One of the great conundrums in today’s world is why computers in general and the digital revolution in particular have had exactly the opposite effect on productivity than everybody expected. Why on earth is productivity growth slowing when we all expected it to rise and what can we do about it? That’s what this month’s Absolute Return Letter is about. Enjoy the read.
60% allocated to equities and 40% to bonds has been an extraordinarily successful investment strategy for most of the past 40 years, but I believe the show is now largely over. In this month's Absolute Return Letter, I focus on the 40%, and I argue that, although I don't expect 10-year government bonds to deliver more than 0-2% annual inflation-adjusted returns in the years to come, there are indeed things you can do to earn higher returns.
Italy suffers from a series of major structural problems that, even with the best of intentions, cannot be corrected anytime soon, and the new Italian government is about to find out that it has landed in the deep end of the pool.
There are three key drivers of financial markets - behavioural patterns, cyclical trends and structural trends. Because human attention spans are getting shorter and shorter, behavioural patterns affect financial markets more and more. That is a problem but also an opportunity set for the astute investor who is prepared to think outside-the-box.
Oil prices have been remarkably strong more recently, defying our (very) long-term prediction that fossil fuel prices will go to $0. In this month's Absolute Return Letter, we take a look at the reasons behind the recent strength and where oil prices are likely to go next.
BIS surprised many, when they back in 2015 concluded that ageing is actually inflationary. New research from Oxford Economics have come to precisely the opposite conclusion, which is why I have decided to do a deeper dive on the topic this month. Conclusion? BIS may have been correct in the past but, more recently, my vote would definitely go to the dis-inflationary camp.
Events of recent weeks suggest that we have now entered the final stage of the long-running bull market in equities, but what will happen next? An inflationary or a deflationary bust? We argue that, as we see things, the more likely end-game is an inflationary bust, but we do admit that the arguments in favour of a deflationary bust are quite pervasive. Regardless, a bust is next, and a bust is still a bust.
At the end of the day, equity returns are driven by ROE, and we argue in this month's Absolute Return Letter that ROE is likely to drop as 2018 unfolds, partly due to rising inflationary pressures – particularly wage inflation – and partly due to rising borrowing costs. Perhaps more surprisingly, the new US tax reform could also negatively affect ROE. Continue to read if you want to understand why.
Equity markets have enjoyed an exceptionally long spell of rising prices but, as we all know, it won't go on forever. Here are five reasons why the party may soon be over. Many would probably expect recession to be one of those five, but it isn't. The economic outlook is simply too good for me to add that to my list of main risks for 2018, but that doesn't mean equities cannot fall. Enjoy the read.
Are you ready to die younger than your parents? It may not be what you want, but for society it is not at all that bad. In the years to come, we will literally drown in healthcare costs, but declining longevity, which is an emerging trend, could just about to solve that problem.
When real wages decline and the retirement pot takes a hit, the man in the street starts to bleed. He doesn't always understand the underlying dynamics, but that rarely matters. Something must change, he says to himself. That is what has happened to many Brits in recent years and explains why Corbyn has suddenly got plenty of momentum.
The world is running out of freshwater, and much needs to be done unless we want a crisis to turn into a catastrophe. Desalination will fix the problem, they say, but desalination is not an option open to all countries. A dramatic change in consumer habits and attitudes must also take place, and that takes time.
Rarely have equity bulls and bears disagreed more than they do at present. We look at both the bull case and the bear case, and then we introduce a longer-term structural angle, which is largely ignored by both bulls and bears. This third side of the coin is based on the fact that inflation is structurally low, and that central banks may be committing a serious policy error by targeting 2% inflation, when it is almost impossible to drive inflation to those levels. Enjoy the read!
As regular readers of the Absolute Return Letter will know, we run a list of structural mega-trends which will form the world as we know it for many years to come – and that list drives our investment strategy.
Low-cost, high-grade coal, oil and natural gas - the backbone of the Industrial Revolution - will be a distant memory by 2050.
When investing, investment rules ensure long term success. I would even go as far as to suggest that those who don't follow certain rules, i.e. they invest more opportunistically, are bound to run into trouble sooner or later, but much more about that, and what my rules and principles are, in this month's Absolute Return Letter.
UK politicians are not telling the full truth about Brexit. Why? Most likely because it is not in their interest to do so. UK exports to the EU are far more important to the UK economy than vice versa, and a substantial number of UK jobs could be at risk should the free trade agreement go up in smoke.That is only one of several issues our political leaders are concealing.
Is inflation finally back? There are certainly signs that it is – at least in some countries – and it appears that both central bankers and investors have already picked up the early signs. We argue why investors should worry more about the US and UK and less about the Eurozone, where higher inflation more recently is all non-core.
This month's Absolute Return Letter is a follow-up to last month's letter. In January I argued why investors could be facing a much more hostile Fed this year than generally perceived, and this month we look at the implications of that; why beta risk should be de-emphasized in 2017, and where we spot better opportunities.
As we always do in January, this month we focus on the investment minefield laid out in front of us and we argue that with upcoming elections in the Netherlands, France and Germany, and economic uncertainties globally, this year could turn into a rather tricky one for investors. There are reasons to be optimistic, however, and we hope that 2017 will be a prosperous year for you all.
There is macroeconomics, and there is microeconomics. Macroeconomics have failed miserably in recent years, and it is time to approach things differently. If you can find ways to stimulate demand more than supplies, you will almost certainly see a re-acceleration in economic growth.