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Despite Hitting an Oil Slick, Evidence Underpins a Positive Outlook on MLPs
The fall in energy prices has raised concerns that the dramatic hydrocarbon volume growth we have seen from the new shale plays in the U.S. in the past few years is over or might even reverse. We believe these concerns are overblown. We think the current dislocation in the commodity markets is a case of supply temporarily getting ahead of demand.
Deflation, Low Inflation, and Monetary Policy
by Scott Brown of Raymond James,
Central bank policymakers fear deflation more than anything. However, there is good deflation and there is bad deflation. Yet, even low inflation can create problems for an economy. Low inflation is expected to be a key factor in the ECB?s decision to embark on quantitative easing and ought to have some influence on the timing of the Fed?s initial rate hike.
Swiss Franc's Surge = Chaos In Global Currency Markets
Last Thursday, the Swiss National Bank stunned the financial world by decoupling the Swiss franc from the euro. This surprise move sent the franc up almost 40% against the euro in one day, although it didn?t close that high (up 19%). Nevertheless, many currency traders, banks and brokerages were left with devastating losses.
IBM: When a Company Veers Off the Roadmap
In 2010, International Business Machines? (IBM) then-CEO Sam Palmisano unveiled the company?s 2015 Roadmap in which management detailed its plans to grow (non-GAAP) operating earnings to ?at least $20? per share by 2015. This plan was the successor to a 2010 Roadmap, originally unveiled in 2007, in which management outlined its plan to deliver ?at least $10? in earnings per share by 2010. Since the company ultimately exceeded its 2010 Roadmap expectations and delivered $11.52 in 2010 earnings per share, the 2015 Roadmap was generally met with enthusiasm by
The Swiss Release the Kraken!
by John Mauldin of Mauldin Economics,
In an era when central bankers are supposed to be more open, collaborative, and communicative, what would make the Swiss National Bank decide to turn on a dime and shock the markets ? to release the Kraken, as it were? Note that in fact all hell did break loose. Rather than delivering hints accompanied by a few well-placed leaks, the Swiss decided it would be best to completely surprise the markets. It will be a long time before we get the full story on what must have been going through their heads as they reached the decision.
Navigating the Oil Slick
by Team of Calamos Investments,
GDP growth for 2015 is likely to be 2.0%-2.5% globally and 2.5%-3.0% in the U.S. Oil prices may fall further but are likely to stabilize over the next several months. The ECB is likely to ramp up QE in the first quarter. These next months are likely to be volatile, but equities have more room to run. Low corporate borrowing costs and high dividend yields should encourage continued M&A and buyback activity, providing support to equity valuations. With the U.S. in the middle innings of the recovery, the case for secular and cyclical growth companies remains strong.
QE and the ECB: "Authorize" is a Slippery Word
by John Hussman of Hussman Funds,
The ECB will authorize a large QE program this week, but my impression is that the details will leave the ECB itself responsible for executing only a fraction of the announced program, with the remaining majority of the program (perhaps 60-75%) being nothing more than the option for each national central bank to purchase its own country?s government bonds, at its own discretion, and its own risk. Moreover, that option is likely to be limited to something on the order of 25% of the outstanding government debt of each respective country.
QQE2: Japan?s Monetary Banzai Charge
by Chris Richey of Neosho Capital,
In this Age of Monetary Policy, it is impossible to ignore the macro. As much as we would like to focus only on individual enterprises, the mind-boggling scale of $5 trillion of monetary intervention in the U.S., Japan, and Europe renders such cloistered thinking imprudent. Not only must Benjamin Graham?s enterprising investor understand individual stocks, but they must also be keenly cognizant of the role the world?s largest central banks actively play in the value of currencies, bonds, stocks, ETFs, mutual funds, and derivatives of all kinds.
Pie in the Sky?
by Team of Absolute Return Partners,
January each year brings with it a host of forecasts, many of which are 'pie in the sky' - silly predictions on equity markets, interest rates and currency movements. We are not in that game, but this is the first time we have written a letter in January. Why? Because we think investors should be focusing on longer term structural trends when analysing the future.
The Shiller P/E Enters Rarefied Air
The domestic stock market cannot deliver a sustainable double-digit return without entering a speculative bubble, based on historical data reflecting correlations between the level of the Shiller P/E and subsequent outcomes in the stock market over the past 134 years. Conditions are ripe for a speculative bubble in the domestic stock market in 2015, and investors should reduce risk in their portfolios in stages during the coming year.
Oil, Currencies, and the Fed
Fourth quarter headlines included volatility spikes, dramatic declines in oil prices, and positive views of the economy by the Fed. Oil declined 41% this quarter and 46% for the year. The dollar continued to gain against some major developed global currencies. For the year, the dollar gained 13.6% against the euro and 13.8% against the yen while gold was down 2%.
Why the World Needs the US Economy to Struggle
by John Mauldin of Mauldin Economics,
In this weeks letter, my associate Worth Wray explores what a rising dollar means for emerging markets and what central banks are likely to do in response. Can they smooth the ride, or will it be the worlds scariest roller coaster? This letter will print long because of the number of fabulous charts Worth provides. I might make a brief comment or two at the end. Heres Worth.
Early Look: Who is the Author?
While I can try to explain why the SP500 can drop 103 points in a straight line (in 7 days), then ramp 106 points in 4 days, I dont think thats where I add value. There are legions of pundits on the #OldWall that use 1-factor moving averages than can help you with that.
Iceberg at the Starboard Bow
by John Hussman of Hussman Funds,
Market history, including the series of bubbles and crashes over the past 15 years, does not teach that valuation is irrelevant, but instead that a key distinction affects whether stability or instability is likely to prevail. When rich valuations are coupled with tame credit spreads and uniform strength across a broad range of market internals and security types, one can infer that investors remain tolerant toward risk. In that environment, risk premiums may be low, but theres no particular pressure for them to normalize, even if the speculation is driven by mindless yield-seeking.
The $330 Billion Global Tax Break
According to an article by Jon Markman titled The Saudi Stimulus, the global economy is looking to save hundreds of billions of dollars on an annual basis: "According to EIA data, consumption of crude oil during the latest 12 months was 6.9 billion barrels. So the price drop from $107/barrel at the June 2014 high to $59 today represents a total presumptive savings of $332 billion per year." In a time when China, the European Union and other major markets are trying to jumpstart their economies, a $330 billion tax break can only come as good news. It should help in stimu
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.
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.
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.
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.
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.
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."
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.
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
Active Investing: Opportunity in Gold
by Tim Gramatovich of AdvisorShares,
As active managers, we embrace both a top down and bottom up investment philosophy as we look for opportunities for investment. One such potential opportunity we are seeing from more of a top down, thematic approach is in gold.
Middle East/Africa: Regional Economic Review - Q3 2014
by Team of Thomas White International,
Despite continuing geopolitical tensions and subdued oil prices, the Middle East and Africa region had a largely positive third quarter. South Africa, the largest economy in this region, saw its labor problems diminish while Egypt reported a string of encouraging data, signaling that it is steadily recovering from a long phase of political and economic turbulence.
3 Things to Think About, Including the Disconnect between Data And Surveys
by Lance Roberts of Streettalk Live,
Last Friday, I discussed the growing gap between economic reports particularly when they measure the same basic areas of the overall economy. For example, how can the Markit Manufacturing PMI Index be negative for three months while the ISM PMI has surged higher during the same period. Both cannot be right.
On the Verge of Chaos
by John Mauldin of Mauldin Economics,
In this weeks letter were going to explore some of the ramifications of the currency war that Japan is precipitating. It is more than just Germany, Korea, and China having issues and needing to contemplate their own competitive devaluations. If the yen goes too far too fast, there will be geopolitical repercussions far beyond the obvious first-order connections.
The Clock is Ticking in Switzerland
by Peter Schiff of Euro Pacific Capital,
For most of my career in international investing, I had always placed a great deal of faith in Switzerland's financial markets. In recent years, however, as the Swiss government has sought to hitch its wagon to the flailing euro currency and kowtow increasingly to U.S.-based financial requirements, this faith has been shaken.
Has Europes Recovery Story Turned Back a Page?
The European economy at large had been moving forward in the wake of the 20072009 global financial crisis and subsequent sovereign debt crisis, spurred by European Central Bank (ECB) President Mario Draghis pledge to do whatever it takes to save the euro in 2012 and the implementation of austerity measures in the eurozone periphery. In recent months, the recovery seemed to have stalled, with some countries, including the eurozones engine of growth- Germany - flirting with recession.
The Beginning of the End of the Fossil Fuel Revolution (From Golden Goose to Cooked Goose)
by Jeremy Grantham of GMO,
The quality of modern life owes almost everything to the existence of fossil fuels, a massive store of dense energy that for 200 years had become steadily cheaper as a fraction of income. Under that stimulus, the global economy grew ever larger, more complex, more inter-related and, I believe, more fragile. Then around the year 2000 the costs of finding oil start to rise at over 10% a year, and with the global economy growing at only 4% oil starts to fall behind in affordability.
Capital Allocation and Risk Management
by The Royce Funds,
Companies with little or no debt on their balance sheets can focus on capital allocation decisions that help the business to grow and/or return free cash back to shareholders. Especially during uncertain periods, a low-debt balance sheet also helps us to assess risk, which is crucial in the small-cap universe, where companies are often fragile.
Reality Check
by Bob Rodriquez of FPA Funds,
As many of you know, and for those of you who dont, Ive been a harsh critic of the fiscal and monetary policies that have been deployed these past several years. Since returning from my 2010 sabbatical in 2011, Ive been very cautious about capital deployment, as many of my successors will confirm. In light of the stock markets astounding rise since 2009 and five years of near zero short-term rates, Ive reassessed and challenged my basic fundamental understanding of how the financial markets operate.
Capital Raising in the MLP Sector Remains Active
We continue to see evidence that underpins our long term positive outlook on MLPs and midstream energy infrastructure companies. The need for new midstream infrastructure remains significant and announcements of large projects continue to be made. New export markets for U.S. hydrocarbons continue to develop and offer new profit opportunities for MLPs.
Central Planners Are In A State of Panic
By the time a central bank is behaving as recklessly as Japan, it's time to edge towards the exit, because the chance of a flash fire in the building has grown uncomfortably high. That is, instead of providing comfort, these most recent moves should invoke greater worry for those of us alert enough to see them for what they are: acts of panic:
How Exchange-Traded Futures Can Improve the Efficiency of Gold & Currency Linked ETFs
by Ade Odunsi of AdvisorShares,
With a number of gold and currency linked ETFs now using exchange traded futures to gain their gold and currency exposure versus the alternative of holding physical gold/hard foreign currency, we discuss below some of the key features of these futures markets which, in our view, mitigate most if not all of the concerns investor may have about these futures based ETPs.
Fast, Furious, and Prone to Failure
by John Hussman of Hussman Funds,
Though we remain open to the potential for market internals to improve convincingly enough to at least defer our immediate concerns about market risk, we should also be mindful of the sequence common to the 1929, 1972, 1987, 2000 and 2007 episodes.
A Scary Story for Emerging Markets
by John Mauldin of Mauldin Economics,
The all-too-predictable effects of a rising dollar on emerging markets that have been propped up by hot inflows and the dollar carry trade will spread far beyond the emerging markets themselves. This is another key aspect of the not-so-coincidental consequences that we will be exploring in our series on what I feel is a sea change in the global economic environment.
The Eighth Default of Argentina
Very few countries have seen as spectacular of a decline in its economic standing over the past 100 years as Argentina has. Argentina has been in the international headlines recently due to its sovereign debt default, the eighth default in the history of the country. This week we will look at Argentina, its long history of economic booms and busts, its political background, and its extensive chronicle of sovereign debt defaults. As always, we will conclude with market ramifications.
Results 2,101–2,150
of 2,772 found.
