Commodities rebounded sharply last week, posting the strongest gain among the major asset classes, based on a set of representative exchange-traded products. The rise marks the second weekly increase for broadly defined commodities.
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The Capital Spectator will be on furlough for the rest of the week, focusing on recreational R&D in an undisclosed location. The standard routine resumes on Monday, Aug. 22. Cheers!

The relatively obscure corner of foreign inflation-linked government bonds edged out the rest of the field last week with 2.1% total return, based on a set of proxy ETFs for the major asset classes. The performance was just enough to fractionally pull ahead of foreign stocks in developed markets, the number-two performer for the five trading days through Aug. 12.
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● Inside the Investments of Warren Buffett: Twenty Cases
By Yefei Lu
Summary via publisher (Columbia University Press)
Since the 1950s, Warren Buffett and his partners have backed some of the twentieth century’s most profitable, trendsetting companies. But how did they know they were making the right investments? What did Buffet and his partners look for in an up-and-coming company, and how can others replicate their approach? A gift to Buffett followers who have long sought a pattern to the investor’s success, Inside the Investments of Warren Buffett presents the most detailed analysis to date of Buffet’s long-term investment portfolio.
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Consumer spending in the US was flat in July, the Commerce Department reports. The surprisingly weak month may be payback for the strong gain in June, which surged 0.8% in today’s revised data. Meanwhile, the year-over-year trend in headline retail ticked lower. Putting it all together suggests that the appetite for consumption is still positive, but the growth rate is easing. Is that a concern? Maybe, although the recent revival in the pace of job creation implies that retail sales will continue to post steady if unspectacular growth.
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Reuters reports that emerging markets are in “melt up” mode as “cash returns to global markets.” The news outlet quotes Bank of America Merrill Lynch’s global strategy team, which advises in a note to clients that “sentiment (is) getting more bullish but not yet at an extreme.” Let’s take a closer look by way of proxy funds.
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Utility stocks remain the top performer among US sectors for the trailing one-year return window, based on a set of proxy ETFs, but the rally in this corner is starting to look a bit tired. For some analysts, the long-running bull market in utilities looks like a bubble. But for now, the sector’s upside momentum over the last 12 months remains second to none.
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Factor funds (aka smart beta funds) have been proliferating like rabbits in recent years, accompanied by marketing hype that can put political campaigns to shame. In some cases the strategies have merit, but playing fast and loose with the facts isn’t uncommon. In the worst cases, products look like thinly veiled excuses to charge relatively high fees with little or no advantages over a plain-vanilla index fund that targets a similar set of securities. How can you tell the difference? A deep dive with analysis is the only solution.
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In late-August 2015, the US stock market tumbled sharply, unleashing a year of heightened volatility that seemed to anticipate the worst for the economy. But the volatility turned out to be a false alarm and equities rebounded, reaching new all-time highs in recent weeks. Mr. Market’s warning, in short, was a dud. In fact, the S&P 500’s various swoons over the past year turned out to be buying opportunities. That’s obvious now, but uncertainty reigned supreme in real time, at least from a markets-only perspective. By contrast, it’s useful to point out that Mr. Market’s tantrums were never verified by real-time monitoring of US macro risk. The lesson: filtering market volatility through a macro prism is essential for separating the signal from the noise.
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Emerging-market stocks topped the performance ledger last week, based on a set of ETF proxies for the major asset classes. The gain (in unhedged US dollar terms) marks the sixth straight weekly advance for this slice of the world’s equity markets.
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