Bill Gross: From Feast to Fast - July 2009 Outlook
July 3rd, 2009
Bill Gross, the “Bond King” is going to great lengths to get us to understand that the world is in a state of reversion to what he and El-Erian, his co-chief at PIMCO coined as the “New Normal” 3 months ago, in his latest missive - “Bon” or “Non” Appétit?.
Our economy which once feasted, no, binged, unable to stop itself, on debt and leverage, and on the basis that home and other asset prices would rise to the sky, is now fasting, cleansing itself of the fat that accumulated, and it is a long-term process that will take many years to complete.
Click Play to Listen to Bill Gross’ Investment Outlook:
Here are some of the highlights from the letter, which you may download here:
Gross re-iterates the “New Normal” - Its starting to sound a lot like “The Emperor’s New Clothes“:
Tags: Asset Prices, Asset Returns, Bill Gross, Burgers, Econometric Models, Excessive Amounts, Financial Markets, Global Consumers, Global Economy, Great Lengths, Gross Investment, Investment Outlook, John Mcsherry, Juxtaposition, Missive, Mistaken Assumption, PIMCO, Profit Margins, Recession, Reversion, Yesteryear
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Make Sure You Get This One Right
July 3rd, 2009
This post is a guest contribution by Niels Jensen*, chief executive partner of London-based Absolute Return Partners.
As investors we are faced with the consequences of our decisions every single day; however, as my old mentor at Goldman Sachs frequently reminded me, in your life time, you won’t have to get more than a handful of key decisions correct - everything else is just noise. One of those defining moments came about in August 1979 when inflation was out of control and global stock markets were being punished. Paul Volcker was handed the keys to the executive office at the Fed. The rest is history.
Now, fast forward to July 2009 and we (and that includes you, dear reader!) are faced with another one of those “make or break” decisions which will effectively determine returns over the next many years. The question is a very simple one:
Tags: 24 Years, Absolute Return, Banki, Central Banks, Defining Moments, Deflationary Spiral, Executive Office, Executive Partner, Fiscal Stimulus, Global Stock Markets, Goldman Sachs, Good Chance, Investment Banking, Life Time, Niels Jensen, Obscurity, Paul Volcker, Printing Money, Rest Is History, Single Day
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Barron’s Confidence Index - Sentiment for Equities Improves
July 3rd, 2009
As often stated in my weekly “Words from the Wise” reviews, a confidence indicator worth monitoring is the Barron’s Confidence Index. This Index is calculated by dividing the average yield on high-grade bonds by the average yield on intermediate-grade bonds. The discrepancy between the yields is indicative of investor confidence. There has been a solid improvement in the ratio since its all-time low in December, showing that bond investors are growing more confident and have started opting for more speculative bonds over high-grade bonds.
Source: Plexus Asset Management (based on data from I-Net Bridge)
Not surprisingly, a strong historical relationship exists between the Barron’s Confidence Index and the S&P 500’s 12-month rate of change.
Source: Plexus Asset Management (based on data from I-Net Bridge)
Tags: Amp, Barron, Bond Investors, Bonds, Bridge, Cape Town, Change Management, Change Source, Confidence Index, Confidence Indicator, Discrepancy, Index Points, Investment, Investor Confidence, Likelihood Mapping, Outlook, Plexus Asset Management, Postcards, Relationship, Sentiment, Stock Markets, Target
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Rosenberg: “Oh sure, the recession is over”
July 2nd, 2009
David Rosenberg, Chief Economist at Gluskin Sheff discusses today’s ‘detonating’ jobs figure. We got a good laugh from the sarcasm that leads this note.
Rosenberg, one of the most highly respected market economists, is considered by many to be an ultra-bear. However, we found it notable that upon his departure from Merrill Lynch, where he was the Chief North American Economist, Rosenberg said the transition to a buy-side firm, would be an interesting change of pace for him, where the focus tends to be longer term.
“The sell-side firm desperately needs a bull market and the buy-side firm really just has to be on the right side of the trade,” he said.
Generally, Rosenberg believes that investors would be far better off from a risk reward standpoint owning fixed income securities (farther down in the article).
Tags: American Economist, Change Of Pace, Chief Economist, Corporate Sector, David Rosenberg, Diffusion Index, Employment Report, Fed President, Fixed Income, Household Survey, Income Securities, Industry Job, Janet Yellen, Market Economists, Merrill Lynch, Payroll Release, Recession, Recessions, Risk Reward, Sarcasm, Sheff, Three Quarters
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Monthly performance round-up: Road to recovery (June 30, 2009)
July 2nd, 2009
The performance of a number of global stock markets is given in the table below in local currency terms for different measurement terms ended June 30. Other than to say that the second quarter delivered exceptional gains and that the first half of 2009 is not looking too shabby either (bar a few exceptions such as the Dow Jones Industrial Index), the numbers speak for themselves.
Click here or on the table below for a larger image.
The gains/declines mentioned above are all in local currency terms. However, converting the movements to US dollar shows a better picture for the non-dollar countries (see table below).
Click here or on the table below for a larger image.
Tags: Cape Town, Currency Terms, Dow Jones, Dow Jones Industrial, Dow Jones Industrial Index, Exceptions, Global Stock Markets, Measurement Terms, Postcards, Second Quarter, Target
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David Rosenberg: Mother of Jobless Recoveries Lies Ahead
July 1st, 2009
David Rosenberg appeared on Fast Money yesterday at the end of the day to discuss the economy, employment data, and the stock market outlook. Here are the highlights:
- There have been 600,000 jobless claims consistently over the last 20 consecutive weeks.
- The pace should slow to 350,000 to 400,000 job losses for now.
- Companies have let go 8 million full time workers - 2 million of those were put on part-time.
- The work week at a record low of 33 hours.
- Therefore, even if the green shoots are real, what you’ll see is part-timers being upgraded back to full-time, and their hours raised by their employers and so the traditional 100-150,000 new jobseekers who come into the labour force each month - I got bad news for them - no jobs.
Tags: 3rd Quarter, 4th Quarter, Auto Production, Bad News, Consecutive Weeks, David Rosenberg, Employment Data, Employment Outlook, Job Losses, Jobless Claims, Jobless Recovery, Jobseekers, Labour Force, Lows, Mean Time, Part Timers, Recession, Reflation, Relapse, Stock Market Outlook, Stocking, Time Workers, Unemployment Rate
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Stock market performance during economic cycles
July 1st, 2009
An interesting analysis on the performance of the S&P 500 Index during various phases of the economic cycle was highlighted in a recent report by Citigroup Investment Research & Analysis, courtesy of US Global Investors.
The table below shows the performance of the Index in 15 complete economic cycles since 1921 and part of the current economic cycle. The performance has been broken down into five phases of each economic cycle: early expansion, middle expansion, late expansion, early contraction, and late contraction.
Interestingly, the average and median figures show that most of the stock market performance occurs in the early and middle expansion phases, and in the late contraction phase.
Tags: 12 Months, Cape Town, Citigroup, Contraction Phase, Downturn, Economic Cycle, Economic Cycles, Emerging Markets, Favourable Environment, Global Economic Activity, Global Economy, Global Investors, Global Wave, Investment Research, Median Figures, Merrill Lynch, Postcards, Stock Market Performance, Target, Troughs
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Why the Economy Will Remain Weak
July 1st, 2009
The paragraphs below are excerpts from the well-respected Comstock’s weekly market commentary, arguing that the stock market rally has probably exhausted itself in the absence of a strong economic recovery - an event unlikely to materialize any time soon. (As an aside, traveling through Europe at the moment it is also hard to see a quick resumption of decent growth in this region given the extent of the economic malaise.)
“The term ‘green shoots’ appears destined to go down in history with other unfortunate themes such as ‘a goldilocks economy’; ‘it doesn’t matter if internet companies have no earnings’; ‘high P/E ratios don’t matter’; ’subprime loans aren’t important’; ‘foreign economies have decoupled from the US’; ‘there’s plenty of liquidity’; and the classic ‘home prices never go down’.
Tags: Collapse, Credit Crisis, Economic Malaise, Economic Recovery, Financial Instruments, Global Credit, Goldilocks Economy, Great Depression, Home Equity Loans, Home Values, Internet Companies, liquidity, Market Commentary, Market Rally, Recession, Recessions, Resemblance, Resumption, Stock Market, World War Ll
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Barry Ritholtz: Fix What’s Broken
July 1st, 2009
An excellent interview by Kate Welling with Barry Ritholtz, author of the must-read “Bailout Nation, How Greed and Easy Money Corrupted Wall Street and Shook the World Economy” and editor of The Big Picture blog, has just been published in the welling@weeden series.
Here is the introduction:
“Barry Ritholtz is not a man to mince words. For one thing, he doesn’t have time. Writing is a sideline to his day job as CEO and research director of FusionIQ, an online quantitative research firm and money manager, running about $100 million, long and short, mainly for high net worth individuals. Besides, as the proprietor of a popular financial blog, The Big Picture, he has been chronicling the foibles and follies of financial man for a number of years now and well, just doesn’t suffer fools. His readers know him for clear explorations of even the densest of topics and for honest vitriol when he comes across self-dealing and worse.
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Hendry: Fears of inflation could trigger bigger downturn
June 30th, 2009
We have followed Hugh Hendry, the outspoken and bold CIO of Eclectica Asset Management, and one of the few profitable absolute return hedgies during the last 12 to 18 months, as he built his high conviction case for deflation, and invested as such, in long dated government bonds, Gilts and 30-year US treasury bonds. Last year, it was Hendry who pointed out that 10-year US treasury bonds were signalling deflation, and that in a sea of risky assets, they were the only asset that was up, and up by 15%, while stocks declined in value by 20% or more, the first half of 2008. Falling interest rates, a flattening yield curve, which came as a result of investors flight from risk in equities and commodities, paid off, with Hendry ending the year up some 40% in his flagship Eclectica hedge fund.
Tags: Absolute Return, Central Banks, Chief Investment Officer, Cnbc, Cnbc Interview, Creditor Nations, Duration Government, Economic Downturn, Excess Liquidity, Finance Minister, Flattening Yield Curve, Forex Reserves, Gilts, Government Bonds, Government Debt, government securities, Hedgies, Hugh Hendry, Hyperinflation, Inflation Deflation, Inflation Fears, Inflation Risk, Intellectual Conviction, Investing In Stocks, Lows, Printing Presses, Risky Assets, Rough Waters, Squawk Box, Stock Markets, Stocks And Commodities, Term Yields, Treasurys, Trillions, Us Treasury Bonds
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