Articles By: Niels Jensen

Niels Jensen

Niels is a founding Partner of Absolute Return Partners LLP and its Chief Executive Partner. He is a graduate of University of Copenhagen with a Masters Degree in economics. He has 25 years of investment banking, private banking and asset management experience.

Here are my most recent posts

Six Months of Nothing

Six Months of Nothing

Even if there are good reasons to believe that the prolonged rally can continue for a little longer, there are equally good reasons to believe that the current equity bull market may end in tears. I am not predicting a repeat of 2008-09. A much more modest decline, but still a decline, is a likely outcome at some point over the next 12-18 months.

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A Century of Policy Mistakes

A Century of Policy Mistakes

Unless serious action is taken, Europe in particular (but the U.S. is not far behind) is at risk of falling into a very deep hole from which it may be extraordinarily difficult to dig itself out of. Once in, it will prove ever so hard to get out again. That is one of the key lessons learned from Argentina, even if the nature of Europe’s problems is different from those of Argentina.

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Challenging the Consensus

Challenging the Consensus

Now, when I look at financial markets going into 2014, I cannot recall ever having come across a more one-sided view than the one which prevails. The consensus view on bonds is overwhelmingly bearish while pretty much everyone is bullish on equities – or at least they were until EM equities began to fall out of bed.

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Are equity markets in a massive bubble?

Are equity markets in a massive bubble?

Niels Jensen: How to spot a bubble? Being closer to the exit point does not, however, imply bubble behaviour. Yes, there are signs of excesses creeping back in to the markets. however, I do not see much in terms of the classic signs of bubble behaviour – excess leverage, taxi drivers giving you his stock pick de jour, etc. etc. It is, after all, the most unenthusiastic rally I have ever experienced.

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QE: Euthanasia of the economy?

QE: Euthanasia of the economy?

Over the past couple of years it has gradually become the consensus view that QE has failed because it hasn’t created the economic growth that everyone was hoping for. I find that view overly simplistic and naïve in equal measures. QE – or broadly similar monetary policy initiatives – has saved the world from a nasty and potentially very damaging financial meltdown not once, but twice – following the Lehman bankruptcy in the autumn of 2008 and during the depths of the Eurozone crisis in the second half of 2011.

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Heads or tails?: The Demographics of Investing

Heads or tails?: The Demographics of Investing

When the working age population grows faster than the broad population, demographics become a tailwind as far as economic growth is concerned. Hence, what is likely to become a significant headwind for advanced economies in terms of economic growth, will almost certainly become a tailwind for most EM economies. However, that doesn’t necessarily mean that EM equity and bond returns will prove attractive.

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A case of broken BRICS?

A case of broken BRICS?

The first seven trading days of September have offered all of these markets some much needed breathing space with EM currencies, bond and equity markets all doing considerably better. It is thus tempting to conclude that this was just another one of those summer hiccups that have become the norm in recent years. I do not buy that argument for one second, though. There are some very sound fundamental reasons why the crisis erupted now.

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Much Ado About Nothing

Much Ado About Nothing

Interest rates will stay low for a long time – long as in years, not months. In the UK there is a risk that a weakening currency may lead to some modest increase in inflation but, generally speaking, inflation is not a problem, and all those who predicted runaway inflation as a result of QE will be thoroughly disappointed. Equities may actually perform better than one would expect from a fundamental point of view. Currencies are likely to be volatile.

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The Wisdom of Crowds

The Wisdom of Crowds

MPT is based on a number of assumptions, some of which are more restrictive than others. The question is whether the sum of those assumptions is so far off the mark that it renders the entire theory absolutely useless. Effectively the question is whether EMH, and with it MPT, should be ditched altogether.

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In the long run we are all in trouble

In the long run we are all in trouble

Now, you may well deduct from all of this that I am as bearish as I have ever been, but nothing could be further from the truth. The issues I have discussed in this month’s letter are clouds on the horizon which are likely to take years to play out and, in the meantime, investors will continue to be preoccupied with far more mundane issues. All I know is that financial markets cannot stay disconnected from economic fundamentals forever so, ultimately, the Tony Dyes of the world will be proven right. Unless they lost their jobs beforehand, that is.

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The Need for Wholesale Change

The Need for Wholesale Change

In the short term, though, a continuation of the currently lax monetary policy is likely to lead to higher assets prices. The investor mindset is very much in risk-on mode at the moment, as documented by the surprisingly calm reaction to the crisis in Cyprus. Mind you, none of this incorporates the risk of an outright war between the two Koreas or an escalation of hostilities between Israel and Iran, just to mention two wild cards. Barring a Black Swan event, though, we are on relatively firm ground for now, but the seeds of the next crisis have already been sown.

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Expect the Unexpected in A Low Return Environment

Expect the Unexpected in A Low Return Environment

The seemingly never-ending debate on passive vs. active investment management is beginning to annoy me. The discussion is one-dimensional and, at times, completely derailed. I shall be the first to admit that the long-only industry has not covered itself in glory in recent years. Nor has large parts of the alternative investment management industry for that matter. It is nevertheless the wrong discussion to have.

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