an army of terrifying size for the times, by turning the imperial army into a parasite that consumed the livelihood of the empire’s home provinces. The Austrian Empire fired him in 1629 after five years of depredation but pressed him back into service in 1631. Those who were left alive joined the army, in a self-feeding spiral of destruction on a scale not seen in Europe since the 8th century. Wallenstein’s power grew with the implosion of civil society, and the Austrian emperor had him murdered in 1634.
Petraeus accomplished the same thing with (literally) bags of money. Starting with Iraq, the American military has militarized large parts of the Middle East and Central Asia in the name of pacification. And now America is engaged in a grand strategic withdrawal from responsibility in the region, leaving behind men with weapons and excellent reason to use them.
Petraeus’ “surge” of 2007-2008 drastically reduced the level of violence in Iraq by absorbing most of the available Sunni fighters into an American-financed militia, the “Sons of Iraq,” or Sunni Awakening. With American money, weapons and training, the remnants of Saddam Hussein’s regime have turned into a fighting force far more effective than the defunct dictator’s state police. And now the American military is doing the same thing in Afghanistan, and, under General Keith Dayton, in Palestine. America is pouring money – which is to say weapons – into disputed areas of Afghanistan, and building the core of a Palestinian army. The latter’s mission is to impose a pro-Western Palestinian government on a population of whom two-thirds oppose the two-state solution. It more likely will end up fighting Israel.
Petraeus created a balance of power between Sunnis and Shi’ites by reconstructing the former’s fighting capacity, while persuading pro-Iranian militants to bide their time. To achieve this balance of power, though, he built up Sunni military power to the point that – for the first time in Iraq’s history – Sunnis and Shi’ites are capable of fighting a full-dress civil war with professional armed forces. “Nation-building” in Iraq failed to construct any function feature of civil society – a concept hitherto unknown to Mesopotamia – except, of course, for the best-functioning organized groups of killers that Iraq ever has had.
The Iranians had no interest in disrupting the surge. If they had, the American military would have made short work of their local proxies, who never could outfight the US Marines. Iran is patient, playing for time, possibly to acquire nuclear weapons – which Washington has all but conceded – and until the Americans withdraw, which they must sooner or later.
An old Israeli joke says that you can’t buy an Arab, but you can rent one. An October 16, 2007, report describes the first meeting between the then commander of American forces in Iraq, Major General Rick Lynch, and his superior, Petraeus, with Sunni tribal leaders:
One mentions weapons, but the general insists: “I can give you money to work in terms of improving the area. What I cannot do – this is very important – is give you weapons.”
The gravity of the war council in a tent at the US forward operating base at Camp Assassin is suspended for a few moments as one of the local Iraqi leaders says jokingly but knowingly: “Don’t worry! Weapons are cheap in Iraq.”
“That’s right, that’s exactly right,” laughs Lynch in reply.
That was then. American forces now are trying to do the same thing in Afghanistan, except that they are unable to distinguish between tribesmen-for-rent and the Taliban itself. The New York Times reported April 3:
Since their offensive here in February, the Marines have flooded Marjah with hundreds of thousands of dollars a week. The tactic aims to win over wary residents by paying them compensation for property damage or putting to work men who would otherwise look to the Taliban for support. The approach helped turn the tide of insurgency in Iraq. But in Marjah, where the Taliban seem to know everything – and most of the time it is impossible to even tell who they are – they have already found ways to thwart the strategy in many places, including killing or beating some who take the Marines’ money, or pocketing it themselves.
Having armed all sides of the conflict and kept them apart by the threat of arms, the United States now expects to depart leaving in place governments of national reconciliation that will persuade well-armed and well-organized militias to play by the rules. It is perhaps the silliest thing an imperial power ever has done. The British played at divide and conquer, whereas the Americans propose to divide and disappear.
At some point the whole sorry structure will collapse, and no-one knows it better than Petraeus. There are many possible triggers. The Iraqi government might collapse, leaving the political agenda to the men with guns. Iran might acquire a deliverable bomb and turn its dogs lose in Iraq after the Americans withdraw. Iran and Pakistan might come to blows over the fractious province of Balochistan on their mutual border, or over Iran’s covert support for Pakistan’s Shi’ites, who comprise a fifth of the country’s population. Or the Israelis might strike Iran’s nuclear program, or Syria, or the Hezbollah clients of Syrian and Iran in Lebanon. |
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| From: skinowski | 5/21/2022 8:39:56 AM | | | | | | ‘Deadly serious’: U.S. quietly urging Taiwan to follow Ukraine playbook for countering China
politico.com
Yet Beijing is also learning lessons from Russia's botched invasion.
Discussions about reshaping Taiwan’s military are intensifying as President Joe Biden heads out this week on his first trip as president to Asia. He will make stops in South Korea and Japan, where he will meet with the leaders of the other nations in the Quad security pact: Japan, India and Australia.
While Biden is not visiting Taiwan — the most likely flashpoint of a conflict — the China problem looms over the trip. The U.S. and its Pacific allies have been alarmed by Beijing’s tacit support for Moscow since the invasion, and U.S. officials believe the conflict has influenced China’s calculations about how and when to attempt to take control of Taiwan.
“Clearly the Chinese leadership is trying to look carefully about the lessons they should draw from Ukraine about their own ambitions in Taiwan,” CIA Director Bill Burns said this month. “I don’t think for a minute it’s eroded [President Xi Jinping’s] determination over time to gain control over Taiwan, but I think it’s something that’s affecting their calculation about how and when they go about doing that.”
While the United States does not formally have diplomatic relations with Taiwan, the two governments maintain tight security ties under the 1979 Taiwan Relations Act. Washington has long supported Taipei’s self-defense capability with arms sales and a close military relationship — the two forces and Taiwanese cadets study at elite U.S. military academies.
Russia’s Feb. 24 invasion of Ukraine was a wakeup call for the Taiwanese people. show a significant increase in citizens who believe a Chinese invasion is likely, compared with surveys taken before the invasion. There is also more support for strengthening Taiwan’s self-defense, Hsiao Bi-khim, Taiwan’s official representative to the United States, told POLITICO in an interview Tuesday.
“We in no way want to see that same type of pain and suffering replicated in Taiwan,” she said. “The government as well as the public has to invest our efforts in our self-defense or preparedness. And I think there is a general acknowledgement that this is a priority right now.”
At the same time, the U.S. effort to reshape Taiwan’s military has taken on new urgency since the Russian invasion, officials and experts said. U.S. officials are pointing to Ukraine’s success with Stinger anti-aircraft and Javelin anti-tank missiles, as well as its spirited corps of civilian volunteers, as proof that the strategy they have long endorsed works.
“The Ukraine situation validated some long-standing steps we’ve been taking in Taiwan,” said one DoD official, speaking on condition of anonymity to discuss a sensitive topic.
Top U.S. military officials have said in recent weeks that Taipei is learning critical lessons from Russia’s invasion of Ukraine that the island could apply to a Chinese attack. Lt. Gen. Scott Berrier, director of the Defense Intelligence Agency, noted in a recent hearing the importance of small unit tactics, a noncommissioned officer corps, and effective training “with the right weapons systems.”
“I think they’re learning some very interesting lessons from the Ukrainian conflict, like how important leadership is,” Berrier said.
The Pentagon and State Department declined to comment for this article.
‘Asymmetric’ weapons
Since 2010, Taipei has spent more than $23 billion on U.S. weapons, primarily large, conventional arms such as F-16 fighter jets and M109A6 self-propelled howitzers. But in recent years Washington has been urging Taipei to buy different types of weapons geared for so-called asymmetric warfare — smaller, more mobile ones that are difficult for a larger foe to target and counter.
On the heels of Russia’s invasion, the State Department in a March letter to purchase MH-60R Seahawk helicopters, designed for hunting submarines — a move experts said U.S. officials would not have made before the Ukraine invasion.
Similarly, the U.S. Army in a separate March letter urged Taiwan to buy an upgraded version of the howitzer Taipei had requested years ago. Meanwhile, officials plan to refuse any request for the E-2D Advanced Hawkeye early warning and battle management aircraft, former and current officials said.
Instead of these weapons, the U.S. believes Taiwan should invest in more mobile, cost-effective systems such as Stingers and Javelins, as well as sea mines and coastal anti-ship missiles.
“We are leaning on them in a way that we’ve not done in the past, in a way in fact that we’ve gone out of our way not to do,” Friedberg said. “The decision [to] turn down the Taiwanese request for the MH-60 helicopters, what that says to me is that OK, we are really deadly serious about this.”
These moves appear to reflect a shift in policy by the Biden administration. Deputy Assistant Secretary of State Mira Resnick and her colleagues briefed the U.S.-Taiwan Business Council in March that the administration would no longer support arms sales for Taiwan “outside their definition of ‘asymmetric’ defense,” according to a Tuesday press release from the council.
The council noted in the release that the administration “appears to have canceled” the Seahawks , Hawkeyes and M109 mobile artillery “for not meeting their ‘asymmetric’ criteria.”
The council pushed back on the new policy, noting in a Monday letter to Resnick that “far from accelerating Taiwan’s deterrent capabilities, we fear that the envisaged “asymmetric” focus for Taiwan security assistance will result in policy confusion and a substantial slowing of overall arms sales.”
In particular, the council expressed concern that the asymmetric policy focuses too much on a “D-day scenario,” leaving China free to continue its “gray-zone” operations — those short of all-out war, for instance flight intercepts and disinformation.
USTBC President Rupert Hammond-Chambers also pointed to America’s longstanding policy of “strategic ambiguity” about whether and how the U.S. would come to Taiwan’s aid in the event of an invasion, according to the release.
If the Biden administration “intends to dictate specific arms sales to Taiwan,” Hammond-Chambers urged some “clarity on when and where the U.S. would be willing to step in and fill the new gaps.”
Culture shift
Taiwan’s military may need a culture shift, as well as new weapons. Gen. Mark Milley, chairman of the Joint Chiefs of Staff, said in an April hearing that an important lesson Taiwan could draw from Ukraine is “a nation in arms.”
“If your opponent tries to invade you, and every military age man [and] woman is armed, and they have a little bit of training, that can be a very effective use,” Milley said.
Behind the scenes, U.S. officials are urging Taipei to modernize its reserve institution and lay the groundwork for mobilizing the population in the event of an invasion, officials said.
Taiwan late last year established an , which is responsible for the mustering of reservists during wartime as well as disaster relief. The agency is drafting an “all-out defense handbook” that will increase the public’s knowledge of military response efforts for wartime and peacetime emergencies, officials said at the time.
But Taiwan’s military is not well integrated with its civilian population, a disconnect that has roots in Taiwan’s long history of martial law. Many citizens still have physical and mental scars from Taiwan’s period of “White Terror,” when those believed to be anti-government were rounded up and imprisoned — thousands were executed.
Over the past few decades, Taiwan has gradually reduced its military service requirement from two years to just four months, said Bonnie Glaser, an East Asia analyst at the German Marshall Fund of the United States. She noted that “it is not considered to be really serious” and that some Taiwanese refer to it as “summer camp.” The problem is compounded by the fact that the active-duty military is not keen to work with the reserve force, which is seen as insufficiently trained, she added.
Taiwan’s defense ministry is assessing whether the four-month requirement is adequate, particularly as there appears to be a high degree of public support for extending the mandatory training, Hsiao said. But the change won’t happen overnight.
Taiwan’s reserve force, meanwhile, is large but limited in capability, Glaser said.
“These people get called up for something like two days a year, so it’s not a serious reserve force,” she said.
Taiwan officials have had extensive communications with their American counterparts on ways to revamp the reserves system, Hsiao said. Officials recently began more intensive reserve training, she said, the timing of which coincided with the beginning of the Ukraine conflict.
The Pentagon is also urging Taiwan to increase cooperation between the military and civilian institutions, particularly with regard to protecting critical infrastructure, officials said. The department has also encouraged the Taiwanese military to consider introducing a civilian territorial defense force, but has not gotten much traction, Glaser said.
“Part of the problem in Taiwan is there really isn’t much enthusiasm among the civilians to work with the military or the military to work with civilians,” she said.
“That said, I think the Pentagon would really like Taiwan to draw some lessons from Ukraine, as everyone has seen that putting up resistance can be one of the most decisive factors in wartime.”
A ‘problematic’ analogy?
But some analysts believe using Ukraine as a model for Taiwan is the wrong approach. Randall Schriver, who served as the Pentagon’s top Asia policy official in the Trump administration, noted that Ukraine may have thwarted a swift Russian victory — but at the cost of tens of thousands of lives and millions of people displaced.
“If you tell Taiwan, ‘this is the plan for you,’ that’s not very comforting,” Schriver said.
The Ukraine analogy is also “problematic” because of Taiwan’s geography — the Chinese must cross 100 miles of ocean to get to the island, whereas Russia and Ukraine share a 1,200-mile land border, Schriver noted. Any Chinese invasion would be visible from miles away and vulnerable to standoff weapons. On the other side, resupply — an issue crucial to Ukraine’s defense — would be much more difficult in the case of Taiwan, a weakness Beijing may seek to exploit with an air and sea blockade.
The diplomatic situation also poses a challenge: Many countries, including the United States, do not recognize Taiwan’s independence from China, while Ukraine is internationally recognized as a sovereign nation, he added.
“There is no guarantee that the international community rallies around Taiwan the way it did Ukraine because of the non-diplomatic status,” he said.
Some analysts worry that, while a mobilized and trained civilian defense force might be useful, the goal should be deterring an attack in the first place. Dan Blumenthal, senior fellow and director of Asian Studies at the American Enterprise Institute, noted that Taiwan needs tools now to deal with near daily Chinese air incursions and other types of military intimidation around the island. Some factions in Taipei believe aircraft such as F-16s, MH-60Rs and E-2Ds are key to solving this problem.
“Taiwan’s political and military leadership need a number of things to deter, including being able to counter the daily coercive and intimidating threats that they face,” Blumenthal said. “They can’t just sit back and wait for an invasion.”
Defense Secretary Lloyd Austin himself advised lawmakers in April not to make “direct comparisons” between Ukraine and Taiwan.
“These are two completely different scenarios, two different theaters,” Austin said during an April 5 hearing.
The economic toolbox
There’s also increased thinking in U.S. government and analytical circles about the non-military dimensions of a Chinese attack on Taiwan — including using sanctions to deter Beijing, or at least punish it.
Last summer, well before the Russian invasion of Ukraine, Eric Sayers of the American Enterprise Institute attended an informal meeting of about 15 former U.S. government officials, analysts and congressional staffers interested in Taiwan policy and sanctions and export control measures.
The goal of the Washington gathering was to brainstorm ways to sharpen the economic tools the United States and allies could use to prevent a Chinese attack. The idea was to “basically do the homework now so we have it ready to go later,” Sayers said.
Congress may need to pass legislation — similar to the Countering America’s Adversaries Through Sanctions Act, which targeted Iran, North Korea and Russia — spelling out the sanctions China would face if it were to initiate a conflict, Sayers said. “Congress can play a bad cop role and initiate that,” he said.
That could prove one of the trickiest efforts of all. The United States is far more economically entangled with China than it was with Russia, although there have been efforts in recent years to reduce that dependency.
But at the same time, the Russian invasion raised questions about the efficacy of sanctions, Friedberg said, noting that the threat of sanctions “didn’t deter the Russians from doing what they did in Ukraine.”
“There is a question of whether we’d be willing to do the same thing with China, because the cost to us would be much greater,” he said.
Nahal Toosi and Phelim Kine contributed to this report. |
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