The document discusses several topics:
1) Taiwan and China signed a trade agreement representing a form of detente between the two entities embroiled in a sovereignty dispute for over 60 years.
2) The agreement opens markets in key sectors like banking, insurance, and movies, reflecting thoughts that the "new normal" is a world of changing risks and opportunities during this global economic transition period.
3) Protecting one's wealth in this epochal transition requires proactive risk assessment and management as debt levels globally are over 4 times annual global GDP and resolving this debt will be deflationary for years to come.
The document provides an economic update and outlook for December 2011. It discusses the ongoing debt crisis in the Eurozone and whether the Euro will survive. It notes the ideological differences between Germany and other countries in their approaches to dealing with the crisis. Domestically, it comments on the reversal in stance by the Indian opposition on retail FDI and the potential impact on economic momentum. Inflation is expected to fall by the end of the fiscal year. The outlook is cautiously positive on long-term debt as interest rates may fall over the next 2-3 years.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
Fears of the U.S. economy falling off a “fiscal cliff” have been percolating among investors, conjuring up frightening images of a deep recession. But the chances of it actually happening in its entirety are slim, say Allianz experts.
The document summarizes a book that examines how Federal Reserve Chairman Alan Greenspan's public speeches moved markets through his use of certain words and phrases that expressed views on topics like the economy, inflation, and financial stability. It discusses words Greenspan used that lifted or sank markets, including discussions of issues like an "exceptional" economy, controlling inflation, tight labor markets, and financial contagion across borders.
MTBiz is for you if you are looking for contemporary information on business, economy and especially on banking industry of Bangladesh. You would also find periodical information on Global Economy and Commodity Markets.
Signature content of MTBiz is its Article of the Month (AoM), as depicted on Cover Page of each issue, with featured focus on different issues that fall into the wide definition of Market, Business, Organization and Leadership. The AoM also covers areas on Innovation, Central Banking, Monetary Policy, National Budget, Economic Depression or Growth and Capital Market. Scale of coverage of the AoM both, global and local subject to each issue.
MTBiz is a monthly Market Review produced and distributed by Group R&D, MTB since 2009.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
1. The document discusses the failures of development policies like the Washington Consensus and financial globalization due to their reliance on first-best thinking when second-best thinking is required given real-world market and institutional failures.
2. It argues policy should be based on second-best thinking and target "binding constraints" through selective, sequential, and context-specific reforms rather than assuming all distortions can be removed at once.
3. Financial globalization failed because capital markets operate under significant market imperfections that cannot be fully addressed, and capital inflows can cause overvaluation and move exchange rates in ways that hinder development.
The document provides an economic update and outlook for December 2011. It discusses the ongoing debt crisis in the Eurozone and whether the Euro will survive. It notes the ideological differences between Germany and other countries in their approaches to dealing with the crisis. Domestically, it comments on the reversal in stance by the Indian opposition on retail FDI and the potential impact on economic momentum. Inflation is expected to fall by the end of the fiscal year. The outlook is cautiously positive on long-term debt as interest rates may fall over the next 2-3 years.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
Fears of the U.S. economy falling off a “fiscal cliff” have been percolating among investors, conjuring up frightening images of a deep recession. But the chances of it actually happening in its entirety are slim, say Allianz experts.
The document summarizes a book that examines how Federal Reserve Chairman Alan Greenspan's public speeches moved markets through his use of certain words and phrases that expressed views on topics like the economy, inflation, and financial stability. It discusses words Greenspan used that lifted or sank markets, including discussions of issues like an "exceptional" economy, controlling inflation, tight labor markets, and financial contagion across borders.
MTBiz is for you if you are looking for contemporary information on business, economy and especially on banking industry of Bangladesh. You would also find periodical information on Global Economy and Commodity Markets.
Signature content of MTBiz is its Article of the Month (AoM), as depicted on Cover Page of each issue, with featured focus on different issues that fall into the wide definition of Market, Business, Organization and Leadership. The AoM also covers areas on Innovation, Central Banking, Monetary Policy, National Budget, Economic Depression or Growth and Capital Market. Scale of coverage of the AoM both, global and local subject to each issue.
MTBiz is a monthly Market Review produced and distributed by Group R&D, MTB since 2009.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
1. The document discusses the failures of development policies like the Washington Consensus and financial globalization due to their reliance on first-best thinking when second-best thinking is required given real-world market and institutional failures.
2. It argues policy should be based on second-best thinking and target "binding constraints" through selective, sequential, and context-specific reforms rather than assuming all distortions can be removed at once.
3. Financial globalization failed because capital markets operate under significant market imperfections that cannot be fully addressed, and capital inflows can cause overvaluation and move exchange rates in ways that hinder development.
This document discusses two key demographic trends and their potential implications:
1) Depopulation of industrialized nations due to low fertility rates and aging populations, which could strain social programs and economies.
2) Increased longevity and healthier aging, with lifespans potentially extending to 100+ years. This may require planning for longer retirements and changing retirement systems.
Financial professionals should consider these trends in advising clients about saving, investing, insurance needs, and retirement planning over longer time horizons.
The document provides an economic update and outlook for June 2011, noting renewed concerns over sovereign debt in Europe, particularly for Greece, and the potential implications of a default by a Eurozone country. It recommends investors either look at relatively safer international markets like the US and China through ETFs or more globally oriented sectors, and also discusses using covered call strategies during periods of range-bound markets. The debt markets outlook expects rates to remain subdued due to expected impact of higher diesel prices on inflation.
The document discusses how the current economic downturn is affecting digital marketing and media spending. It provides statistics showing that the economy is declining sharply, consumer confidence is low, and media and marketing budgets are expected to be flat or decrease over the next two years for the first time in over 40 years. Marketers anticipate significant cuts to their advertising budgets in response to the recession.
Howard Marks provides a balanced discussion of the current market environment, covering both positives and negatives. On the positive side, the U.S. economy is growing and corporate profits are increasing. However, asset valuations are very high by historical standards and investor behavior has become increasingly risky. Given the high prices and uncertainties, Marks favors a cautious stance rather than aggressiveness. While not recommending getting out of the market, he advocates incorporating more defensiveness into portfolio management strategies.
Western governments are hopelessly addicted to deficit financing while refusing to address looming funding issues - with apologies to the embarrassingly foolish Angela Merkel, politicians can no more successfully “battle” the markets than you and I can successfully “battle” gravity. Petrocapita is an investment trust built around the premise that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil & gas assets directly to their portfolios.
Blackwall partners 2 qtr 2016- transient volatility part iiiMichael Durante
This document discusses the state of the US economy under President Obama and the policies of the Obama administration. It argues that the economy has stagnated, with 95 million Americans not working, wages stagnant, and declining upward mobility. It attributes this to failed "socialistic" policies and excessive government intervention. The author argues the economy needs inspiration to return to growth and policies that worked previously to boost jobs, wages, home and family formation.
This paper examines episodes of high public debt, defined as periods where debt exceeded 90% of GDP for at least 5 years, in advanced economies since 1800. It finds 26 such "debt overhang" episodes. On average, these episodes lasted 23 years and were associated with annual GDP growth that was 1.2 percentage points lower than during periods of lower debt. Even when real interest rates were low, high debt was still correlated with reduced growth. The long duration of debt overhang episodes suggests the growth effects are not merely cyclical and can result in massive cumulative output losses over time.
The document summarizes the financial crisis of 2008 and its aftermath. It discusses how excess leverage and easy credit led to the crisis. It then describes the massive fiscal and monetary responses by governments to counter the recession. Finally, it outlines a new investment strategy focused on bonds, hedging risks, and adapting to long-term volatility in a more regulated post-crisis economic environment.
The document discusses the global crisis of legitimacy facing political and corporate elites in Europe and the United States. It argues that the financial crisis revealed perceived collusion between political and corporate interests, undermining public trust. This political crisis now threatens the stability of governments and international economic systems. The aftermath of such widespread distrust can last years and provide opportunities for other powers to gain influence. The document examines economic and political disruptions facing different countries and regions, as well as generational changes and the challenges of transitioning from the baby boomer era. It argues for new models of risk management that incorporate endogenous risk factors and liability-driven investing.
The document discusses cooperation vs unilateral intervention in international economics. It argues that while countries agree on goals like global growth and rebalancing, individual countries prioritize domestic goals which can lead to policy spillovers and retaliation that result in suboptimal outcomes. Cooperation through forums like the G20 faces challenges due to diverging economic performance among members and lack of enforcement. Regional arrangements and integration can facilitate cooperation where interests converge. Overall, cooperation requires addressing policy spillovers and providing credible incentives and commitments to avoid outcomes where all countries are worse off.
The document discusses several economic and political issues:
1) European authorities have struggled to effectively address the escalating sovereign debt crisis, providing only temporary solutions while the problems get worse.
2) The US debt level has risen significantly due to tax cuts, spending increases, and the financial crisis, reaching nearly 100% of GDP.
3) Emerging markets saw large declines as investors fled to safe havens like US treasuries, though some emerging countries remain attractive long-term investments due to growth and demographics.
4) South Africa faces economic challenges including slowing growth compared to other emerging markets, while political risks also loom over policy and foreign investment.
Vgis macro the pigs and the emu lost decadeFahd Rachidy
The document discusses the sovereign debt crisis in Greece and its potential impact on the European Monetary Union (EMU). It notes that Greece is facing severe budget deficits and debt levels that threaten its long-term fiscal stability. There is a risk that the crisis could spread to other weaker Eurozone economies like Portugal, Spain, and Italy. Immediate intervention is needed to prevent Greece's problems from worsening and sparking a wider crisis across Europe. However, options are limited given rules prohibiting bailouts between Eurozone members. In the longer run, the crisis has revealed structural weaknesses in the EMU and calls its sustainability into question.
Michael Durante Western Reserve Blackwall Partners 1Q12Michael Durante
Blackwall Partners posted a 30% return for Q1 2012. They believe financial firms are fundamentally strong but undervalued due to political attacks exaggerating risk. The fundamentals of financials are appealing, with record profits and excess capital. However, low valuations and high volatility make financial stocks a "winning hand". The author argues the equity risk premium has collapsed to levels not seen since WWI and negative yield gaps indicate a bull market. They believe regulations holding back banks will be reduced, allowing earnings growth and higher payouts that will drive financial stock prices and ownership higher over time. However, some volatility is expected in the short term.
This document discusses the concept of "black swans" and economic forecasting. It begins by explaining the origin of the term "black swan" and how Nassim Taleb later used it to describe rare events with disproportionate impacts. It then discusses challenges with economic analysis and forecasting due to lack of data and uncertainties. The rest of the document focuses on analyzing past recessions and economic cycles, challenges with the recent recovery, issues around credit growth and deleveraging, and the importance of considering many interrelated factors when developing economic forecasts. It also describes the machine learning techniques and models used by the company discussed in the document to generate their economic forecasts.
This document analyzes the real effects of different types of debt, including government, corporate, and household debt. The authors find that beyond certain thresholds, debt becomes a drag on economic growth. Specifically, their analysis of OECD countries from 1980 to 2010 finds that government debt above 85% of GDP, corporate debt above 90% of GDP, and household debt above 85% of GDP can negatively impact growth. The authors conclude that highly indebted countries need to reduce their debt levels to avoid harming long-term growth, which is made more difficult by aging populations in advanced economies.
The document provides a quarterly review from Western Reserve Master Fund, LP for the first quarter of 2009. It summarizes that the fund declined approximately 13% for the quarter, compared to declines of around 34% for S&P financial indexes. Stocks were initially driven down by fear over new government policies, but stabilized by the end of the quarter. The document argues that financial stocks currently sit at depressed values and represent opportunities for strong future returns as the economy recovers.
General Stanley McChrystal was fired by President Obama after unflattering comments he made about administration officials were published in Rolling Stone magazine. The article was able to be published because the freelance journalist who wrote it, Michael Hastings, was not constrained by concerns about burning bridges, unlike beat reporters who rely on ongoing access. This highlights how outsiders can sometimes uncover important stories that insiders miss due to fears of jeopardizing relationships and access.
Fasanara Capital | Investment Outlook
1. The Future Is Wide Open: Avoid The ‘Illusion Of Knowledge’ Trap
The single most dangerous thinking trap / optical illusion for investors today is to look at Trump, Brexit and Italy Referendum as non-events, buried in the past. We believe that 2017 may likely be driven by the same factors that failed to shape 2016. The non-events of 2016 are likely to be the drivers of 2017. Finally, we will get to find out if Brexit means Brexit, if Trump means Trump, if a failed Italian referendum means early elections and a membership of the EMU in jeopardy down the line.
2. Structural Shift: These Are Transformational Times
The macro outlook of the next years will be influenced the most by these structural trends:
› Protectionism, De-Globalization & De-Dollarization. In Pursuit of Inclusive Growth
› End of ‘Pax Americana’. The ascent of China. Geopolitical risks on the rise
› End of ‘Pax QE’. Markets without steroids, but still delusional.
› 4th Industrial Revolution: labor participation rate falling from 63% to 40% in 10 years?
3. Our Baseline Scenario: Bubble Unwind, Equities and Bonds Down
Starting this 2017, our major macro convictions are as follows:
› Global Tapering to progress
› US Dollar to keep grinding higher
› European Political Instability to worsen
› US Equities to weaken
Instructions1. On the top of the page, provide the article citat.docxnormanibarber20063
Instructions
1. On the top of the page, provide the article citation in current APA format.
On the next line down, type the topic of your articles: (Gross Domestic Product (GDP)
in all caps and bold format.
2. In a double-spaced document, briefly explain the author’s purpose for writing the article. One way to understand the author’s purpose is to ask yourself why he or she wrote it. (For example, consider current and future events, politics, or anything else that may have inspired the article.)
3. Summarize the article(The criminality of Wall Street), focusing on the discussion of the topic the article addresses. Incorporate relevant economic theory that is present so that discussion of the article content is clear.
Article: The Criminality of Wall Street
Tabb, William K. Monthly Review66.4 (Sep 2014): 13-22.
The current stage of capitalism is characterized by the increased power of finance capital. How to understand the economics of this shift and its political implications is now central for both the left and the larger society. There can be little doubt that a signature development of our time is the growth of finance and monopoly power.1
In 1980 the nominal value of global financial assets almost equaled global GDP. In 2005 they were more than three times global GDP.2 The nominal value of foreign exchange trading increased from eleven times the value of global trade in 1980 to seventy-three times in 2009.3 Of course it is not certain what this increase means, since such nominal values can fluctuate widely, as we saw in the Great Financial Crisis. They cannot be compared directly and without all sorts of qualifications to the value added in the real economy. But they do give an impressionistic sense of the enormous magnitude by which finance grew and came to dominate the economy. Between 1980 and 2007, derivative contracts of all kinds expanded from $1 trillion globally to $600 trillion.4 Hedge funds and private equity groups, special investment vehicles, and mega-bank holding companies changed the face of Western capitalism. They also brought on the collapse from which we still suffer. Ordinary people may not be acquainted with the numbers (and even those best informed are not sure of their significance), but people generally understand in different and often deep ways what has been happening: namely, an ongoing process of financialization that has come to dwarf production.
What is particularly important is that despite the huge bubble created by this metastasizing growth of finance, the economy did not expand as rapidly as it had in the postwar years, before the goods producing industries lost ground in terms of employment to other sectors of the economy, and when government spending was used actively to promote growth. While the nature of much of the growth that occurred then is certainly open to criticism from all sorts of standpoints, at the time there was widespread understanding in policy circles that government spending was.
- The document discusses whether the current stock market is in a bubble. It notes that by some measures like price-to-earnings ratios, stocks are not yet in bubble territory as they were in 2000.
- It provides several facts to counter the "hair on fire" media coverage of the stock market: there are no true market gurus, markets tend to rise over time, trying to time the market often fails, and cash is not king compared to long term investing in stocks.
- Even if a bubble forms, bubbles always burst eventually but stocks recover over time, so investors should stick to their plan and not panic during downturns.
This document discusses two key demographic trends and their potential implications:
1) Depopulation of industrialized nations due to low fertility rates and aging populations, which could strain social programs and economies.
2) Increased longevity and healthier aging, with lifespans potentially extending to 100+ years. This may require planning for longer retirements and changing retirement systems.
Financial professionals should consider these trends in advising clients about saving, investing, insurance needs, and retirement planning over longer time horizons.
The document provides an economic update and outlook for June 2011, noting renewed concerns over sovereign debt in Europe, particularly for Greece, and the potential implications of a default by a Eurozone country. It recommends investors either look at relatively safer international markets like the US and China through ETFs or more globally oriented sectors, and also discusses using covered call strategies during periods of range-bound markets. The debt markets outlook expects rates to remain subdued due to expected impact of higher diesel prices on inflation.
The document discusses how the current economic downturn is affecting digital marketing and media spending. It provides statistics showing that the economy is declining sharply, consumer confidence is low, and media and marketing budgets are expected to be flat or decrease over the next two years for the first time in over 40 years. Marketers anticipate significant cuts to their advertising budgets in response to the recession.
Howard Marks provides a balanced discussion of the current market environment, covering both positives and negatives. On the positive side, the U.S. economy is growing and corporate profits are increasing. However, asset valuations are very high by historical standards and investor behavior has become increasingly risky. Given the high prices and uncertainties, Marks favors a cautious stance rather than aggressiveness. While not recommending getting out of the market, he advocates incorporating more defensiveness into portfolio management strategies.
Western governments are hopelessly addicted to deficit financing while refusing to address looming funding issues - with apologies to the embarrassingly foolish Angela Merkel, politicians can no more successfully “battle” the markets than you and I can successfully “battle” gravity. Petrocapita is an investment trust built around the premise that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil & gas assets directly to their portfolios.
Blackwall partners 2 qtr 2016- transient volatility part iiiMichael Durante
This document discusses the state of the US economy under President Obama and the policies of the Obama administration. It argues that the economy has stagnated, with 95 million Americans not working, wages stagnant, and declining upward mobility. It attributes this to failed "socialistic" policies and excessive government intervention. The author argues the economy needs inspiration to return to growth and policies that worked previously to boost jobs, wages, home and family formation.
This paper examines episodes of high public debt, defined as periods where debt exceeded 90% of GDP for at least 5 years, in advanced economies since 1800. It finds 26 such "debt overhang" episodes. On average, these episodes lasted 23 years and were associated with annual GDP growth that was 1.2 percentage points lower than during periods of lower debt. Even when real interest rates were low, high debt was still correlated with reduced growth. The long duration of debt overhang episodes suggests the growth effects are not merely cyclical and can result in massive cumulative output losses over time.
The document summarizes the financial crisis of 2008 and its aftermath. It discusses how excess leverage and easy credit led to the crisis. It then describes the massive fiscal and monetary responses by governments to counter the recession. Finally, it outlines a new investment strategy focused on bonds, hedging risks, and adapting to long-term volatility in a more regulated post-crisis economic environment.
The document discusses the global crisis of legitimacy facing political and corporate elites in Europe and the United States. It argues that the financial crisis revealed perceived collusion between political and corporate interests, undermining public trust. This political crisis now threatens the stability of governments and international economic systems. The aftermath of such widespread distrust can last years and provide opportunities for other powers to gain influence. The document examines economic and political disruptions facing different countries and regions, as well as generational changes and the challenges of transitioning from the baby boomer era. It argues for new models of risk management that incorporate endogenous risk factors and liability-driven investing.
The document discusses cooperation vs unilateral intervention in international economics. It argues that while countries agree on goals like global growth and rebalancing, individual countries prioritize domestic goals which can lead to policy spillovers and retaliation that result in suboptimal outcomes. Cooperation through forums like the G20 faces challenges due to diverging economic performance among members and lack of enforcement. Regional arrangements and integration can facilitate cooperation where interests converge. Overall, cooperation requires addressing policy spillovers and providing credible incentives and commitments to avoid outcomes where all countries are worse off.
The document discusses several economic and political issues:
1) European authorities have struggled to effectively address the escalating sovereign debt crisis, providing only temporary solutions while the problems get worse.
2) The US debt level has risen significantly due to tax cuts, spending increases, and the financial crisis, reaching nearly 100% of GDP.
3) Emerging markets saw large declines as investors fled to safe havens like US treasuries, though some emerging countries remain attractive long-term investments due to growth and demographics.
4) South Africa faces economic challenges including slowing growth compared to other emerging markets, while political risks also loom over policy and foreign investment.
Vgis macro the pigs and the emu lost decadeFahd Rachidy
The document discusses the sovereign debt crisis in Greece and its potential impact on the European Monetary Union (EMU). It notes that Greece is facing severe budget deficits and debt levels that threaten its long-term fiscal stability. There is a risk that the crisis could spread to other weaker Eurozone economies like Portugal, Spain, and Italy. Immediate intervention is needed to prevent Greece's problems from worsening and sparking a wider crisis across Europe. However, options are limited given rules prohibiting bailouts between Eurozone members. In the longer run, the crisis has revealed structural weaknesses in the EMU and calls its sustainability into question.
Michael Durante Western Reserve Blackwall Partners 1Q12Michael Durante
Blackwall Partners posted a 30% return for Q1 2012. They believe financial firms are fundamentally strong but undervalued due to political attacks exaggerating risk. The fundamentals of financials are appealing, with record profits and excess capital. However, low valuations and high volatility make financial stocks a "winning hand". The author argues the equity risk premium has collapsed to levels not seen since WWI and negative yield gaps indicate a bull market. They believe regulations holding back banks will be reduced, allowing earnings growth and higher payouts that will drive financial stock prices and ownership higher over time. However, some volatility is expected in the short term.
This document discusses the concept of "black swans" and economic forecasting. It begins by explaining the origin of the term "black swan" and how Nassim Taleb later used it to describe rare events with disproportionate impacts. It then discusses challenges with economic analysis and forecasting due to lack of data and uncertainties. The rest of the document focuses on analyzing past recessions and economic cycles, challenges with the recent recovery, issues around credit growth and deleveraging, and the importance of considering many interrelated factors when developing economic forecasts. It also describes the machine learning techniques and models used by the company discussed in the document to generate their economic forecasts.
This document analyzes the real effects of different types of debt, including government, corporate, and household debt. The authors find that beyond certain thresholds, debt becomes a drag on economic growth. Specifically, their analysis of OECD countries from 1980 to 2010 finds that government debt above 85% of GDP, corporate debt above 90% of GDP, and household debt above 85% of GDP can negatively impact growth. The authors conclude that highly indebted countries need to reduce their debt levels to avoid harming long-term growth, which is made more difficult by aging populations in advanced economies.
The document provides a quarterly review from Western Reserve Master Fund, LP for the first quarter of 2009. It summarizes that the fund declined approximately 13% for the quarter, compared to declines of around 34% for S&P financial indexes. Stocks were initially driven down by fear over new government policies, but stabilized by the end of the quarter. The document argues that financial stocks currently sit at depressed values and represent opportunities for strong future returns as the economy recovers.
General Stanley McChrystal was fired by President Obama after unflattering comments he made about administration officials were published in Rolling Stone magazine. The article was able to be published because the freelance journalist who wrote it, Michael Hastings, was not constrained by concerns about burning bridges, unlike beat reporters who rely on ongoing access. This highlights how outsiders can sometimes uncover important stories that insiders miss due to fears of jeopardizing relationships and access.
Fasanara Capital | Investment Outlook
1. The Future Is Wide Open: Avoid The ‘Illusion Of Knowledge’ Trap
The single most dangerous thinking trap / optical illusion for investors today is to look at Trump, Brexit and Italy Referendum as non-events, buried in the past. We believe that 2017 may likely be driven by the same factors that failed to shape 2016. The non-events of 2016 are likely to be the drivers of 2017. Finally, we will get to find out if Brexit means Brexit, if Trump means Trump, if a failed Italian referendum means early elections and a membership of the EMU in jeopardy down the line.
2. Structural Shift: These Are Transformational Times
The macro outlook of the next years will be influenced the most by these structural trends:
› Protectionism, De-Globalization & De-Dollarization. In Pursuit of Inclusive Growth
› End of ‘Pax Americana’. The ascent of China. Geopolitical risks on the rise
› End of ‘Pax QE’. Markets without steroids, but still delusional.
› 4th Industrial Revolution: labor participation rate falling from 63% to 40% in 10 years?
3. Our Baseline Scenario: Bubble Unwind, Equities and Bonds Down
Starting this 2017, our major macro convictions are as follows:
› Global Tapering to progress
› US Dollar to keep grinding higher
› European Political Instability to worsen
› US Equities to weaken
Instructions1. On the top of the page, provide the article citat.docxnormanibarber20063
Instructions
1. On the top of the page, provide the article citation in current APA format.
On the next line down, type the topic of your articles: (Gross Domestic Product (GDP)
in all caps and bold format.
2. In a double-spaced document, briefly explain the author’s purpose for writing the article. One way to understand the author’s purpose is to ask yourself why he or she wrote it. (For example, consider current and future events, politics, or anything else that may have inspired the article.)
3. Summarize the article(The criminality of Wall Street), focusing on the discussion of the topic the article addresses. Incorporate relevant economic theory that is present so that discussion of the article content is clear.
Article: The Criminality of Wall Street
Tabb, William K. Monthly Review66.4 (Sep 2014): 13-22.
The current stage of capitalism is characterized by the increased power of finance capital. How to understand the economics of this shift and its political implications is now central for both the left and the larger society. There can be little doubt that a signature development of our time is the growth of finance and monopoly power.1
In 1980 the nominal value of global financial assets almost equaled global GDP. In 2005 they were more than three times global GDP.2 The nominal value of foreign exchange trading increased from eleven times the value of global trade in 1980 to seventy-three times in 2009.3 Of course it is not certain what this increase means, since such nominal values can fluctuate widely, as we saw in the Great Financial Crisis. They cannot be compared directly and without all sorts of qualifications to the value added in the real economy. But they do give an impressionistic sense of the enormous magnitude by which finance grew and came to dominate the economy. Between 1980 and 2007, derivative contracts of all kinds expanded from $1 trillion globally to $600 trillion.4 Hedge funds and private equity groups, special investment vehicles, and mega-bank holding companies changed the face of Western capitalism. They also brought on the collapse from which we still suffer. Ordinary people may not be acquainted with the numbers (and even those best informed are not sure of their significance), but people generally understand in different and often deep ways what has been happening: namely, an ongoing process of financialization that has come to dwarf production.
What is particularly important is that despite the huge bubble created by this metastasizing growth of finance, the economy did not expand as rapidly as it had in the postwar years, before the goods producing industries lost ground in terms of employment to other sectors of the economy, and when government spending was used actively to promote growth. While the nature of much of the growth that occurred then is certainly open to criticism from all sorts of standpoints, at the time there was widespread understanding in policy circles that government spending was.
- The document discusses whether the current stock market is in a bubble. It notes that by some measures like price-to-earnings ratios, stocks are not yet in bubble territory as they were in 2000.
- It provides several facts to counter the "hair on fire" media coverage of the stock market: there are no true market gurus, markets tend to rise over time, trying to time the market often fails, and cash is not king compared to long term investing in stocks.
- Even if a bubble forms, bubbles always burst eventually but stocks recover over time, so investors should stick to their plan and not panic during downturns.
OFIP Q2 2010 - Security In An Insecure Worldbwoyat
Brent Woyat discusses principles of value investing outlined by Benjamin Graham in a 1963 talk titled "Securities in an Insecure World". Graham emphasized 3 principles: 1) Only invest amounts you can tolerate fluctuations in, 2) Paying a reasonable price is key, 3) Maintain a long-term focus and sticking to a plan. Woyat applies these principles in discussing recent market volatility and positioning portfolios defensively with sectors like consumer staples that benefit from economic slowdowns while maintaining a long-term bullish outlook. Portfolio returns remained respectable despite recent market declines.
CASE STUDY CAPITALISM This case views the global, capitalistMaximaSheffield592
The document discusses the 2007-2008 financial crisis and its consequences. It analyzes how the crisis emerged from a combination of individual greed, organizational mismanagement, government failure to regulate the financial system, and the fostering of moral hazard. The crisis highlighted the need for more strategic corporate social responsibility practices. It caused a major backlash against American-style capitalism and shifts in global economic power. Key questions remain about what obligations societies and organizations have to prevent future crises and reform the global economic system.
The document discusses applying concepts of situational awareness (SA) to investing in alternative investments such as hedge funds. SA involves perceiving elements in one's environment, comprehending their meaning, and projecting their future status. The document outlines applying SA's three levels - acquiring data, evaluating the data to create an understanding, and projecting future states - to gain knowledge about macroeconomic conditions, the alternative investment industry, and individual managers. This framework can help differentiate investment choices and ensure accurate mental models are used for decision making.
The document discusses the role of institutional investors in propagating the financial crisis of 2007-2008. It states that institutional investors like mutual funds, pension funds, hedge funds, and insurance companies contributed to the crisis through their large and professional investments. While institutional investors enjoy benefits due to the scale of their investments, their actions also amplified the crisis. The document cites the example of hedge fund Magnetar Capital and insurance company AIG as institutional investors that played a role in the crisis.
The document discusses the causes of the financial crisis and solutions to prevent future crises. It argues that the financial system is too important to leave unregulated and that mistakes were made during the crisis that went unpunished. It identifies three main challenges regulators face: 1) increasing capital requirements for financial institutions, 2) increasing regulation and transparency of credit derivative markets, and 3) regulating credit rating agencies to address conflicts of interest. Nationalizing credit rating agencies and increasing clearinghouse requirements are proposed as solutions.
This document provides excerpts from investment commentaries by Anthony Lombardi from 2016 to 2019. It discusses market conditions, political events, and Lombardi's views on sectors and portfolio positioning over a 3-5 year horizon during this period. Key events mentioned include the 2016 US presidential election, midterm elections in 2018, ongoing trade negotiations, and regulatory risks for large technology companies. The excerpts reflect Lombardi's consistent value-based investment approach and perspective on market cycles and sentiment over time.
The document discusses concerns about the "fiscal cliff" and the potential economic impact if Congress fails to prevent automatic spending cuts and tax increases from taking effect. However, experts believe the chances of the fiscal cliff occurring in its entirety are slim. While Congress is likely to delay action until after the election, extreme market pressure may speed up legislative talks. Investors should focus on weakening economic fundamentals in the U.S. and globally rather than exaggerated fears about the fiscal cliff, and invest in stable, dividend-paying companies well-positioned for a period of low growth.
This document provides a summary of the economic crisis that began in 2007. It discusses how the increasing integration of global markets led to growth but also vulnerability. The crisis that started in 2007 was more than a recession, as the housing market collapse in the US continued through 2009, exacerbating problems of high household debt levels. Government and central bank efforts to inject liquidity and spend on stimulus programs struggled to stop the economic downward spiral. Major banks remained fundamentally insolvent despite government capital injections, and credit creation broke down. By the end of 2008, the US government had committed over $7 trillion to bailouts, and deficits were rapidly rising.
Secular Stagnation
Why Might Equilibrium Real Rates Have Fallen?
Increased Savings
Changes in distribution of income and profits share
Reserve accumulation or capital flight
Increasing deleveraging and retirement preparation
Decreases in Investment Propensity
Declining growth rate of population and/or technology
Demassification of the economy
Fall in price of capital goods
Other factors
Increased global save asset demand
3/14/2020 The Age of Secular Stagnation | Larry Summers
larrysummers.com/2016/02/17/the-age-of-secular-stagnation/ 1/6
HOME CONTACT SEARCH
Lawrence H.
Summers is the
Charles W. Eliot
University Professor
and President
Emeritus at Harvard University. He
served as the 71st Secretary of the
Treasury for President Clinton and
the Director of the National Economic
Council for President Obama.
FULL BIO
Larry Summers on
SECULAR STAGNATION READ MORE
FOLLOW @LHSUMMERS
on Twitter
Larry Summers
COMMENTARY RESEARCH TEACHING MEDIA RESOURCES
Summers published an article title, “The Age of Secular
Stagnation: What It Is and What to Do About It,” in the February
issue of Foreign A�airs. The article explores how expansionary
�scal policy by the U.S. government can help overcome secular
stagnation problems and get growth back on track.
The Age of Secular Stagnation: What It Is and What to Do About It
February 15, 2016
published in Foreign A�airs
As surprising as the recent �nancial crisis [1] and recession were, the behavior of the
world’s industrialized economies and �nancial markets during the recovery [2] has been
even more so.
Most observers expected the unusually deep recession to be followed by an unusually
rapid recovery, with output and employment returning to trend levels relatively quickly.
Yet even with the U.S. Federal Reserve [3]’s aggressive monetary policies, the recovery
(both in the United States and around the globe) has fallen signi�cantly short of
predictions and has been far weaker than its predecessors [4]. Had the American
economy performed as the Congressional Budget O�ce fore cast in August 2009—after
the stimulus had been passed and the recovery had started—U.S. GDP today would be
about $1.3 trillion higher than it is.
Almost no one in 2009 imagined that U.S. interest rates would stay near zero for six
years, that key interest rates in Europe would turn negative, and that central banks in the
G-7 would collectively expand their balance sheets by more than $5 trillion. Had
economists been told such monetary policies lay ahead, moreover, they would have
con�dently predicted that in�ation would become a serious problem—and would have
been shocked to �nd out that across the United States, Europe, and Japan, it has
generally remained well below two percent.
In the wake of the crisis, governments’ debt-to-GDP ratios have risen sharply, from 41
percent in 2008 to 74 percent today in the United States, from 47 percent to 70 percent
in Europe, and from 95 percent to 126 percent in Japan.
Secular Stagnation
Why Might Equilibrium Real Rates Have Fallen?
Increased Savings
Changes in distribution of income and profits share
Reserve accumulation or capital flight
Increasing deleveraging and retirement preparation
Decreases in Investment Propensity
Declining growth rate of population and/or technology
Demassification of the economy
Fall in price of capital goods
Other factors
Increased global save asset demand
3/14/2020 The Age of Secular Stagnation | Larry Summers
larrysummers.com/2016/02/17/the-age-of-secular-stagnation/ 1/6
HOME CONTACT SEARCH
Lawrence H.
Summers is the
Charles W. Eliot
University Professor
and President
Emeritus at Harvard University. He
served as the 71st Secretary of the
Treasury for President Clinton and
the Director of the National Economic
Council for President Obama.
FULL BIO
Larry Summers on
SECULAR STAGNATION READ MORE
FOLLOW @LHSUMMERS
on Twitter
Larry Summers
COMMENTARY RESEARCH TEACHING MEDIA RESOURCES
Summers published an article title, “The Age of Secular
Stagnation: What It Is and What to Do About It,” in the February
issue of Foreign A�airs. The article explores how expansionary
�scal policy by the U.S. government can help overcome secular
stagnation problems and get growth back on track.
The Age of Secular Stagnation: What It Is and What to Do About It
February 15, 2016
published in Foreign A�airs
As surprising as the recent �nancial crisis [1] and recession were, the behavior of the
world’s industrialized economies and �nancial markets during the recovery [2] has been
even more so.
Most observers expected the unusually deep recession to be followed by an unusually
rapid recovery, with output and employment returning to trend levels relatively quickly.
Yet even with the U.S. Federal Reserve [3]’s aggressive monetary policies, the recovery
(both in the United States and around the globe) has fallen signi�cantly short of
predictions and has been far weaker than its predecessors [4]. Had the American
economy performed as the Congressional Budget O�ce fore cast in August 2009—after
the stimulus had been passed and the recovery had started—U.S. GDP today would be
about $1.3 trillion higher than it is.
Almost no one in 2009 imagined that U.S. interest rates would stay near zero for six
years, that key interest rates in Europe would turn negative, and that central banks in the
G-7 would collectively expand their balance sheets by more than $5 trillion. Had
economists been told such monetary policies lay ahead, moreover, they would have
con�dently predicted that in�ation would become a serious problem—and would have
been shocked to �nd out that across the United States, Europe, and Japan, it has
generally remained well below two percent.
In the wake of the crisis, governments’ debt-to-GDP ratios have risen sharply, from 41
percent in 2008 to 74 percent today in the United States, from 47 percent to 70 percent
in Europe, and from 95 percent to 126 percent in Japan.
1) The document analyzes historical data from 14 advanced economies over 140 years to identify trends leading up to financial crises. It finds that periods of high credit growth and leverage often precede crises and result in long, slow recoveries, especially when combined with high public debt.
2) Five facts are presented: advanced economies have experienced more frequent crises since the 1970s as financial sectors grew rapidly independent of the real economy; crises are deflationary and depress economic growth; unprecedented leverage in the banking sector now compared to the past; emerging markets insure against currency crises while developed markets benefit; and demographic changes may undermine long-term liquidity.
3) Five lessons recommend macroprud
This document discusses credit default swaps (CDS) and their role in the 2008 financial crisis. It begins by introducing CDS and their stated purpose of insuring against bond defaults. However, it notes that CDS were also used speculatively. The document then describes how CDS work and defines an "open position." It lists pros and cons of CDS, including that they allowed off-balance sheet leverage but lack of transparency exacerbated risk. The role of CDS in the crisis is explored, how they amplified systemic risk. The conclusion advocates banning speculative CDS on sovereign debt while standardizing and regulating CDS could increase transparency and limit panic.
The document discusses whether the United States may be headed toward a double-dip recession. It analyzes key economic indicators like GDP, personal income, unemployment, and bankruptcies that are still below pre-recession levels. This suggests the recession may not have truly ended and the economy experienced just one prolonged recession rather than two discrete recessions separated by a recovery. The National Bureau of Economic Research, which officially declares recessions, will be slow to announce the end given most indicators have yet to surpass pre-recession highs. Individuals should understand the economy remains weak rather than speculate on the NBER's eventual announcement.
The document discusses how the recession has impacted consumer spending habits and how consumers will pay for goods going forward. It notes that consumers are deleveraging and taking on less debt due to job losses and stagnant wages. While credit card usage fueled spending for decades, consumers will now likely shift to debit cards and alternative payment methods. This change creates opportunities for new payment companies and technologies to fill the gap left by reduced credit availability and help consumers continue to purchase goods and services.
The Morton Investment Doctrine is presented as an alternative to Modern Portfolio Theory for developing suitable asset allocations. It focuses on geographic proximity and common ancestry to identify investable free markets during a period of expected financial market volatility. The doctrine aims to protect and grow wealth as global consumption patterns transition away from developed markets towards emerging economies. It questions relying solely on government efforts to reduce debt levels and considers weighing probable outcomes of policies intended to correct high consumer leverage in the US.
The document contains several articles discussing economic and financial market risks and opportunities. The first section highlights Standard & Poor's downgrading of the UK banking system due to economic weakness, reputational damage to banks, and high dependence on government support. The second section focuses on opportunities in emerging markets such as Brazil, where fundamentals remain positive and growth is expected to be strong. It also notes pension funds pouring funds into emerging market debt and the potential for relatively higher growth in developing economies going forward.
This document provides a summary of quotes from various individuals and institutions in April 2010 regarding global economic and fiscal matters. It discusses risks and opportunities related to the aging US population and challenges funding entitlement programs. It suggests opportunities to address structural deficiencies through increased exports, immigration, employee ownership, and tax policy incentives. Overall, the document questions whether current US leaders can make difficult decisions needed to ensure future prosperity or will they be constrained by protecting their own entitlements and legacy views.
The document discusses the history and future of quantitative easing programs. It notes that the end of the second quantitative easing program is approaching. It briefly reviews the effects of the end of the first quantitative easing program, when stock markets declined. The document suggests monitoring how markets respond when the current program ends, and considers what may happen given banks' current holdings of cash from quantitative easing versus other economic indicators like unemployment.
Summit Creek Capital, LLC (SCC) is an independent asset management firm that provides customized investment advisory services. SCC analyzes each client's unique goals, risk tolerance, and financial situation to develop personalized investment strategies and portfolios. SCC aims to balance risk management with achieving clients' objectives through its proprietary research and selection of both in-house and third-party investment products. The firm is led by experienced principals and provides independent advisory services without conflicts of interest from proprietary products.
This document discusses seven major investment themes that are seen as important drivers of global economic growth: connectivity, demand, efficiency, energy, food, mobility, and resources. It provides an overview of each theme, highlighting trends and growth opportunities across industries that are shaped by these interconnected themes. The document argues that considering how companies relate to and benefit from these evolving global themes can provide valuable insights into their potential.
1. summitV I E W summit creek
“Politics is the art of of a trade agreement between Taiwan
looking for trouble, and China. For two entities embroiled in
a dispute over sovereignty for the last 60
finding it everywhere, plus years, the signing of the agreement
summitVIEW
represents a form of detente. Bloomberg
diagnosing it incorrectly reports, “in the trade agreement between
the sovereignties China will also open
and applying the wrong markets in 11 service sectors such as
banking, securities, insurance, hospitals
and accounting, while Taiwan agreed
remedies.” to offer wider access in seven areas,
including banking and movies, the two
sides said. They also signed an agreement
Groucho Marx on intellectual property rights protection.”
1
The agreement appears to reflect the
H ow about General Stanley McChrystal? Flying thoughts of Mohamed El-Erian, Chief
July 2010
from the opposite side of the planet to be fired by Executive Officer of PIMCO. El-Erian
the president certainly cannot be easy on the ego. stated in an article titled Driving Without
McChrystal’s visit to the White House lasted around a Spare, that the new normal is a world of
thirty five minutes or so. A life in the armed forces “changing risks and opportunities.” For
comes to a close in a brief firing from the Commander this global economic transition period,
in Chief. Nothing like going out with a bang is there? investment with the safest carry will be
“in sovereigns that, due to their economic
What is most interesting in the story is not so much that and financial fundamentals, are truly
a man was fired for insubordination. Of most interest core countries in the midst of the global
is a quote from Politico suggesting the writer of the paradigm shift.”
Rolling Stone article, Michael Hastings, was able to
write the piece because, as a freelance journalist and As readers of prior SummitVIEWs know, a
not a beat reporter, “burning bridges by publishing primary concern is the current level of risk in
many of McChrystal’s remarks” was not a worry to the system or, rather, the financial markets.
him. Frank Rich, in the New York Times on June 27, Relying on your local newspaper or news
2010 said, “Politico had the big picture right. It’s the program to provide the proper insight
Hastings-esque outsiders with no fear of burning likely will engender confusion and a belief
bridges who have often uncovered the epochal stories in false realities. If one were to follow the
missed by those with high-level access.” national media attention on the imminent
threat of inflation, the result would be a
Wow! How does one feel? Again, SummitVIEW is belief that the US is doomed to experience
reminded that what one often reads or hears in the inflation very soon. Reality is likely to be
news just may not be the full picture. Why would quite different. Recent housing data points
anyone want to report the ugly truth when spin to the continued decline in real estate
is so easily digested by the American populace? prices. Although there does exist pricing
What else is not being reported for fear of burning power in some industries, with a pillar
bridges? Where is Clark Kent when you need of economy, real estate, still experiencing
him? SummitVIEW is beginning to understand the declining values, the likelihood of inflation
motivations for the creation of Superman in 1939. See rearing its ugly head in the next few years
Rosenberg’s quote on page 5 titled, Daring to Compare is low. Wage increases? Not happening.
Today to the 30’s. Unemployment rate declining? Nope.
Another news item of interest is the announcement The data point most telling to SummitVIEW
see disclaimer on last page is that which is cited by David Rosenberg
2. summit creek
on page 4, in the quote titled The
Bottom Line. Rosenberg says “[t]he
world is awash with $222.5 trillion
of total liabilities across public
summitVIEW
and private sector claims, or the
equivalent of 362% of global GDP.
Extinguishing this debt will be
deflationary even as central banks
will be forced to print money as an
antidote and we are really in the
early stages of this deleveraging
cycle.” Rosenberg goes on to say
in Dinner with Dave from June 30,
2
2010 the following:
Resolving the pension crisis in the
July 2010
U.S. though [sic] a longer work-
life and higher contribution rates is
surely going to mean that deflation,
not inflation, as it pertains to many
discretionary segments of the
consumer spending pie, is going
to be the primary trend for some
period of time; likely five years or
more. In other words, the time to
be worried about inflation is really
beyond our forecasting horizon.
Think about the ratio cited above
for a moment. On a global scale
there exists over 4 times (and
rapidly approaching 5 times) loss of capital. In an environment where most
the level of debt as the level of annual global underfunded pension funds are holding out
production. As we all know most of that for the return of an equity bull market, the
debt is held in the developed world. Without underfunded state of pensions is likely to get
extend and pretend accounting standards in the worse than better in the near term.
banking and mortgage industries, where would
equity values be today? As leading economic 2010 is likely to go down in history as a
indicators roll over in the United States, few seminal year. The confluence of events shaping
choices are available that have not already been geopolitics and global economics are starting to
deployed. How do equity values hold up when make their mark. Although the events will be
the economic engine is slowing and leverage the focus of headlines, the response to the events
is excessive. As an investor one should seek is how our time will be defined. SummitVIEW
high earnings yield companies (that is low price holds to the belief that, although the transition
to earnings) with little to no leverage, if you to a new period of growth will be rife with
have to be in stocks that is. Otherwise, holding strife and stress, a new period of prosperity will
cash, high quality debt, and sovereigns of those emerge on a scale few can forecast.
countries that are recipients of the new economic
paradigm likely will prove prudent. Getting through a stormy sea of debt and traction-
less economic growth requires proactive risk
Protecting one’s wealth in this epochal transition assessment and management. As James Montier
is of primary importance. Long term asset of GMO LLC says, as quoted below, “[h]aving
performance averages are irrelevant when risk defined the [return] target, managers should be
is defined as the probability of the permanent given as much discretion as possible to deliver
3. that real return. This avoids the benchmark-
hugging behavior that is typically induced by
policy portfolios.”
Francois Trahan, Vice Chairman and Chief
Investment Strategist at Wolfe Trahan & Co.,
expects the forthcoming period of deflation to be
summitVIEW
reflected in the equity markets with lower price
to earnings multiples. In research titled Time
to Throw Out Your Textbooks, Trahan states, “the
fact is that the majority of empirical data show
that lower interest rates are consistent with
lower P/E multiples for the market.” Echoing
SummitVIEW’s sentiment that our time will be
defined by the responses to current economic
circumstances, Trahan goes on to say, “[w]e
3
hope policy makers will be somewhat proactive
and the market won’t have to once again force
the “invisible hand”.
July 2010
In closing I turn to the words of Woody Brock:
To sum up, what we are experiencing is not an
event-driven turning point as in 1990, but rather
a conceptual revolution in which much received
wisdom about the role of the state and economic
prospects for the future is being stood on its head.
On both sides of the Atlantic, there is a sense that
the Social Contract has been broken, and that
government is the true culprit. What a change
from a year ago when bankers were deemed
the sole villains! The historian Simon Schama
detects the beginnings of the Age of Rage, and he
is probably right. The stakes are very high, and
the political and economic consequences will be
severe.1
Recent market volatility is a reminder to all
investors to fasten seat belts. The wild ride is
just leaving the station.
1. Brock, H. Wood, Profile May 2010, Is the “Age of Rage” at Hand? - Sovereign
Debt, the European Crisis, and the Euro, Strategic Economic Decisions, Inc.
www.SEDinc.com
www.summitcreekcapital.com
4. I Want to Break Free, or,
Quotes: Strategic Asset Allocation
≠ Static Asset Allocation
Driving Without a Spare
summitVIEW
Clients should liaise with their managers to
Over the next few years, Australia and Canada set a “realistic” real return target (recognizing
will constitute the analytical battle-ground as that available returns are a function of the
elements of the new normal come head-to-head opportunity set, not a function of the needs of
with those of the old normal. Our sense is that the fund). After all, the aim of investing must
the two countries’ exposure to the dynamic surely be “maximum real returns after tax” as Sir
components of global growth - through direct John Templeton observed long ago. None but a
trade links with Asia and the commodity angel - few very lucky fund managers get to retire on
will likely outweigh the drag from the legacy of relative performance.
household leverage (Australia) and the economic
4
links to the U.S. ( Canada). Having defined the target, managers should be
given as much discretion as possible to deliver
For investors, this translates into a secular period that real return. This avoids the benchmark-
July 2010
of changing risks and opportunities: hugging behavior that is typically induced by
policy portfolios.
• The distribution of global outcomes is
going through a transformation, both in Of course, it creates problems for measurement.
terms of overall shape (flatter) and tails Indeed, as I mentioned at the beginning of
(fatter); this paper, the most common response when I
• It is a world where several of the old present these arguments is, “So, how should we
simplifying adages that once brought measure you?” This obsession with performance
comfort to investors - such as industrial measurement at the expense of investment sense
country governments constitute interest is disturbing to me. There is no easy mark to
rate risk while emerging economies judge fund managers against. This may actually
involve credit risk - require considerable be a good thing. It may force investors to allocate
refinement; capital on the basis of process: i.e., you will only
let managers that you trust and understand run
• It is a world that calls for a broader your money. [emphasis added]
investment universe and guidelines and
, for those who use them, revamped James Montier, GMO LLC May 2010, “I Want to Break
benchmarks that better capture the world Free, or, Strategic Asset Allocation ≠ Static Asset Allocation”
of today and tomorrow rather than that of
yesterday;
The Bottom Line
• It is a world of significant country, regional
and instrument differentiation when it The bottom line is that all levels of society, and
comes to harvesting equity and credit across most countries in the industrialized
premiums in high-quality corporates, world, have far too much debt and far too
financials and emerging markets; much debt-servicing costs in relation to income.
The world is awash with $222.5 trillion of
• It is a world where the currencies of the total liabilities across public and private sector
emerging (as opposed to submerging) claims, or the equivalent of 362% of global GDP.
economies will continue to warrant a Extinguishing this debt will be deflationary even
greater allocation over time; and as central banks will be forced to print money as
• It is a world where the safest of carry
an antidote and we are really in the early stages
will come from duration and curve in of this deleveraging cycle.
sovereigns that, due to their economic
and financial fundamentals, are truly David A. Rosenberg, “Breakfast with Dave,” Gluskin
core countries in the midst of the global Sheff & Co., June 22, 2010
paradigm shift.
Mohamed El-Erian, PIMCO, “Driving Without a
Spare,” Secular Outlook, , May 2010
5. Daring to Compare Today
to the 30’s In 2010, the authorities seem to have only two
choices: allow defaults, which lead to deflation
Coming off a crash (‘29) and rebound (‘30); and tremendous stress to the political system and
aftermath of an asset deflation and credit public order; or inflate so that debts lose their
summitVIEW
collapse banks fail (Bank of New York back significance, which eventually leads to hyper-
then, Lehman this time around); natural disaster inflation and tremendous stress to the political
(dust bowl then, oil spill now); global policy system and public order. Growth is a theoretical
discord (with the U.K. then, with Germany way out of this dilemma, but with shrinking
now); geopolitical threats; interventionist populations and increased regulation, Europe
governments; ultra low interest rates (long bond cannot manage this option. The US might, but
yield finished the 1930s below 2%); chronic the way will be difficult. Cascading defaults
unemployment (25% then, 17% now); deflation will strip away many entitlements upsetting
pressures; competitive devaluations; gold bull the rentiers [the debt owners, or, rather, the
5
market (doubled in Sterling terms in the 30s); beneficiaries of the coupon payments] and those
debt defaults; sputtering recoveries and rallies; who had planned to become rentiers in the future.
onset of consumer frugality. Countries that choose to allow defaults will see
July 2010
their currencies rally as there will be a shrinkage
David A. Rosenberg, “Breakfast with Dave,” Gluskin
of currency outstanding increasing the value of
Sheff & Co., June 24, 2010
the rest, but collapsing equity markets will test
their resolve at every turn. We rentiers will be
How The Middle Class, Or lucky if we can enjoy our dotage.
The New Rentiers, Is Stuck John R. Taylor, Jr., Chief Investment Officer, “FX
Between Deflation And Concepts,” June 24, 2010
Hyperinflation For a glimpse of changed societal mores, this
headline speaks volumes.....
The world is currently overwhelmed with debt,
but underwhelmed with growth. Everyone is
trying to export, but no country has embraced
How Many Graduates
the concept of expanding domestic consumption. Does It Take to Be No. 1?
Although I personally like consumption, I am
an American and therefore over-borrowed and Principals say that recognizing multiple
unable to service the debt loads of my city, my valedictorians reduces pressure and competition
state, and my country, not to mention my own among students, and is a more equitable way
personal debt load. With the Americans no to honor achievement, particularly when No.
longer available as consumer of the last resort, 1 and No. 5 may be separated by only the
and no one else stepping up, global final sales smallest fraction of a grade from sophomore
will stagnate in the years ahead. As a result, science. But some scholars and parents have
global debt loads will become relatively larger. criticized the swelling valedictorian ranks as yet
If the world economic pie can not grow strongly, another symptom of rampant grade inflation,
thereby lessening the relative size of global debts, with teachers reluctant to jeopardize the best
the magic of compound interest will certainly and brightest’s chances of admission to top-tier
bankrupt many governments and commercial colleges.
entities. Currently there is a growing solvency
crisis impacting many Eurozone sovereigns and Winnie Hu, New York Times, June 26, 2010
another one that is occurring within many states
and jurisdictions in the United States. It seems
quite obvious that many of these problems will
lead to default and the loss of principal on a grand
scale. In the next few years, a greatly increased
percentage of all outstanding investment grade
global debt will default. Disclaimer: All material presented herein is believed to be reliable but we cannot attest to its accuracy. Neither
the information nor any opinion expressed constitutes a solicitation by us for the purchase or sale of any
securities.
www.summitcreekcapital.com