When Choosing Companies, Go for Quality Earnings

Posted by Vident Financial on 8/29/22 12:56 PM

Basic financial theory teaches that the value of an investment is the value of the future cash flow from that investment, but with an adjustment downward because investors must wait for those future cash flows.

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Quintile Performance Analysis: A Plain English Explainer

Posted by Vident Financial on 8/22/22 4:37 PM

We do a lot of research and writing about how various factors such as valuation, inflation, economic growth, and earnings quality relate to investment returns. One of the tools we use to do this is “quintiles.”

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Debt Doesn't Matter Until it Does

Posted by Vident Financial on 7/11/22 10:05 AM

National debt doesn't matter, right up until the moment when it is practically the only thing which matters. The debt crises of the 1990s and the European Debt Crisis of the 2010s show us that deficit and/or debt levels can grow gradually, with little or no discernible consequences, and then suddenly dominate the headlines and collapse currencies, economies, and markets.

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U.S. No Longer Global Growth Driver

Posted by Vident Financial on 7/5/22 10:12 AM

After World War II, the U.S. was almost half of global economic output. Now it's about a fourth. It's not that the U.S. didn't grow, it's just that the rest of the world grew faster.

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Prosperity Starts with People

Posted by Vident Financial on 6/30/22 1:52 PM

...the productivity of a nation is the average productivity of each person times the number of people ... If population declines, the only way to grow is for individual value creation to grow fast enough to outpace the decline in population.

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Human Productivity Requires Productive Humans

Posted by Vident Financial on 6/20/22 3:30 PM

If human productivity is the key to economic and profit growth and by extension long-term investment returns, then selecting countries which attract productive people is a promising proposition.

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U.S. Falls to Bottom of Top Ten Most Competitive Nations

Posted by Vident Financial on 6/15/22 11:35 AM

The Switzerland-based International Institute for Management Development (IMD) produces an annual ranking of competitiveness ... The United States has generally appeared in the #1 spot, or near that spot, since the data has been available. However, it has recently begun to lose that consistently-high ranking, and in the last report it plunged to 10th place.

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Stock Market is Yelling "Stag" and Bond Market is Yelling "Flation"

Posted by Vident Financial on 3/15/22 10:16 AM

...10-year treasury yields, which have gotten a lot of attention lately, only tell us one small part of the story: they tell us that demand for treasuries has been dropping. However, we can't know why demand for treasuries has dropped without looking at what investors have done with the money they took out of the treasury bond market.

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Without Baseline Effects, Recovery Looks Weaker and Growth Less Likely

Posted by Vident Financial on 3/11/22 10:34 AM

Once we take baseline effects out of the picture and the "easy" growth of a simple return to normal out of the picture, we see an economy that is fairly stagnant. And that stagnation started before any monetary tightening...

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Statement on Exclusion of Russia From Investible Universe

Posted by Vident Financial on 3/3/22 10:14 AM

As a result of recent events involving Russia and the Ukraine, and an analysis of perceived investment risk and reward as discussed below, Russia has been excluded as of March 2nd, 2022, from the Vident Core International Equity IndexTM (VIEQX) investable universe.

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Yahoo Finance Highlights the Vident International Equity Fund vs. Dominant Industry Approach

Posted by Vident Financial on 3/2/22 11:40 AM

In late 2021, Yahoo Finance did a write-up on Vident International Equity Fund (VIDI) ("Is Vident International Equity ETF (VIDI) a Strong ETF Right Now?," Zacks Equity Research, 11-18-21, finance.yahoo.com). The article put its finger on how most of the industry works:

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How to Know why Bond Yields are Rising

Posted by Vident Financial on 2/25/22 2:02 PM

One of the biggest financial stories of 2021 was probably the one about rising bond yields. The other biggies were inflation and supply chain disruptions. But a close look at the data shows that maybe those three are one, viewed through three different vantage points.

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Nasdaq Features Vident's Core U.S. Equity Fund, VUSE

Posted by Vident Financial on 1/27/22 9:42 AM

Recently Nasdaq's website published an article which asked whether VUSE "is a strong ETF right now." Using research from Zacks Equity Research, the article outlined ways in which VUSE differs from the pack when it comes to investment philosophy.

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COVID Economy Creates More Noise than Signal

Posted by Vident Financial on 1/25/22 10:20 AM

This on-again-off-again consumption pattern creates confusing waves of distortion in the economy. Economic data and headlines have always been a mix of signal and noise, but the COVID economy has given us the highest ratio of noise to signal that I've ever seen.

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Winter of Our Discontent: December Media Focused a Little Too Much on Bad News

Posted by Vident Financial on 1/20/22 9:22 AM

We believe that the historic pattern regarding financial risk runs like this: The actual data shows a problem is brewing, but the media is slow to acknowledge the problem. Then, when the problem becomes undeniable, the media overshoots and exaggerates it.

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Markets Signaling Strong Growth Now, But Weak Growth Later

Posted by Vident Financial on 1/17/22 9:30 AM

What COVID Classic did in terms of a hard stop last spring, delta appears to have done in a more subdued form late last summer. If the pattern holds, there should be a bounce-back in the fall.

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Profits Are Well Thawed Out

Posted by Vident Financial on 1/14/22 10:08 AM

In our previous analysis, we described the odd pandemic economy dynamics of profits getting deferred and then unfrozen ... What really happened is that the shutdowns mostly deferred business activity instead of destroying it.

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Taking Inventory of Our Supply Chain Problems

Posted by Vident Financial on 1/13/22 9:43 AM

Continuing our series about supply chain disruptions, we now look at business inventories, because basically they are what supply chain problems are all about: not enough stuff on the shelves, in the back, or in the warehouse. There are other reasons shortages can occur.

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Why We Warned About Supply Chain Issues Before the Headlines Did

Posted by Vident Financial on 1/11/22 1:53 PM

Supply chain disruption issues are very much in the news and in the public mind at the moment. One reasonably-good proxy for public attention is a Google Analytics feature that allows the user to track the relative frequency of various search terms over a certain time period.

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Inflation is Real, but Don’t Get Hyper About It

Posted by Vident Financial on 12/22/21 11:50 AM

We've been warning about inflation for some time, at least since last fall.

At the time, an inflation prediction was counter-intuitive because prices had actually been falling during the spring. But that's actually why inflation should have been a concern. Deflationary episodes tend to create the conditions for inflationary episodes because economists generally associate deflation with depressions, and therefore central banks are intolerant of deflation.

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Forget the “Dual Mandate,” Here’s Every Fed Chair's Mono-Mandate

Posted by Vident Financial on 11/8/21 12:30 PM

Looking back at economic conditions in October, culminating in a Federal Reserve meeting which announced probable “tapering” but not raising interest rates, three particular points jump out at us.

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Where in the World Do You Put Your Money When America is Inflationary?

Posted by Vident Financial on 11/4/21 10:08 AM

It should probably be obvious, but when inflation has been high in the United States in the past, indices which are outside of the United States have tended to outperform. There is a phenomenon in financial behavior, however, known as 'home bias'.

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When Inflation is High, Buy High?

Posted by Vident Financial on 11/2/21 9:30 AM

The financial industry has various ways of classifying stocks. One is size, but there are also styles of investing, such as buying companies which are expensive (meaning the price is high relative to sales, or earnings or revenues or cash flow, or some other form of income). If stocks are expensive, it's like they are expected to have high earnings growth, otherwise why would investors pay more for them than for the "cheap" stocks?

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Large vs. Small, Cheap vs. Expensive: Which Stocks Indices Did Best in Other High Inflation Times?

Posted by Vident Financial on 10/28/21 9:30 AM

We’ve recently written about various asset classes (commodities, real estate, bonds) during high and low inflation periods. This time, let's zoom in on the stocks.

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The opinions expressed herein are those of Vident Financial at the time of publication and are subject to change. This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only and on the understanding that the recipient has sufficient knowledge and experience to be able to understand and make their own evaluation of the information described herein, any risks associated therewith and any related legal, tax, accounting or other material considerations. Recipients should not rely on this material in making any future investment decision.

Investors cannot invest directly in an index. Indexes are not managed and do not reflect management fees and transaction costs that are associated with some investments. Past performance does not guarantee future results.