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The Lessons of Oil
I want to provide a memo on this topic before I and hopefully many of my readers head out for year-end holidays. Ill be writing not with regard to the right price for oil about which I certainly have no unique insight but rather, as indicated by the title, about what we can learn from recent experience.
A Rising Tide Lifts Most Boats
PIMCO expects global growth to accelerate in 2015, reaching about +2.75% year-over-year, with the majority of this improvement due to the (predominantly supply-driven) decline in oil prices. However, there will be large differences in growth dynamics among countries. While fiscal and monetary policies in most developed countries will stimulate growth in 2015, the U.S. Federal Reserve will attempt to break from the pack.
Testing the Limits of Monetary Policy Without Fiscal Union
Over the next 12 months, we expect eurozone growth to accelerate from the current annualised run rate of 0.5% to a still-very-weak pace of approximately 1%, while the ultra-low inflation tells us there is a demand problem. With the ECB set to expand its balance sheet over the cyclical horizon, the biggest risk to growth is if the ECB buys large quantities of government bonds but the governments do nothing. We expect to remain overweight European peripherals and overweight European corporate credit, with the focus on financials.
Outlook for the Global Credit Markets in 2015
by Mark Kiesel of PIMCO,
The combination of fundamentals, technicals, valuations and global central bank policies drives our overall constructive outlook for global credit in 2015. Economic growth dynamics, including an improving outlook in the U.S., along with likely changes in global central bank policies, continued energy price volatility and the potential for more shareholder-friendly actions by companies inform our credit views and strategies.
Valuation estimate of SP500 2015 returns : 2,246 target
The RecessionALERT Valuation Index (RAVI) is a multifactor valuation model that examines cyclically adjusted trailing SP-500 earnings (various multi-decade horizons), the SP-500 total-return index level, total stock market capitalization, Gross Domestic Product, non-financial corporate equities and liabilities, non-financial corporate business net-worth and percentage of investors allocation to stocks versus cash and bonds to determine 10, 5, 3, 2 and 1 year forecasts for the SP-500 Total Return Index (dividends re-invested).
Will the European Union Reindex Stock Markets to 100 points?
by Wim Grommen of Transfer Solutions,
The introduction of the euro brought the citizens of Europe many advantages, including uniformity. It would be nice if that uniformity also applied to the comparison of the various stock exchanges. An index point is not a fixed unit in time and does not have any historical significance, so the European citizen may therefore not attach any significance for the future. Comparing index points to their history and also comparing the various stock exchanges makes no sense. The time is ripe to reindex European stock exchanges to 100 points.
2014 Year End Letter
As 2014 comes to a close, we want to provide an update on the energy sector. Energy has been making headlines as oil prices have reached unexpected lows. As discussed below, while the decline in oil prices is creating volatility in the energy sector, we believe that there continues to be opportunity in this sector and that the low oil prices should prove beneficial to U.S. and global economic growth.
Allocating to Alternative Investment Strategies
by Nathan Rowader of Forward Investing,
Following the market declines in 2008 and 2009, many investors have shown interest in alternative investment strategies such as hedge funds and mutual funds that employ hedge fund-like strategies. These types of strategies have been around a long time, but until recently their use among individual investors has been somewhat limited.
Strategy Spotlight: An Update on PIMCO'S Fundamental Index-Based Product Suite
The Fundamental IndexPLUS AR strategies combine the best of what passive indexing and active management aim to deliver: broadly representative, transparent equity exposure plus the potential for meaningful equity market outperformance.
Financial Planning for an Uncertain Energy Future
by Richard E. Vodra,
Advisors hearing optimistic forecasts of plentiful new supplies of oil that may last for decades may be encouraged to make aggressive projections for their clients. It is critical to understand the role oil plays in the economy and the factors that will affect future supplies. Advisors should "drill down" beneath the slogans to see both risks and opportunities upon which to base their recommendations.
Oil, Employment, and Growth
by John Mauldin of Mauldin Economics,
Last week we started a series of letters on the topics I think we need to research in depth as we try to peer into the future and think about how 2015 will unfold. In forecasting US growth, I wrote that we really need to understand the relationships between the boom in energy production on the one hand and employment and overall growth in the US on the other.
Falling Oil Prices Cause Jitters, but the Economy Stays on Track
The dominant financial story last week was the concern over the continued slide in oil prices, which have dropped close to 40% so far this year.1 Worries about the growing power of the Greek opposition party Syriza, and the potential effect on European policy should it assume control over the government, also contributed to investor unease.
European Small-Caps: Focus on Companies, Not Countries
Growth in the euro area has slowed sharply, but thats not true for all companies in the region. We think worries about Europes recovery may offer investors the chance to buy quality, small-cap stocks for less than they would pay for similar-caliber companies elsewhere.
Three Winning Arguments for Japan
by Russ Koesterich of BlackRock,
I travel to Japan every year, normally around early December. The more time I spend there, the more I come to realize what a uniquely distinct country it is. On my trip last week, one of my Japanese colleagues pointed out that Tokyo was starting to allow taller office buildings. I assumed the previous limitation was a function of Japans location in a geologically active part of the Pacific. My friend politely laughed. The injunction was due to the fact that no building was supposed to look down on the Imperial Palace.
2015 Year Ahead: Continuing to Deflate the Global Credit Bubble
Stock market leadership virtually always changes when volatility significantly spikes, and the 2008 bear market was no exception. Credit-related asset classes led the markets for the decade prior to 2008 as the global credit bubble inflated. Since 2008?s bear market, however, leadership has significantly changed and credit-related asset classes have generally underperformed plain, old-fashioned stocks.
The Hidden Value of a Reverse Mortgage Standby Line of Credit
by Wade Pfau,
Recent research has investigated how opening a standby line of credit through a reverse mortgage and strategically spending from this line of credit can help improve the sustainability of retirement income strategies. In this article, I show that the benefits of opening a home-equity conversion mortgage (HECM) line of credit extend beyond meeting spending needs.
An Improving Economy Justifies a Pro-Growth Investment Stance
U.S. equities advanced again last week with the S&P 500 Index climbing 0.4%, extending its winning streak to seven weeks. Investors responded well to improving economic data and focused on the positive aspects of declining oil prices. In China, equities moved sharply higher and notched their best weekly performance in seven years as investors speculated that Chinese officials were on the verge on enacting additional policy support.
Hungary's PM: Madman or Geopolitical Genius?
Hungarys Prime Minister Viktor Orban is one of the first European leaders to turn friendly toward Russia, noting that geopolitics are changing and Eastern European countries should redefine their international policies according to these changes. This report explores the differences between the rules of the geopolitical game being played by Hungary, the West and Russia. We will describe the history of Hungarys balancing act between the powers of the East and West and how this history affects its current politics. We will discuss the most likely outcomes and their international si
Jeremy Grantham's Favorite Book
by Michael Edesess,
Jeremy Grantham has long advocated that economic growth is inexorably constrained by physical resources, especially oil and other fossil fuels. Thus, in his quarterly letter, he writes, "I think that the old growth rates in productivity will not come back, at least until we have had a transition away from fossil fuels." But Grantham also gratefully notes that "a new book appears that amazes me by doing the opposite, and by an increasingly well-known economist no less - It is entirely sensible from start to finish - I agree with almost everything he writes."
A Long-Term View for China
by Nick Niziolek of Calamos Investments,
When I meet with clients, one of the most frequent questions Im asked is, What do you think about China? With Chinas rate cut this past Friday helping to fuel a global equity rally, we were reminded of how relevant the China question is to the overall health of the global markets and economy. In this post, Ill discuss the lens through which we view China and how we interpret the daily flood of policy-related headlines coming out of the country to determine what is noise and what is actionable.
Macroeconomics Finally Gets Interesting
by John Mauldin of Mauldin Economics,
2015 may be the year that macroeconomics really becomes interesting again, if it hasnt already. After a long period of relatively coordinated central bank policies and remarkably low volatility, the macro scene is becoming more dynamic. Thats great for those who live and die by dramatic long-term shifts in global markets, but it should be terrifying for emerging-market policymakers, currency carry traders, Texas oil men, and, frankly, the average investor. King Volatility is back on his throne.
Dont Let Market Motion Sickness Keep You From Missing the Boat
Despite all of the good news, the recent threat of market volatility, which weve seen plenty of in commodities and emerging markets, seems to have pushed close-to-retirement folks away from equity securities. The August and October downturns, not to mention the decline in gold and oil prices, have understandably heightened consumer fears.
Monetary Policy Outlook
by Scott Brown of Raymond James,
The minutes of the October 28-29 Federal Open Market Committee meeting suggested that there is still no consensus opinion among senior officials regarding when the Fed will begin raising short-term interest rates. There is strong agreement that monetary policy moves will be data-dependent. However, policymakers differ in their views on the amount of slack in the job market.
The Tooth-Fairy Economics of Jeff Madrick
Incentives don't matter, tradeoffs don't exist and there are no limits to what the government can give you. Those who believe this dogma are likely to still have faith in the tooth fairy. In Seven Bad Ideas, a critique of the neoclassical revival in economics that surrounded Milton Friedman and that affected policy and politics worldwide for more than a generation, Jeff Madrick emerges as tooth-fairy economics' chief exponent.
Black Friday Hindenburg Omen Suggests Near-Term Caution
by Chris Puplava of PFS Group,
Given how extended the markets are and the near uninterrupted run since the mid-October lows, the recent Hindenburg Omen signals on the NASDAQ and Russell 2000 on Black Friday are likely warning of a coming pullback.
Quantitative Easing, Interest Rates, Real Yield Curves And Fedspeak...Get A Load Of That BULL!
People got it wrong, Quantitative Easing did not lower long-term interest rates. The Federal Reserves money printing actually halted the plunge of yields and cheapened bonds. Yields fell when other institutions showed their hunger for long bonds, and that suggests trouble ahead.
Is Bitcoin the Future?
by John Mauldin of Mauldin Economics,
Worth Wray has written this weeks letter as a summary of what we know about Bitcoin. Delving into its history and bringing us up to date, he also offers a glimpse of the future. At the end of the letter I offer a few of my own thoughts on the relationships among gold, fiat money, Bitcoin, and financial transactions. If nothing else, Bitcoin offers a provocative way to think of the future of money.
Hard-Won Lessons and the Bird in the Hand
by John Hussman of Hussman Funds,
The S&P 500 is more than double its historical valuation norms on reliable measures (with about 90% correlation with actual subsequent 10-year market returns), sentiment is lopsided, and we observe dispersion across market internals, along with widening credit spreads. These and similar considerations present a coherent pattern that has been informative in market cycles across a century of history including the period since 2009. None of those considerations inform us that the U.S. stock market currently presents a desirable opportunity to accept risk.
The Dow Jones: Beautiful Tree in the Desert
by Wim Grommen of Transfer Solutions,
The Dow Jones Industrial Average (DJIA) Index is the only stock market index that covers both the second and the third industrial revolution. Calculating share indexes such as the Dow Jones Industrial Average and showing this index in a historical graph is a useful way to show which phase the industrial revolution is in. Changes in the DJIA shares basket, changes in the formula and stock splits during the take-off phase and acceleration phase of industrial revolutions are perfect transition-indicators.
Monetary Tectonics
John Hathaway, manager of the Tocqueville Gold Fund (TGLDX), examines in his latest piece "the very meaningful difference between the dollars relative and absolute strength, and look(s) at the widening fissures beneath the faade of strength fissures that, as yet, appear to have had little impact upon the investment consensus."
Pick and Mix: Fresh Ideas for Diversifying Bond Exposure
by John Taylor of AllianceBernstein,
Policy backdrops and growth trajectories around the world are showing increasing signs of divergence. Yet many bond investors continue to congregate in a few selected pockets of the fixed income universe. In our view, its a perfect time to reconsider diversification tactics.
The Tortoise and the ECB
by Harley Bassman of PIMCO,
It is curious that the ECB continues to slumber while the eurozones trading partners move steadily ahead. While not a certainty, it seems highly unlikely that the ECB will indefinitely allow its main trading partners to competitively devalue versus the euro. And since there is no reason to reinvent the wheel, Europes policymakers will likely unveil a familiar-looking and expansive QE policy designed to accelerate asset velocity and, in turn, reflate their equity market.
Median Household Income Down Last 15 Years - Why?
One of the most puzzling questions in economics today is why did median household income peak in 1999 and has yet to recover? Most analysts cite the fact that we had two serious recessions in the space of a decade, including the financial crisis of 2008-2009.
Global Economic Perspective: November
by Christopher Molumphy, Michael Materasso, Roger Bayston, Michael Hasenstab & John Beck of Franklin Templeton Investments,
Steady improvements in US employment and relatively good economic growth figures mean that debate over when the US Federal Reserve (Fed) will begin to tighten policy continues to be the order of the day. US job growth increased at a fairly brisk pace in October, and numbers for the previous two months (already good) were revised higher. Since the start of 2014, US employers have added more than 220,000 workers on average each month, which should be sufficient to sustain economic momentum after an initial reading showed annualized gross domestic product (GDP) growth of 3.5% in the third quarter
Reflections on the 25th Anniversary of the Fall of the Berlin Wall: Part 2
Last week, we began our two-part series on the fall of the Berlin Wall with an examination of the end of Marxism. In this report, we will examine the rest of the important consequences from the fall of the Berlin Wall. These are: the Collapse of the U.S.S.R., the Onset of the U.S. Unipolar Moment, and the Impact of German Unification. We will conclude our comments with potential market ramifications.
Results 8,451–8,500
of 10,317 found.
