Post Tagged with: "investing"

Pie in the Sky

Pie in the Sky

We are still in a post-crisis environment, and enough people are still negative on equities, and interest rates are low enough, to provide plenty of purchasing power. We therefore expect it to be an ok period for equities over the next year or two – not outstanding given our modest growth expectations but ok. The trick is to be careful on emerging markets. If the U.S. dollar continues to be strong, it is an accident waiting to happen.

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The convergence of safe asset yields toward zero

The convergence of safe asset yields toward zero

As low nominal GDP growth takes hold, we should expect short-term interest rates to remain low and for the yield curve to flatten. There are three main reasons this is so. First, low nominal growth rates imply low inflation. Second, to the degree market volatility produces risk-off sentiment, the bid for safe assets will further suppress yields. And third and most importantly, the natural rate of interest on a zero-day fiat currency liability is zero. I expect that the safe asset class in lowflation currency areas will be dominated by these trends, causing yields to stay low or even shrink. This convergence to zero makes the highest yielding safe assets attractive and thus favours New Zealand and Australia, as well as the the US, UK and Canada to some degree. Comments below

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A Brave New World

A Brave New World

By Niels Jensen The Absolute Return Letter, December 2014 “The deepest sin against the human mind is to believe things without evidence.” Aldous HuxleyIn the the last two Absolute Return Letters I have argued why one should expect global GDP growth to be below average over the next decade or so, why interest rates should, as a consequence, remain low […]

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Snail Trail Vortex

Snail Trail Vortex

The Absolute Return Letter, November 2014 “The single most robust and striking fact about cross-national growth is regression to the mean.”  -Lawrence Summers and Lant Pritchett Low growth is printed on the wall When financial markets capitulate, many investors lose the ability to keep things in perspective. That is a fact of life. Instead the little things take over and […]

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QE will end, GDP growth expected at 3.0%, deflator at 1.4%

- This will be a busy week between stress tests and data releases, which markets have taken as positively
– Market expectations have settled down, and the Fed is widely expected to announce the finish of QE
– Economic news for Europe has been mixed so far, with M3 improving by German IFO disappointing
– The initial impact of the Ukrainian and Brazilian elections will be local

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Are we in a global financial crisis?

With financial markets tanking across the board, there is a whiff of panic and some people might be thinking that the next global financial crisis is already upon us. I don’t think this is the case. Certainly, the European sovereign debt crisis has entered round two but this can easily be overcome. Turbulence and a simmering crisis in Europe, yes. An acute crisis, no.

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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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Divergence in ECB and Fed rate regimes will drive portfolio shifts

Divergence in ECB and Fed rate regimes will drive portfolio shifts

The big news today was the ECB’s decision to lower interest rates 10 basis points to 0.05% and its simultaneous decision to engage in a form of quantitative easing using the asset-backed market as a vehicle. While these measures are welcome, they will almost certainly not be enough on their own. But it will give some respite to a euro area on the brink of outright deflation.I have a few brief comments below.

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Cyclical recovery petering out before it hits middle class

Cyclical recovery petering out before it hits middle class

This is an abbreviated post from our subscription series at Credit Writedowns Pro. Before I get into the details today, I want to note that going forward, I may not have the bandwidth to be able to post on a daily basis. I am going to try. But there are definitely going to be weekdays going forward where I won’t […]

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Edward Harrison’s Ten Surprises for 2014, Update 2

Edward Harrison’s Ten Surprises for 2014, Update 2

This is an abbreviated post from our subscription series at Credit Writedowns Pro. Today is the time to update you on how my 2014 surprises are faring and why. Just to remind you, the surprise list is based on Byron Wien’s list of ten surprises which he has been conducting for the last thirty years. Surprises are events to which […]

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Economic and market themes: 2014-07-25 Ukraine, China, Japan, technology overvaluation

Economic and market themes: 2014-07-25 Ukraine, China, Japan, technology overvaluation

Ukraine is at risk of becoming a failed state
China’s growth is due to stimulus
Japan’s macro figures worsen
Microsoft’s strategy is weak
Facebook is overvalued

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Iran real beneficiary of Russia-China gas deal and more on overheated markets

Iran real beneficiary of Russia-China gas deal and more on overheated markets

The big news today is the Gazprom deal in China. This is a $400 billion gas deal to supply gas from Russia to China for 30 years that has been in the works for over a decade. But the changing geopolitical atmosphere has given it urgency. Overall, from a macroeconomic perspective I am positive. But risk has really increased. And the Russell 2000 is one of the areas where you see the biggest overvaluation. We see it in high yield as well.

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