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3. Key points
Market disconnect
Prices and momentum remain positive
While the underlying economics remain less
convincing
Result of unprecedented Central Bank stimulus
Withdrawal of which will have implications for
markets
20. Q.E. and Tapering
The incoming Chair of the US Federal Reserve
has bought markets a few months it would seem
Before we see a slowdown in the asset purchase
programme
Bond market Funds are already showing losses on
their books
As they suffer net outflows for 5th straight months
E.M. bonds fare the worst
21. U.S. Mutual Fund - Flows
10/16/201 10/23/201 10/30/201
11/13/201
11/6/2013
3
3
3
3
Total Equity
2,805
13,582
7,947
9,072
7,254
701
9,209
4,301
5,432
3,973
2,104
4,373
3,646
3,640
3,281
618
2,391
2,084
1,394
1,475
-5,453
-2,386
-4,301
-4,260
-7,568
Taxable
-3,604
-1,363
-3,514
-3,428
-6,434
Municipal
-1,849
-1,023
-787
-833
-1,134
-2,030
13,588
5,730
6,206
1,161
Domestic
World
Hybrid
Total Bond
Total
22. Credit risk default
The risk of credit default looms large
With a spike in cost of capital very probable
When long term fixed income investors demand a
higher return to lend to sovereigns, states,
municipals and corporations.
30. Tech bubble?
Maxim of “build it and they will come”
Not about profits – not yet anyway
“Value per user” metrics preferred
Assumption that the metrics can be monetise
sometime in future
For some, perhaps
Though many will fail
A paradigm shift? I think not.
31. Eight months ago, Snapchat was valued at $70
million. Today, it is valued at $4 billion, even
though it has zero revenue.
32. Six months ago, Pinterest was valued at $2.5
billion. Today, it is valued at $3.8 billion — and
no revenue there, either.
33. And last week news broke that Dropbox was
said to be seeking a new round of funding that
would value the company at $8 billion, up from
$4 billion a year ago.
36. Property
Artificial boost from concessional tax regimes can
change
Credit squeeze from fallout in equities and bonds
pose some risk
Less transparent compared to regulated markets
37. In closing
We follow the broad positive lead from stocks until
a discernible change in the present momentum
Look for cracks approaching the Feb 2014
earnings season
Continue to favour a short term view on markets
by maintaining a dynamic tilt to strategic asset
allocation
Prudent for borrowers to fix the rate on a portion of
loans
