...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.

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.

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.

...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.

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...

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 2^nd, 2022, from the Vident Core International Equity Index^TM (VIEQX) investable universe.

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:

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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'.

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?

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.