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
Us economy goldilocks- 4th oct 2007 published in singapore timessatya saurabh khosla
The author's article that appeared in Business Times, Singapore on Oct 4, 2007 stated that USA Housing, low interest rates and derivatives will lead the global economy into a recession
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.
Fasanara Capital | Investment Outlook
1. Fake Markets: How Artificial Money Flows Kill Data Dependency, Affect Market Functioning and Change the Structure of the Market
Hard data ceased to be a driver for markets, valuation metrics for bonds and equities which held valid for over a century are now deemed secondary. Narratives and money flows trump hard data, overwhelmingly.
‘Fake Markets’ are defined as markets where the magnitude and duration of artificial flows from global Central Banks or passive investment vehicles have managed to overwhelm and narcotize data-dependency and macro factors. A stuporous state of durable, un-volatile over-valuation, arrested activity, unconsciousness produced by the influence of artificial money flows.
- Passive Flows: The Prehistoric Elephant In The Room
- ETFs Are Taking Over Markets
- The Impact of Passive Investors on Active Investors: the Induction Trap
- How Narratives Evolve To Cover For Fake Markets
- Defendit Numerus: There is Safety in Numbers
- What Could We Get Wrong
2. Be Short, Be Patient, Be Ready
Markets driven by Central Banks, passive investment vehicles and retail investors are unfit to price any premium for any risk. If we are right and this is indeed a bubble (both in equity and in bonds), it will eventually bust; it is only a matter of time. The higher it goes, the higher it can go, as more swathes of private investors are pulled in. The more violently it can subsequently bust.
The risk of a combined bust of equity and bonds is a plausible one. It matters all the more as 90%+ of investors still work under the basic framework of a balanced portfolio, exposed in different proportions to equity and bonds, both long. That includes risk parity funds, a leveraged version of balanced portfolio. That includes alternative risk premia funds, a nice commercial disguise for a mostly long-only beta risk, where premia is extracted from record rich markets that made those premia tautologically minuscule.
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.
This document provides a September 2017 investment commentary from Anthony Lombardi. It discusses the firm's investment philosophy of focusing on a 3-5 year horizon and not reacting to short-term market events. Recent geopolitical and weather events are mentioned. The portfolio positioning is reviewed, with some cash deployed this quarter into industrial stocks. The portfolio performance for the quarter outpaced benchmarks, driven by stock selection, and characteristics remain attractive on valuation metrics.
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.
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.
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
Us economy goldilocks- 4th oct 2007 published in singapore timessatya saurabh khosla
The author's article that appeared in Business Times, Singapore on Oct 4, 2007 stated that USA Housing, low interest rates and derivatives will lead the global economy into a recession
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.
Fasanara Capital | Investment Outlook
1. Fake Markets: How Artificial Money Flows Kill Data Dependency, Affect Market Functioning and Change the Structure of the Market
Hard data ceased to be a driver for markets, valuation metrics for bonds and equities which held valid for over a century are now deemed secondary. Narratives and money flows trump hard data, overwhelmingly.
‘Fake Markets’ are defined as markets where the magnitude and duration of artificial flows from global Central Banks or passive investment vehicles have managed to overwhelm and narcotize data-dependency and macro factors. A stuporous state of durable, un-volatile over-valuation, arrested activity, unconsciousness produced by the influence of artificial money flows.
- Passive Flows: The Prehistoric Elephant In The Room
- ETFs Are Taking Over Markets
- The Impact of Passive Investors on Active Investors: the Induction Trap
- How Narratives Evolve To Cover For Fake Markets
- Defendit Numerus: There is Safety in Numbers
- What Could We Get Wrong
2. Be Short, Be Patient, Be Ready
Markets driven by Central Banks, passive investment vehicles and retail investors are unfit to price any premium for any risk. If we are right and this is indeed a bubble (both in equity and in bonds), it will eventually bust; it is only a matter of time. The higher it goes, the higher it can go, as more swathes of private investors are pulled in. The more violently it can subsequently bust.
The risk of a combined bust of equity and bonds is a plausible one. It matters all the more as 90%+ of investors still work under the basic framework of a balanced portfolio, exposed in different proportions to equity and bonds, both long. That includes risk parity funds, a leveraged version of balanced portfolio. That includes alternative risk premia funds, a nice commercial disguise for a mostly long-only beta risk, where premia is extracted from record rich markets that made those premia tautologically minuscule.
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.
This document provides a September 2017 investment commentary from Anthony Lombardi. It discusses the firm's investment philosophy of focusing on a 3-5 year horizon and not reacting to short-term market events. Recent geopolitical and weather events are mentioned. The portfolio positioning is reviewed, with some cash deployed this quarter into industrial stocks. The portfolio performance for the quarter outpaced benchmarks, driven by stock selection, and characteristics remain attractive on valuation metrics.
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.
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.
Michael Durante Western Reserve Blackwall Partners 2011 outlook primer- finalMichael Durante
- Blackwall Partners believes the financial crisis has ended and a new "golden age" for financial stocks is beginning, similar to the period following the 1990s savings and loan crisis.
- Excessive capital reserves built up during the crisis due to mark-to-market accounting will be redeployed, leading to aggressive capital management and benefiting investors.
- Financial stocks currently trade at very low valuations and earnings growth is expected to be much higher than other sectors over the next few years, yet they remain underowned.
The document provides a quarterly investment outlook and discusses recent volatility in financial markets. It notes that sentiment has been swinging between irrational optimism and excessive pessimism. While most equity markets have rebounded in recent months, bond prices have also risen due to deflation fears. The document discusses the debate around whether the threats are inflation or deflation and argues that subdued growth does not necessarily mean deflation will take hold. It outlines some areas where investment opportunities still exist, such as global equity income funds and Japanese equities, and concludes by emphasizing the need for diversification given the current environment of low predictability.
The document provides a recap and analysis of macroeconomic factors and their impact on the economy and financial markets from 2007 to 2009. It summarizes warnings in 2007 about the credit crisis, including rising lending standards, dependence on credit growth, and the bursting of the credit bubble. It describes shocks to the financial system in August 2007 and the Federal Reserve's response. While the stock market rallied on rate cuts, the document warns that the full economic impact was still unknown and that home prices and the economy remained at risk.
- The S&P 500 had its best year since 1997 in 2013, returning over 32%, surprising many investors and professionals who had predicted a market decline.
- Many experts warned of factors that could trigger a recession in 2013, such as stagnating US growth, the European debt crisis, and slowing emerging markets, but the US stock market rose steadily throughout the year against these expectations.
- While some issues like Detroit's bankruptcy filing led some to believe a shift in municipal finance was underway, US stocks continued to perform well, confounding negative predictions.
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.
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.
The document discusses rising global debt levels and their implications. Total global debt, including government and private sector debt, has nearly tripled since 2001 to over $82 trillion. In comparison, total global equity assets are only around $44 trillion, resulting in a negative global net worth of around $38 trillion. High and rising debt levels increase the risk of fiscal and financial crises for governments and could plunge countries into crisis if debt is not rolled over successfully. The higher global debt climbs, the greater the risks become.
Global Risk 2018-Your Guide To The Year AheadMiguel Miranda
Excellent recap on important geopolitical events in 2017. Anyone working in education, finance, government, and technology should read this to get the right frame of mind for the year ahead.
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.
1. The portfolio manager discusses the market performance in Q2 2014, with the Canadian equity markets outperforming other global regions.
2. He explains that central bank monetary policies, particularly from the US Federal Reserve and European Central Bank, have been a key driver for the stock market rally over the past few years by keeping interest rates low.
3. The portfolio manager reiterates his advice to investors to stick to their customized plans and not be deterred by short-term market fluctuations, as the plans are designed to navigate periods of volatility.
The document discusses the housing bubble and its causes. It argues that loose monetary policy and government policies promoting homeownership led to a misallocation of resources and artificial inflation of housing prices. This created a bubble that has now burst, leading to an economic recession. In the long run, there is a concern that the government failures that caused the crisis will not be admitted and more power will be given to the same mechanisms that caused the problems.
The document discusses how precious metals may perform under policies enacted by President Trump and his administration, known as "Trumponomics." It notes that while the stock market has risen in anticipation of pro-growth policies, investors should hedge against potential disappointments. It also argues that Trump's plans for tax cuts, infrastructure spending, and trade policies could lead to deficit spending, inflation, and a weaker U.S. dollar - developments that would be positive for gold and silver prices. The article concludes that despite short-term volatility, precious metals remain a prudent investment given ongoing economic and political uncertainties under the new administration.
1) The document discusses competing theories for long-term low interest rates, including secular stagnation, financial repression, and shortage of safe assets.
2) It argues that financial repression is not a major factor for developed economies and that interest rates are likely low due to weak private sector demand rather than a shortage of safe assets.
3) The key debate is whether low rates reflect lingering effects of the financial crisis or a new normal of secular stagnation, with major implications for the future of monetary policy.
She adores hats. She is always very polite and respectful of others. She waves to everyone, and consistently avoids conflict. She is a lady; she is The Queen.
Without a doubt, Queen Elizabeth lives a life quite unlike everyone else in the World – after all, royalty does have its privileges. Yet, when it comes to investing, the Queen is swimming in the same pool of stock market sharks as us common people.
Like everyone else, she pours through her quarterly statements to see how she’s fared. And like everyone else, she loves to make money and simply deplores negative returns. It was rumored that the 2008 crisis hit her particularly hard – over USD 40 million in stock market losses.
This experience must have jilted something, as when The Queen was visiting the esteemed London School of Economics she asked the professor a rather “un-queen” like question – why did economists fail to predict the biggest global recession since the Great Depression?
Ricardo V Lago -Interbank- Lima-22 04 2009 neiracar
Conferencia a la alta Gerencia de Intergroup en Lima el 22 de abril , 2009 sobre perspectivas de las economias mundial y peruana y oportunidades de inversion en bolsa
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.
This document provides a summary and analysis of current economic and market conditions:
1) Corporate profits in the US have declined significantly in the past two quarters, dropping profits to 2006 levels and reducing profit margins from unprecedented highs.
2) Stock market valuations by several measures, including price-to-earnings ratios and corporate sector value to market capitalization, are at very rich levels seen only during the tech bubble, suggesting low future returns.
3) Central bank policies have kept interest rates low and driven investment into stocks, but this is masking weaker underlying corporate earnings. As monetary policies normalize, stock markets may face challenges.
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.
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.
Michael Durante Western Reserve Blackwall Partners 2011 outlook primer- finalMichael Durante
- Blackwall Partners believes the financial crisis has ended and a new "golden age" for financial stocks is beginning, similar to the period following the 1990s savings and loan crisis.
- Excessive capital reserves built up during the crisis due to mark-to-market accounting will be redeployed, leading to aggressive capital management and benefiting investors.
- Financial stocks currently trade at very low valuations and earnings growth is expected to be much higher than other sectors over the next few years, yet they remain underowned.
The document provides a quarterly investment outlook and discusses recent volatility in financial markets. It notes that sentiment has been swinging between irrational optimism and excessive pessimism. While most equity markets have rebounded in recent months, bond prices have also risen due to deflation fears. The document discusses the debate around whether the threats are inflation or deflation and argues that subdued growth does not necessarily mean deflation will take hold. It outlines some areas where investment opportunities still exist, such as global equity income funds and Japanese equities, and concludes by emphasizing the need for diversification given the current environment of low predictability.
The document provides a recap and analysis of macroeconomic factors and their impact on the economy and financial markets from 2007 to 2009. It summarizes warnings in 2007 about the credit crisis, including rising lending standards, dependence on credit growth, and the bursting of the credit bubble. It describes shocks to the financial system in August 2007 and the Federal Reserve's response. While the stock market rallied on rate cuts, the document warns that the full economic impact was still unknown and that home prices and the economy remained at risk.
- The S&P 500 had its best year since 1997 in 2013, returning over 32%, surprising many investors and professionals who had predicted a market decline.
- Many experts warned of factors that could trigger a recession in 2013, such as stagnating US growth, the European debt crisis, and slowing emerging markets, but the US stock market rose steadily throughout the year against these expectations.
- While some issues like Detroit's bankruptcy filing led some to believe a shift in municipal finance was underway, US stocks continued to perform well, confounding negative predictions.
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.
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.
The document discusses rising global debt levels and their implications. Total global debt, including government and private sector debt, has nearly tripled since 2001 to over $82 trillion. In comparison, total global equity assets are only around $44 trillion, resulting in a negative global net worth of around $38 trillion. High and rising debt levels increase the risk of fiscal and financial crises for governments and could plunge countries into crisis if debt is not rolled over successfully. The higher global debt climbs, the greater the risks become.
Global Risk 2018-Your Guide To The Year AheadMiguel Miranda
Excellent recap on important geopolitical events in 2017. Anyone working in education, finance, government, and technology should read this to get the right frame of mind for the year ahead.
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.
1. The portfolio manager discusses the market performance in Q2 2014, with the Canadian equity markets outperforming other global regions.
2. He explains that central bank monetary policies, particularly from the US Federal Reserve and European Central Bank, have been a key driver for the stock market rally over the past few years by keeping interest rates low.
3. The portfolio manager reiterates his advice to investors to stick to their customized plans and not be deterred by short-term market fluctuations, as the plans are designed to navigate periods of volatility.
The document discusses the housing bubble and its causes. It argues that loose monetary policy and government policies promoting homeownership led to a misallocation of resources and artificial inflation of housing prices. This created a bubble that has now burst, leading to an economic recession. In the long run, there is a concern that the government failures that caused the crisis will not be admitted and more power will be given to the same mechanisms that caused the problems.
The document discusses how precious metals may perform under policies enacted by President Trump and his administration, known as "Trumponomics." It notes that while the stock market has risen in anticipation of pro-growth policies, investors should hedge against potential disappointments. It also argues that Trump's plans for tax cuts, infrastructure spending, and trade policies could lead to deficit spending, inflation, and a weaker U.S. dollar - developments that would be positive for gold and silver prices. The article concludes that despite short-term volatility, precious metals remain a prudent investment given ongoing economic and political uncertainties under the new administration.
1) The document discusses competing theories for long-term low interest rates, including secular stagnation, financial repression, and shortage of safe assets.
2) It argues that financial repression is not a major factor for developed economies and that interest rates are likely low due to weak private sector demand rather than a shortage of safe assets.
3) The key debate is whether low rates reflect lingering effects of the financial crisis or a new normal of secular stagnation, with major implications for the future of monetary policy.
She adores hats. She is always very polite and respectful of others. She waves to everyone, and consistently avoids conflict. She is a lady; she is The Queen.
Without a doubt, Queen Elizabeth lives a life quite unlike everyone else in the World – after all, royalty does have its privileges. Yet, when it comes to investing, the Queen is swimming in the same pool of stock market sharks as us common people.
Like everyone else, she pours through her quarterly statements to see how she’s fared. And like everyone else, she loves to make money and simply deplores negative returns. It was rumored that the 2008 crisis hit her particularly hard – over USD 40 million in stock market losses.
This experience must have jilted something, as when The Queen was visiting the esteemed London School of Economics she asked the professor a rather “un-queen” like question – why did economists fail to predict the biggest global recession since the Great Depression?
Ricardo V Lago -Interbank- Lima-22 04 2009 neiracar
Conferencia a la alta Gerencia de Intergroup en Lima el 22 de abril , 2009 sobre perspectivas de las economias mundial y peruana y oportunidades de inversion en bolsa
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.
This document provides a summary and analysis of current economic and market conditions:
1) Corporate profits in the US have declined significantly in the past two quarters, dropping profits to 2006 levels and reducing profit margins from unprecedented highs.
2) Stock market valuations by several measures, including price-to-earnings ratios and corporate sector value to market capitalization, are at very rich levels seen only during the tech bubble, suggesting low future returns.
3) Central bank policies have kept interest rates low and driven investment into stocks, but this is masking weaker underlying corporate earnings. As monetary policies normalize, stock markets may face challenges.
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.
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.
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
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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.
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.
This document discusses geopolitics and their potential impact on investments. It includes interviews with experts Marko Papic, Kevin Hebner, and Todd Mattina. Papic discusses the rise of populism globally and implications for trade. A multi-polar world with more independent states could increase risks of conflict and instability. Hebner and Mattina note geopolitical risks are hard to forecast but diversification helps reduce risk. Specific catalysts for international investments include currency shifts, fiscal policy changes, and emerging market recoveries. Long-term themes include secular stagnation, technology's impact, and China's economic rebalancing.
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.
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.
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.
Covid19 Pandemic: Looming Global Recession and Impact on BangladeshMd. Tanzirul Amin
The document summarizes the economic impacts of the Covid-19 pandemic, including a potential global recession. It discusses indicators that a recession may occur, such as stock market declines and yield curve inversions. The pandemic has reduced global production and exports while increasing unemployment. For Bangladesh specifically, exports and remittances declined sharply, threatening employment and government revenue. The economic challenges for Bangladesh recovering are substantial in the face of an uncertain global economic outlook.
The document discusses several potential major economic and geopolitical themes for 2023. It suggests that the Federal Reserve and China may both pursue "soft pivots" away from the very tight monetary policies of 2022, gradually making their stances less restrictive. It also notes that 2023 may see relative political stability in major countries due to a lack of elections in G7 nations. Additionally, it posits that countries may further weaponize trade in the coming year by restricting certain exports or foreign assets. Finally, it explores how geopolitical tensions could contribute to the formation of two separate semiconductor manufacturing ecosystems centered around the US and China.
This document is a newsletter from Q3 2013 that includes the following articles:
- An introduction that looks back at the market recovery since the Great Recession and lessons for investors who stayed invested versus those who withdrew during the downturn.
- An announcement for a holiday party in December 2013.
- An article discussing how dire predictions often don't come true and investors should focus on positive economic factors.
- A piece about managing retirement accounts held outside of the main brokerage to get a full view of clients' finances.
- A section touting the strong economy and job growth in Houston, Texas.
- A brief discussion on whether it's a good time to start investing now rather
Chairman Christopher Dodd gave a speech at the US Chamber of Commerce's 3rd Annual Capital Markets Summit. He argued that the financial crisis was caused by a breakdown in trust between businesses and consumers due to predatory lending practices and complex financial products consumers did not understand. To rebuild trust and the economy, Dodd called for greater transparency, disclosure, and responsibility in the financial system through a new era of regulation that protects consumers while not stifling innovation.
This document discusses preparations individuals can make as the U.S. dollar faces risks of devaluation or hyperinflation due to unsustainable government debt and deficits. It recommends getting out of Treasury bonds, investing some cash in currencies of U.S. creditor nations like China, opening an offshore bank account in Switzerland, keeping stashes of foreign currencies, silver coins, and gold coins to preserve purchasing power outside of dollars. The overall message is the dollar's value and status as the world's reserve currency are at risk so diversifying out of dollars into tangible and foreign assets is prudent.
The document discusses concerns around the ongoing viability of U.S. Treasury securities serving as a risk-free benchmark and hedging tool in fixed-income markets. Recent factors like changes to Treasury debt issuance, reduced liquidity from dealers, and technical pressures from large hedges have undermined Treasuries' status as a pricing vehicle. Alternative benchmarks like GSE debt introduce credit risk, while other options like corporate bonds or swaps face liquidity or other issues. The market may adapt by finding new substitutes, but removing Treasuries' role could increase overall market risk and cause dislocations.
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 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 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. “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and
applying the wrong remedies.” Groucho Marx
How about General Stanley McChrystal? Flying from the opposite side of the planet to be fired
by the president certainly cannot be easy on the ego. McChrystal's visit to the White House
lasted around thirty five minutes or so. A life in the armed forces comes to a close in a brief
firing from the Commander in Chief. Nothing like going out with a bang is there?
What is most interesting in the story is not so much that a man was fired for insubordination. Of
most interest is a quote from Politico suggesting the writer of the Rolling Stone article, Michael
Hastings, was able to write the piece because, as a freelance journalist and not a beat reporter,
"burning bridges by publishing many of McChrystal's remarks" was not a worry to him. Frank
Rich, in the New York Times on June 27, 2010 said, "Politico had the big picture right. It's the
Hastings-esque outsiders with no fear of burning bridges who have often uncovered the epochal
stories missed by those with high-level access."
Wow! How does one feel? Again, SummitVIEW is reminded that what one often reads or hears
in the news just may not be the full picture. Why would anyone want to report the ugly truth
when spin is so easily digested by the American populace? What else is not being reported for
fear of burning bridges? Where is Clark Kent when you need him? SummitVIEW is beginning
to understand the motivations for the creation of Superman in 1939. See Rosenberg’s quote
below where he compares today to the 1930s.
Another news item of interest is the announcement of a trade agreement between Taiwan and
China. For two entities embroiled in a dispute over sovereignty for the last 60 plus years, the
signing of the agreement represents a form of detente. Bloomberg reports in the trade agreement
between the sovereignties China will also open markets in 11 service sectors such as banking,
securities, insurance, hospitals and accounting, while Taiwan agreed to offer wider access in
seven areas, including banking and movies, the two sides said. They also signed an agreement on
intellectual property rights protection." The agreement appears to reflect the thoughts of
Mohamed El-Erian, Chief Executive Officer of PIMCO. El-Erian stated in an article
titled Driving Without a Spare, that the new normal is a world of "changing risks and
opportunities." For this global economic transition period, investment with the safest carry will
be "in sovereigns that, due to their economic and financial fundamentals, are truly core countries
in the midst of the global paradigm shift."
As readers of prior SummitVIEWs know, a primary concern is the current level of risk in the
system or, rather, the financial markets. Relying on your local newspaper or news program to
provide the proper insight likely will engender confusion and a belief in false realities. If one
2. were to follow the national media attention on the imminent threat of inflation, the result would
be a belief that the US is doomed to experience inflation very soon. Reality is likely to be quite
different. Recent housing data points to the continued decline in real estate prices. Although
there does exist pricing power in some industries, with a pillar of economy, real estate, still
experiencing declining values, the likelihood of inflation rearing its ugly head is very low. Wage
increases? Not happening. Unemployment rate declining? Nope.
The data point most telling to SummitVIEW is that which is cited by David Rosenberg below, in
the quote titled The Bottom Line. Rosenberg says “[t]he world is awash with $222.5 trillion of
total liabilities across public 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.”
Think about the ratio cited above for a moment. On a global scale there exists over 4 times (and
rapidly approaching 5 times) the level of debt as the level of annual global production. As we all
know most of that debt is held in the developed world. Without extend and pretend accounting
standards in the banking and mortgage industries, where would equity values be today? As
leading economic indicators roll over in the United States, few choices are available that have
not already been deployed. How do equity values hold up when the economic engine is slowing
and leverage is excessive. As an investor one should seek high earnings yield companies (that is
low price to earnings) with little to no leverage, if you have to be in stocks that is. Otherwise,
holding cash, high quality debt, and sovereigns of those countries that are recipients of the new
economic paradigm likely will prove prudent.
Protecting one’s wealth in this epochal transition is of primary importance. Long term asset
performance averages are irrelevant when risk is defined as the probability of the permanent loss
of capital. In an environment where most underfunded pension funds are holding out for the
return of an equity bull market, the underfunded state of pensions is likely to get worse than
better in the near term. Ironically, Rosenberg just released his view of current financial market
activity. The closing paragraph in Dinner with Dave, June 30, 2010 dovetails with
SummitVIEW nicely:
Resolving the pension crisis in the 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.
3. 2010 is likely to go down in history as a seminal year. The confluence of events shaping
geopolitics and geo-economics are starting to make their mark. Although the events will be the
focus of headlines, the response to the events is how our time will be defined. SummitVIEW
holds to the belief that, although the transition to a new period of growth will be rife with strife
and stress, a new period of prosperity will emerge on a scale few can forecast.
Getting through a stormy sea of debt and traction-less economic growth requires proactive risk
assessment and management. As James Montier of GMO LLC says, as quoted below, “[h]aving
defined the target, managers should be given as much discretion as possible to deliver 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 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 hope policy
makers will be somewhat proactive and the market won't have to once again force the "invisible
hand".
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.
1Brock, 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
4. Driving Without a Spare
Over the next few years, Australia and Canada will constitute the analytical battle-ground as
elements of the new normal come head-to-head with those of the old normal. Our sense is that
the two countries’ exposure to the dynamic components of global growth - through direct trade
links with Asia and the commodity angel - will likely outweigh the drag from the legacy of
household leverage (Australia) and the economic links to the U.S. ( Canada).
For investors, this translates into a secular period of changing risks and opportunities:
The distribution of global outcomes is going through a transformation, both in terms of
overall shape (flatter) and tails (fatter);
It is a world where several of the old simplifying adages that once brought comfort to
investors - such as industrial country governments constitute interest rate risk while
emerging economies involve credit risk - require considerable refinement;
It is a world that calls for a broader investment universe and guidelines and , for those
who use them, revamped benchmarks that better capture the world of today and
tomorrow rather than that of yesterday;
It is a world of significant country, regional and instrument differentiation when it comes
to harvesting equity and credit premiums in high-quality corporates, financials and
emerging markets;
It is a world where the currencies of the emerging (as opposed to submerging) economies
will continue to warrant a greater allocation over time; and
It is a world where the safest of carry will come from duration and curve in sovereigns
that, due to their economic and financial fundamentals, are truly core countries in the
midst of the global paradigm shift.
Mohamed El-Erian, PIMCO, Driving Without a Spare, Secular Outlook, , May 2010
I Want to Break Free, or, Strategic Asset Allocation ≠ Static Asset Allocation
Clients should liaise with their managers to set a “realistic” real return target (recognizing that
available returns are a function of the opportunity set, not a function of the needs of the fund).
After all, the aim of investing must surely be “maximum real returns after tax” as Sir John
Templeton observed long ago. None but a few very lucky fund managers get to retire on relative
performance.
Having defined the target, managers should be given as much discretion as possible to deliver
that real return. This avoids the benchmark-hugging behavior that is typically induced by policy
portfolios.
5. Of course, it creates problems for measurement. Indeed, as I mentioned at the beginning of this
paper, the most common response when I present these arguments is, “So, how should we
measure you?” This obsession with performance measurement at the expense of investment
sense is disturbing to me. There is no easy mark to judge fund managers against. This may
actually be a good thing. It may force investors to allocate capital on the basis of process: i.e.,
you will only let managers that you trust and understand run your money. [emphasis added]
James Montier, GMO LLC May 2010,
I Want to Break Free, or, Strategic Asset Allocation ≠ Static Asset Allocation
The Bottom Line
The bottom line is that all levels of society, and across most countries in the industrialized
world, have far too much debt and far too much debt‐servicing costs in relation to income. The
world is awash with $222.5 trillion of total liabilities across public 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.
David A. Rosenberg, Breakfast with Dave, Gluskin Sheff & Co., June 22, 2010
DARING TO COMPARE TODAY TO THE 30’S
Coming off a crash (‘29) and rebound (‘30); aftermath of an asset deflation and credit collapse
banks fail (Bank of New York back then, Lehman this time around); natural disaster (dust bowl
then, oil spill now); global policy discord (with the U.K. then, with Germany now); geopolitical
threats; interventionist governments; ultra low interest rates (long bond yield finished the 1930s
below 2%); chronic unemployment (25% then, 17% now); deflation pressures; competitive
devaluations; gold bull market (doubled in Sterling terms in the 30s); debt defaults; sputtering
recoveries and rallies; onset of consumer frugality.
David A. Rosenberg, Breakfast with Dave, Gluskin Sheff & Co., June 24, 2010
How The Middle Class, Or The New Rentiers, Is Stuck Between
Deflation And Hyperinflation
The world is currently overwhelmed with debt, but underwhelmed with growth. Everyone is
trying to export, but no country has embraced the concept of expanding domestic consumption.
Although I personally like consumption, I am an American and therefore over‐borrowed and
unable to service the debt loads of my city, my state, and my country, not to mention my own
personal debt load. With the Americans no longer available as consumer of the last resort, and
no one else stepping up, global final sales will stagnate in the years ahead. As a result, global
debt loads will become relatively larger. If the world economic pie can not grow strongly,
thereby lessening the relative size of global debts, the magic of compound interest will certainly
bankrupt many governments and commercial entities. Currently there is a growing solvency
crisis impacting many Eurozone sovereigns and 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.