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Australia’s Terms of Trade: Implications For Credit Investors
by Tracy Chin, Aaditya Thakur of PIMCO,
Australia is contending with a multi-year decline in the terms of trade and a rebalancing toward the non-mining sectors of the economy. For companies, the macroeconomic consequences of a downswing in the terms of trade provide both challenges and benefits. For investors, it is important to find companies that have a clear, demonstrated understanding of the macro environment and can navigate the headwinds through operational efficiencies, cost control, market positioning and balance sheet management.
Managing Expectations - Part III
In the first of this three-part series on managing expectations, I discussed the role cycles play in the investment management process. At U.S. Global Investors, we actively monitor both short- and long-term cycles, from the annual seasonality of gold to four-year presidential elections, in order to manage expectations based on historical patterns.
Lifted by Germany and China
We briefly review the interplay of the global and regional (Europe and Asia) business cycles and where we stand. It turns out that the global business cycle is muddling through, continuing deceleration of China is still trying to find bottom and Germany recently turned the corner and is back to deceleration. While this state of affairs is no news the interesting aspect of this regional interplay which we want to bring to your attention is that US is helped and lifted by deceleration of both neighbors. That said US itself is in a mixed state.
Time to Consider Korea Hedged Equities
by Jeremy Schwartz of WisdomTree, Inc.,
The Korean won has been on a tear as one of best-performing emerging-market currencies in 2014. And this has the Korean government and central bank officials worried that the rising Korean won is eroding the competitiveness of Koreas exports.
Municipal Market Perspectives
Heightened international unrest and the likelihood of accelerating economic weakness in Europe will provide further support for fixed income securities. It is unlikely central banks will move from their current accommodative monetary positions anytime soon. Since we do not anticipate a meaningful upward move in Treasury rates, municipal bond prices should also benefit. Yields are likely to remain close to current levels and even possibly move lower. Strong market technical factors will also provide support.
Developed Asia Pacific: Regional Economic Review - Q2 2014
by Team of Thomas White International,
During the first half of 2014, developed Asia Pacific economies faced challenges arising from lukewarm consumption and meek trade growth. Most countries in the region tried boosting their economies with a mix of infrastructure spending and loose monetary policies. Countries that had their trade skewed to China, Asias largest economy, faced prospects of slowing trade.
Misunderstanding Buffett
In November 2013, Connecticut-based money management firm AQR published a paper considering how to construct a quantitative model emulating the way Warren Buffett has selected his investments and generated attractive long-term returns. As we believe AQR's conclusions do not represent how Buffett actually invests, we considered how we might build a "Buffett model" in a different way.
Reflections on WWI: Geopolitics and Markets
WWI was a devastating conflict and the postwar effects were substantial. From a market perspective, measuring the impact of geopolitics is difficult. Some events are short-term; others are more substantial but mostly cyclical. There are also events that permanently change the investing landscape. This report gives a short recap of the onset of WWI, and examines the problem that comes from induction, the logical process of observing the world and predicting the future. From there, we discuss the lessons learned from the post-WWII and post-Cold War era with an analysis of what may
Managing Expectations
Financial markets are influenced by relatively predictable cycles, a lesson we at U.S. Global Investors rely on to help us manage expectations and be effective stewards of your money. This is a theme I've frequently written about and discussed in investor presentations, one of which, Anticipate Before You Participate, is a classic that I often use to remind investors of these timeless principles.
Summer Void
Although Wall Street and other corners of the business and political world may empty over the next few weeks, risks of a pullback in U.S. equities have gone up. Although we believe it would represent a buying opportunity and are optimistic longer term due to improving economic growth, nervous investors may want to consider a hedging strategy. China's stock market performance has improved and we remain positive, while European economic data has been more concerning, although the stocks still look attractively valued in our view.
Important Reform Progress
by Andy Rothman of Matthews Asia,
Last week's announcement that the Communist Party will reform the hukou, or household registration system, is an important first step toward reducing the contradictions and conflicts in Chinese society. Migrant workers were primarily responsible for China's rapid economic growth, and today account for the majority of the manufacturing and construction workforce.
Finding Smart Beta in the Factor Zoo
In the latest piece from Research Affiliates, Jason Hsu, Co-Founder and Vice Chairman, and Vitali Kalesnik, head of equity research, look at how the "publish-or-perish" syndrome and the smart beta movement have motivated academics and practitioners to come up with a spate of new investment factors. How can investors determine which ones are legitimate and how to use them in their equity portfolios?
The Tocalino Index: applying Demographics to a variation on Arthur Melvin Okuns Misery
The similarity between the trajectory of this new indicator (Tocalino Index, or Indice Tocalino) and the behavior of the stock market index corrected for inflation is clearly visible and a surprise. Even more importantly, it shows clearly the benefit and necessity of taking the demographic profile into consideration when analyzing data that concerns the economy of a country and any reflections of it on the behavior of stock markets.
Grey Owl Q2 Investment Commentary
by Team of Grey Owl Capital Management,
Even after a second quarter rebound, gross domestic product (GDP) growth is barely positive for the first half of 2014. That has not stopped the S&P 500 from climbing to new highs. In fact, GDP growth has been weak for the entire recovery and, while improved, corporate sales and earnings also leave something to be desired. Stock market returns look better still, but only when compared to these weak results. Looking over a longer timeframe, the US equity market is approaching fifteen years of low single-digit returns.
Always Wrong?!
by Jeffrey Saut of Raymond James,
s the public always wrong? This is probably the most frequently asked question about the Theory of Contrary Opinion. For a correct answer we need to change the words in the question. Let me put it this way: Is the public wrong all the time? The answer is decidedly, No.
Avoiding the Unintended Migration from Investor to Speculator
The identification of value/price in the allocation of capital is essential to successful investing. Assets purchased at levels above intrinsic value reflect an approach based on hope and momentum not sound risk/reward analysis and normally portend negative results.
So, What Did We Learn?
by Scott Brown of Raymond James,
The busy week of economic news left investors uneasy. The 4.0% GDP growth figure contributed to concerns that the Fed may be forced to raise short-term interest rates sooner rather than later. However, while the economic data reports, and even the Fed policy statement, had something for everybody, the outlook for monetary policy should be essentially unchanged.
The Alpha and the Beta of Investing
by Adam Jared Apt,
This article conveys two distinct practical lessons worth remembering and applying. One concerns the relationship between risk and return, and it will behoove you to keep this lesson in mind whenever you're inclined to throw caution to the wind in pursuit of better stock returns. The other concerns what counts as skill in selecting stocks.
The Chinese Wall of Worry: Uncertainty Rhymes with Opportunity
In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, looks at the over-valued global market environment and points out that "While we wait for the day of reckoningwe should not be oblivious to potential opportunities, wherever they may exist. China may be a case in point." Digging deeper, Sicart looks at the negative media perception of China and believes "Many of the problems invoked in the headlines are real. But they are neither new nor, I believe on investigation, as catastrophic as implied."
Fed's Janet Yellen To Continue Punishing Savers
New revelations have suggested that our new Fed Chair, Janet Yellen, may be the most liberal person to ever hold the highest monetary office in the world. This news comes after a recent extended interview Ms. Yellen did with The New Yorker Magazine and her testimony before Congress earlier this month.
Should Be an Eventful Week
by Scott Brown of Raymond James,
The economic calendar is packed with important items this week. Oddly, Wednesday afternoons policy announcement from the Federal Open Market Committee may be the least interesting. One shouldnt put too much weight on the advance GDP estimate, as the figures will be revised, but the initial estimate, along with annual benchmark revisions, should have important implications for the outlook for growth in the second half of the year.
Emerging Europe: Regional Economic Review - Q2 2014
by Team of Thomas White International,
During the second quarter of the year, the Emerging Europe region appeared to be displaying divergent trends. The fallout of the Ukraine crisis was not as damaging to the Russian economy as feared, with the economy even expanding during the review period. However, as the IMF pointed out, the sanctions imposed by the West appear to have dented investor confidence.
How High is High? (To Whom?)
by Jeffrey Saut of Raymond James,
I have a number of friends who succeeded as investors in the late 1960s, and they are succeeding now. The key to their success more than 20 years ago was that they managed to get out with most of their capital when the market turned down. Most investors were not so astute.
The 401(k) Event Horizon
by Scott Klimo of Saturna Capital,
Who would have guessed in 1973 that Roger Waters' meditation on life's fleeting passage would describe the dilemma faced by many today as they consider how best to save for retirement? The good news is that missing the starting gun doesn't prevent you from joining the race. We have all seen the calculations of how big our nest eggs could be if we started saving and investing at a young age, but those unable to do so still have an opportunity to build substantial savings.
The Outlook for Emerging Market Bonds
Emerging market bonds exhibit high real yields and improving credit quality. In addition, emerging market currencies are likely to strengthen. This article explains why emerging market bonds issued in local currencies might be a solid addition to a diversified portfolio.
Maintaining A Constant Standard Of Living Is Very Difficult
by Team of Optimus Advisory Group,
Ever wonder why rises in the Consumer Price Index ("CPI") seem low compared to your own personal experiences? Or why social security annual cost of living increases seem to get smaller and smaller? Or why inflation-adjusted pensions can't seem to keep up with general price increases? Or why the American worker gets such meager annual raises (if at all) that they seem to fall further behind year after year?
2014 Another Ho Hum Year from Hedge Funds
by Ryan Davis, Brian Payne of Fortigent,
Through the first six months of the year, hedge funds have generated a positive, albeit somewhat modest return. According to data compiled by Hedge Fund Research, the Fund Weighted Composite of hedge funds in their universe had generated a 3.2% return, compared to the S&P 500s 7.1% gain. While not terrible on a standalone basis, many investors had greater hopes for the asset class following five straight calendar years of underperformance versus the broad equity markets.
Smart Beta in Action: Taking Chips Off the Small-Cap European Table
by Jeremy Schwartz of WisdomTree, Inc.,
European equity markets performed strongly throughout much of 2013 and into the first five months of 2014. While it is difficult to time market tops and bottoms for individual stocks on a consistent basis, we believe there are benefits to undertaking a disciplined practice to rebalance weight based on changes in relative valuation.
A Farmland Investment Primer
by Julie Koeninger of GMO,
Farmland is a real asset that combines solid investment fundamentals with the potential for attractive cash yields, inflation hedging, and consistent returns from biological growth. Furthermore, farmland total returns tend to be uncorrelated with financial asset returns, offering genuine portfolio diversification for institutional investors.
Weekly Economic Commentary
by Carl Tannenbaum of Northern Trust,
From the Suez Canal, to Japanese bullet trains, to the American interstate highway system, to the Millennium Bridge to the Three Gorges Dam, the grandeur of infrastructure is on full display the world over. Awe-inspiring and beautiful to some, these fixtures also play a critical role in the functioning of the global economy. The choices nations make in the area of infrastructure can bear critically on prosperity.
Perspectives from the Franklin Templeton Fixed Income Group
by Christopher Molumphy, Michael Materasso, Roger Bayston, Michael Hasenstab, and John Beck of Franklin Templeton Investments,
In early July, there was a noticeable disconnect between the median forecast of Fed officials for interest rates by end-2015 and the markets forecast, as expressed in the federal funds futures rate. But if unemployment continues to decline and inflation to pick up in the coming months, the danger for bond market participants is that their predictions for interest rates may be too low and will have to be adjusted.
Comparison of Rising Rates Strategies
by Yung Lim of AdvisorShares,
With the ultra low interest rate environment becoming more of a norm in many investors mind, complacency has driven portfolio managers to maintain the status quo and stick to traditional duration and asset allocation targets. Recent history of bond market behavior has also supported this view. On a forward looking basis, however, the important questions center around how risk/return profiles change under rising interest rate environments and what investors should consider in evaluating the risk of their current portfolio mix.
Why We Favor Owning Gold in Euro Terms
by Ade Odunsi of AdvisorShares,
In this discussion piece we discuss the rationale for why investors looking to buy gold as a defensive asset during these uncertain times should consider buying gold in euro terms. When an investor buys gold in dollars they are expressing the view that they expect the price of gold to increase relative to the dollar. Similarly when an investor buys gold in euro, they express the view that they expect the value of gold to increase relative to the euro.
Dissecting the Japan Hedged Equity Rebalance
by Jeremy Schwartz of WisdomTree, Inc.,
We think it is important to be mindful of how an annual rebalance back to an underlying fundamental such as dividends can help manage valuation risks. With market capitalization-weighted indexes, when constituents increase in price compared to other stocks, they gain greater weight and increase their impact on the performance of the index.
Analysis of Ayres and Curtis Critique of 401(k) Plans
In our previous article we reviewed [Professors Ayres and Curtis's paper Beyond Diversification: The Pervasive Problem of Excessive Fees and 'Dominated Funds' in 401(k) Plans] (John M. Olin Center for Studies in Law, Economics, and Public Policy Research Paper No. 493). Our purpose in that article was simply to describe what Professors Ayres and Curtis are saying. In this article we evaluate their findings and proposals, discussing the limits of and possible objections to their conclusions.
The New Neutral: Investment Implications for Insurance Companies
by David Braun of PIMCO,
Low rates are unhelpful to an industry with legacy long-term liabilities containing rigid embedded credited rates; they exacerbate asset-liability mismatches and pressure earnings margins. Insurers may want to recalibrate their expectations of future interest rates, as well as broad bond and equity market returns. In The New Neutral, with beta from stocks and bonds likely to be relatively low, insurers should look to enhance buy-and-hold return potential via active management.
Retirement Planning with Annual Available Spend
by John Craig,
Sound financial planning requires neither the determination of safe withdrawal rates nor the use of Monte Carlo simulations. Relying on the past to predict the future is unnecessary. Instead, one must focus on how much can be spent each year, given expected returns and inflation, and then consider how negative and worst-case scenarios would affect retirement planning. That is the basis for the annual available spend methodology I describe here.
The Dollar Weapon
Over the past few years, various prosecutorial arms of U.S. government entities have brought charges against foreign banks that have violated U.S. sanctions that were placed on different countries. In this report, we will discuss the general nature of U.S. sanctions and how these banks violated American law. From there, we will reiterate the dollars reserve currency role from both a historic and theoretical perspective and show how this role makes the currency and the U.S. financial system pivotal in the global economy. We will conclude with market ramifications.
Two Top Experts Debate the Outlook for Growth
by Laurence Siegel,
Growth may slow, as Robert Gordon contends, at least when measured by GDP - if only because population growth is slowing. But that is not a foregone conclusion. And even if it were to happen, it doesn't mean that global standards of living would face a similar deceleration. Moreover, GDP doesn't fully capture the improvements in the standard of living that come with advanced technology.
Results 5,601–5,650
of 6,534 found.
