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A Bubble in Complacency
by John Mauldin of Mauldin Economics,
The simple fact is that we are in what I call a Muddle Through Economy. Things arent terrible, but they are not great, either. Weve come through a devastating Great Recession caused by a crisis in the financial sector. It is quite typical for the effects of such a crisis to linger for a decade or more. So compared to where we were at the bottom of the Great Recession, the glass is half-full. But compared to the expectations we have for economic recovery and the resumption of vibrant growth, half-full seems like an exaggeration. And for many people, the glass is simply empty, whil
Trends in Gold Option Volatility
by Ade Odunsi of AdvisorShares,
Liquidity in gold option trading has risen significantly over the last five years. Using the COMEX 100 ounce gold option contract as a proxy for the market, Year-to-Date Average Daily Volume has risen from approximately 30,000 contracts in May 2009 to 70,000 contracts (~ 217 metric tonnes) in May 2014. This period of growth in option use has coincided with the rapid rise in the gold price after the 2008 credit crisis and perhaps reflected a need from the growing number of gold investors for derivative contracts with which they could manage the risks inherent in their gold exposure.
In a Flash, China Looks Strong
If you want to know where the world economy is headed, there is one number that I believe investors should focus on: the HSBC China Manufacturing Purchasing Managers Index (PMI). On Thursday, the preliminary flash PMI for May came in at 49.7, beating Bloombergs consensus of 48.3.
Online Upstarts Challenge Chinese Banks
by Richard Gao of Matthews Asia,
Chinese banks have long operated under a protective environment in which deposit and lending rates have been managed in a rather tight band by the central bank. One advantage of these controls for the banks has been fixed net interest rate margins. But Chinas traditional state-owned banks have been pressured recently to try to keep depositors from seeking the higher yield products now offered by online Chinese financing firms.
The Crimean Conflict Has Affected Commodities Markets, Just Not Where You’d Expect
Since the end of February, when the Crimean crisis started to escalate, grain prices have responded to nearly every up and down of the crisis. Wheat is up 21%, and corn is up 10%. We believe investors looking to take a view on the future price of wheat or corn should do so through the options market. In this case, we think being long puts on wheat is an attractive way to implement our short wheat view.
Why We're Often Bullish When the Market Turns Bearish
by Francis Gannon of The Royce Funds,
While economic anxiety has hit the market prior to the often bearish summer months, we continue to concentrate on matters less publicized: a shift in equity market leadership in favor of quality driven by rising interest rates.
Interest Rates Have To Go Up. The "Bond King" Says No
The prevailing view on Wall Street and Main Street is that medium and long-term interest rates have to go higher in the months and years ahead. Interest rates have to get back to normal at some point, so were told. Yet in the last several months, yields on 10-year Treasury notes and 30-year Treasury bonds have fallen rather significantly. Whats up with that?
Everyday Brands in the Right Hands
An ownership mentality, long-term perspective, and disciplined capital allocation are characteristics we look for in all management teams but find in few. Through its commitment to these attributes, Jarden Corp. (JAH) has driven significant outperformance for long-term investors and compiled an attractive portfolio of niche brands that are leaders in their respective markets.
Pacific Powers: Australia and Japan
Separated by nearly 4,000 miles of sea, the economies of Australia and Japan are often lumped together under the Asia Pacific (APAC) label. Both of these countries can be considered global powers and powerful GDP generators, but their economies, the challenges they face and their responses to those challenges have been very different. Don Huber, vice president, research analyst and portfolio manager, Franklin Equity Group, looks at how these APAC powers are navigating their unique issues and shares his market outlook for each.
Will Global Tensions Derail the US Recovery?
by Robert Huebscher,
It's not the Fed's monetary policy that investors should fear, but the "geopolitical tapering" undertaken by the Obama administration, contends Niall Ferguson, the Harvard historian. Ian Bremmer, the political scientist and chairman of the Eurasia Group, disagrees - despite some tactical missteps, he said, the current administration has achieved reasonable results.
Throwing Babies Out With Bathwater
Instead of behaving wisely, we think investors have been "throwing babies out with the bath water" this year. We believe speculators have fled out of the Biotech ETFs and have unwittingly sold Amgen (AMGN) between $129 and $109 per share because it is the largest holding of most of these targeted vehicles. From our vantage point, investors have tossed out EBAY (EBAY) in the internet space, Gannett (GCI) in media, Pfizer (PFE) in Pharma and Bank of America (BAC) and JP Morgan (JPM) in the banking sector.
Which Resource Areas Show Signs of Strength?
Global synchronized growth, as measured by the Global Purchasing Managers' Index (PMI), remained stable or positive for the past 12 months until Japan reversed the momentum in April with a precipitous drop in its PMI. China is contributing modest growth but, fortunately, the U.S. and Europe are rebounding. This lack of consistent global momentum has created a short-term, volatile, hot and cold, stop-and-go sentiment. Global real GDP growth peaked in 2010 at 5.2 percent then slowed for the next three years to 3 percent. Global growth in 2014 is likely to accelerate, for the first time in four y
Mixed Signals and the Road Less Traveled
As the markets flirt with all-time highs and a potential shift in Fed policy, earnings season has not altered the fact that the level of investor uncertainty feels elevated. Throw in the case of a really bad winter, a geopolitical environment that rhymes with events just prior to World War I, and poor trading volumes, and it all suggests that heightened levels of unease remain.
Schroders Monthly Markets Review: Overview of Markets in April 2014
Global equities edged higher in April. Some stronger macroeconomic data from developed economies helped to support returns but the ongoing crisis in Ukraine remained a headwind for equities. Developed markets outperformed emerging markets. In the US, a generally firmer tone to macroeconomic data and a broadly encouraging corporate earnings season supported sentiment. Investors were also reassured by comments from Federal Reserve (Fed) Chair Janet Yellen about maintaining low interest rates.
Washington Hates Carrots, Loves Sticks
by John Browne of Euro Pacific Capital,
A widely-held maxim tells us that money tends to flow from where it is treated badly to where it is treated well. This trend has taken center stage in the ongoing battle between U.S. states to attract and retain top employers. In that conflict, high tax states like California have been losing ground to relatively low tax states such as Texas and Florida.
Never, Never
by Andrew Redleaf of Whitebox Advisors,
Imagine a few months from now Mark Zuckerberg calls a press conference to announce his goals for Facebook for the next few years. As the crowd waits with baited breath, he announces three: 1.To have Facebook recognized as the worlds coolest company. 2. To triple the number of Facebook employees, because there are so many cool things to do and because we all have to work together to fight unemployment. 3. To make Facebook employees on average the highest paid in the world, because income inequality is incompatible with FBs values.
Equity Markets Remain Mixed as Fundamentals Slowly Improve
U.S. equities finished mixed last week as the Dow Jones Industrial Average was the only major index to end in positive territory. The overall macro narrative appears favorable despite the lack of market direction. Scrutiny of beaten-down momentum stocks resurfaced, although broader market spillover remained muted.
Goldilocks and the Global Economy
Macro conditions are lukewarm but positive and largely absent any systemic risk. Momentum stocks have fallen out of favor as the market rotates into names with more attractive valuations. Europe and especially the U.K. have been showing signs of strength despite geopolitical risk with its energy supplier, Russia. The safety of sidelined cash exposes investors to what we view as the greatest current risk in the market upside risk.
Are Valuations Really Too High?
by John Mauldin of Mauldin Economics,
I have done quite a number of media interviews and question-and-answer sessions with audiences in the past few months, and one question keeps coming up: "Are valuations too high?" In this weeks letter were going to try to look at the various answers (orthodox and not) one could come up with to answer that basic question, and then well look at market conditions in general.
The Good, the Bad and the Opportunity
Twice a day, in the morning and at lunch, our investment team sits down together to discuss what?s important and what?s immaterial. This past week, in my opinion, the good outweighed the bad. Much of the economic news was a direct result of government policies, both fiscal and monetary. Here are my findings, which I hope will help you filter through the noise.
Europe, Not Too Hot, Not Too Cold Sweet Spot for Credit Investors
by Eve Tournier of PIMCO,
European economies are improving, yet the regions low growth and low inflation will keep the central bank engaged. As such, European duration should be safer versus other major developed economies. Given recent European Central Bank comments pointing to a further easing bias, we believe it makes European assets relatively attractive, especially in sectors with deleveraging fundamentals, positive technicals and attractive valuations.
Gold and Portfolio Efficiency
by Ade Odunsi of AdvisorShares,
In previous commentaries we have discussed the benefits of using a diversified financing currency approach for investing in gold by which we mean using two or more currencies (rather than just the US dollar) to make gold purchases. The example we have used to demonstrate the approach was to construct a time series of the price of gold purchased with an equal weighted basket of dollars, euro, yen and pound.
The Top Five Government Policies I’m Watching This Week
Every morning when I meet with the investment team, we review the news of the previous day, the movements of the markets around the world, and corporate actions that may affect our funds. This is how we keep our ears open in order to manage money that shareholders like you have entrusted us with. We meet again at lunchtime, daily, to share ideas, because something happening in China may affect the U.S. markets, or an energy company might have news that can benefit our domestic funds as well as our resources funds.
And the Band Played On
by Peter Schiff of Euro Pacific Capital,
After three months of consistently disappointing jobs numbers, the markets were as keyed up for a good jobs report as a long suffering sailor awaiting shore leave in a tropical port. The just released April jobs report, which claimed that 288,000 jobs were created in the U.S. during the month, provided the apparent good news. But you don't have to go too far beneath the surface to find some troubling trends within the data. Even this minor excavation was too much for the media cheerleaders and Wall Street pitchmen to handle.
First Quarter Letter
by Team of Grey Owl Capital Management,
The broad equity market displayed a fair amount of volatility during the quarter, but essentially went sideways. This pattern continued through April; 2013s losers became 2014s winners and vice versa. In the broadest sense, bonds narrowly beat stocks on the heels of 2013s thorough drubbing.
The U.S. Economy Reached a Turning Point in April
U.S. equities finished higher last week with the S&P 500 advancing nearly 1.0%. Positive sentiment has been supported by growing traction for the economic recovery, key economic data and corporate commentary. Although the upbeat dynamics were mentioned in the latest FOMC statement, policy normalization expectations have not changed. Another widely discussed tailwind was M&A headlines. Although tensions continue in Ukraine, geopolitical risks were mostly on the back burner.
Albania?s Fertile Grounds for Oil Opportunities
Texas is oil country. The state I now call home leads the nation in oil production and would be one of the top oil-producing nations if it were its own country. But that doesn?t stop us from exploring other promising oil opportunities further afield. I recently traveled to Albania to check out a drill site of Petromanas Energy, a Calgary-based international oil and gas company focused on exploration and production throughout Europe and Australia. We own the junior stock in our Global Resources Fund (PSPFX) and Emerging Europe Fund (EUROX).
Labor Markets Bounce Back from Winter Hibernation
In a less than surprising development, U.S. non-farm payrolls grew by 288,000 in April. While some are loathe admitting the positive nature of Aprils report, there was plenty to be happy about in the latest release, suggesting the economy continues to move towards a more favorable footing. As always in the post-2008 world, caveats remain and the trend in the months ahead will provide a clearer picture into the pace of recovery.
Economic Capital Market Summary
After the Financial Crisis and the resulting Dodd-Frank Act and Affordable Health Care Act, we knew there was no way we would go back to normal, whatever normal really was. Our world changed and we still continue to feel the uncomfortable mutations after the crisis. The management of Citigroup showed another disconnect with regulators as its 2014 capital plan was rejected. After several attempts to launch its healthcare website, the Obama administration announced that over 8 million people had signed up for health care insurance through the government exchange.
Albania's Fertile Grounds for Oil Opportunities
Texas is oil country. The state I now call home leads the nation in oil production and would be one of the top oil-producing nations if it were its own country. But that doesn?t stop us from exploring other promising oil opportunities further afield. Last week I traveled to Albania to check out a drill site of Petromanas Energy, a Calgary-based international oil and gas company focused on exploration and production throughout Europe and Australia. We own the junior stock in our Global Resources Fund (PSPFX) and Emerging Europe Fund (EUROX).
Housing may be returning to a bad neighborhood
by Team of Northern Trust,
The head of financial stability at the Bank of England recently called rising property prices ?the very brightest [hazard] light on its dashboard.? But he may have a difficult time getting his colleagues who are charged with promoting full employment to agree with him. And if they do, it is far from clear what they might do about the issue. Some favor supervisory curbs; others prefer the more-traditional method of raising rates. The recovery in global real estate has been pronounced. While it beats the alternative, one wonders whether the hard lessons learned in recent corrections have been su
A Yen for a Mortgage
by John Mauldin of Mauldin Economics,
For some time I have been saying that I was going to close the mortgage on my new apartment and then hedge it in yen. I promised to tell you the story, including what type of loan I got and how I am doing the hedge. This week I was finally able to pull the trigger. This topic will also let us re-examine why I think the Japanese yen is a screaming short. This is not a big think piece, but I think many of you will find it interesting. It outlines how I put my economic thinking into actual practice, and names names, if you will, of those who helped me do it.
A Tepid Cyclical Lift
by Tom West of Columbia Management,
The S&P 500 Index should grow earnings by about 7% this year, while consensus estimates for the U.S. economy are for 2.5% real growth. One reason for the gap between the two numbers is that the constituent companies of the broad market have a more cyclical tilt than the economy itself, and could be expected to expand faster in a recovery. Fair enough. But are the cyclical drivers like investment and discretionary spending on track to deliver that cyclical boost to earnings? The answer is probably yes, but only if expectations are tempered.
Valuing Legends
Some time ago a sportswriter asked legendary quarterback Johnny Unitas what he thought he was worth relative to the enormous salaries being paid to today's best quarterbacks. Unitas said, "Maybe about $750,000." The sportswriter was incredulous and said, " Mr. Unitas, the top quarterbacks today make several million dollars a year." To which Unitas replied, "Well, you have to understand, I'm 75 years old." I love that story. It tells you so much about one of the greatest players in NFL history, but it also serves as a reminder that the process of valuation is far from an exact science.
The Debate Debate
by Peter Schiff of Euro Pacific Capital,
While there is wide agreement that the cost of college education has risen far faster than the incomes of most Americans, there is some debate as to whether the quality of the product has kept pace with the price. Not surprisingly, almost all who argue that it has (college administrators, professors, and populist politicians) are deeply invested either ideologically or financially in the system itself. More objective observers see a bureaucratic, inefficient, and hopelessly out of touch ivory tower that is bleeding the country of its savings, and more tragically, its intellectual acuity.
Does Negative GOFO Signal Higher Prices for Gold Financed in Currencies?
by Ade Odunsi of AdvisorShares,
In recent weeks a number of gold commentators have once again highlighted the strong inverse relationship over the last year between the price of gold in dollar terms and the London Bullion Market Association Gold Forward Offered Rate "GOFO". Since the first week of July 2013 when the price of gold bounced decisively, the GOFO rate has fairly reliably predicted the future direction of the gold price.
First Quarter Commentary
In investing, certain things are viewed as worth paying a lot for, if you "know" you're going to get them. Akin to Socrates, we speculate that it may be wiser to admit that you do not know the future and therefore are unwilling to pay for these positive outcomes, than to falsely believe you can know the future with certainty and are justified in paying a high price...
How to Help Business Clients Unlock Wealth
by Bob Veres,
Is there a way to help your business clients diversify their holdings, take some risk off the table and create a side investment portfolio that will sustain them if their business runs into trouble? Is there a way you can help your clients find capital when they need it most?
Americas: Regional Economic Review - Q1 2014
by Team of Thomas White International,
The developed economies in North America continue to see relatively healthier growth prospects this year, while the outlook for the emerging economies in Latin America remains subdued. Trends from both the U.S. and Canada indicate that these economies are recovering from the slowdown at the beginning of the year, caused by adverse weather.
Results 8,751–8,800
of 10,168 found.
