It´s Reassuring That Bernanke Affirmed That The Fed Will Maintain An Active Posture
Posted by blodmell in Uncategorized on August 27th, 2010
Global equity markets are so touchy right now that Bernanke´s announcements today are good news. The United States economy is suffering the negative consequences of long term trends that began decades ago. The emerging markets will continue on their trend towards more independence from US Fed policy however. There is a fantastic article on Brazilian agricultural policy in the Economist this week, “Brazil´s Agricultural Miracle”, which clarifies one more way that nation, for example, is solidifying financial independence and prosperity. The whole world won´t be hanging of the Federal Reserve Chairman´s every utter forever. The stoic American consumer coming to the rescue is already a phenom of the past.
Pictet Research On China, ” Tight monetary and loose fiscal policies”
Posted by blodmell in Uncategorized on August 26th, 2010
China’s economy is slowing down… but it looks like a moderation rather than a crash or double dip. Central government should not push anymore social and economic responsibilities on local governments. If necessary, China has room to expand fiscal policy rather than monetary policy. Public works and especially social housing can be financed through sovereig bond issuance at low cost to public. We do not expect any reversal in property tightening measures or a lift in 2010credit quota which seems sufficient to cushion any severe slowdown “tight monetary and loose fiscal policies” should be the new slogan
We Are Entering The Fifth Day Of Downward Pressure On Global Equities
Posted by blodmell in Uncategorized on August 25th, 2010
We´ve been here before. It should get easier every time to deal with market volatility. Clients, cooly cost average down as opportunities arise. I noticed since the copper prices have been under pressure that several low ball limit orders for Sterlite Industries in India ticked off. This is the strategic approach.
Benjamin Reid Lodmell, “The Emerging Market ‘Story’ Is The Most Rational One Around”
Posted by blodmell in Uncategorized on August 24th, 2010
In the world of communication and sales, everything is a “story”. Behind the sale of any product or vision, someone framed a “story”. Hollywood has one story: hope, loss and redemption. Politicians live with “storytellers” whom are constantly trying to keep one step ahead of the “story” in order to shape it. That’s spin. Archetypes and cliches are stories: the hero, the villian, the victim, the martyr. Product designers in the world of finance are just modeling “stories”. Notice every mutual fund has some theme and there is a story behind it. The problem with stories is that only some of them are true. I often joke that investors can’t afford to buy stories that sound good but fail. I learned that the hard way when the bank back in the early 90’s told all of us private bankers a “story” and then we told the clients the story: shift your time deposits into bond funds. They make more interest. We converted millions and then the whole portfolio dropped 15% in a few months as the Fed starting raising rates. I try to really get honest with clients about the reality behind all these stories running around. Most of them are, frankly, half baked. The emerging market story is actually comprised of several stories such as the emerging consumer boom, the disruptive innovation, the commodity story. I and a lot of smarter folks have thought carefully about whether we really believed the emerging market story. The skeptics had some good points but the evidence is growing. It’s like watching a case being built in front of our eyes. If you scroll through the entries in the last year of this blog it is the evolution of the emerging market story. I keep reminding clients that their are many ways to make money and buying the new global blue chip corporate titans (PetroChina, Vale, Itau, China Aluminum, State Bank of India e.g.) in core sectors (Financials, Energy, Materials) of fast growing marketplaces (China, India, Brazil, frontier markets) is not the only answer. I simply think it’s the most likely one to become true as a winning strategy, especially if we manage the market volatility to build positions by buying on dips. In other words, I invest in this story and advise on millions of dollars of good people to do the same. It’s a sober responsibility and not for the faint hearted. It’s our best chance to grow wealth. These emerging market blue chips are still priced as “risk assets” and trade with a lot of volatility. Nevertheless, I think that is where the momentum lies, emerging and frontier markets, and I believe the evidence is confirming that assessment each day a little more. I encourage clients to be critical minded in your own common sensical analysis. Does this story contradict experience and logic? Does this story and strategic approach make common sense to you? It’s a good question to think about.
The Chinese Renminbi Moves Another Step Closer To Convertibility
Posted by blodmell in Uncategorized on August 24th, 2010
Chinese capital markets are maturing and the move by TPG to establish and renminbi denominated fund is meaningful. TPG, one of the world’s biggest private equity firms, said early Tuesday that it was teaming up with the municipal governments of two of China’s biggest cities to raise nearly $1.5 billion and create its first funds denominated entirely in Chinese currency.
It´s A Boring Day In The Markets. Be Grateful.
Posted by blodmell in Uncategorized on August 23rd, 2010
Global markets are flat today as they ponder all these conflicting signals. That is great news. 3 months ago conflicting signals sent investors into a panic. It´s almost as we are all getting used to an uncomfortable new reality. The power shift as the latest round of mergers and acquisitions as well as IPOs confirm is occuring. Asia and other emerging markets will take the drivers seat in this new global economy. The writing is all over the wall, folks.
Benjamin Reid Lodmell, “Sell Your Municipal Bonds. The Downside Risk Outweighs The Upside Reward.”
Posted by blodmell in Uncategorized on August 23rd, 2010
I just got off the phone with a client and the muni bond issue was front and center. It´s simple. “Credit Risk” in munis can only get worse (and it could indeed get much worse). “Interest rate risk” can only increase as rates eventually rise since they at zero now. Both scenarios push muni bond prices down. I know a lot of you are clipping coupons for 4 and 5 percent which is above the market return for other fixed income, BUT that means the prices are higher now. Bonds have prices just like stocks and “market risk” for those prices is no different than stocks. They fluctuate. I know your bond brokers are buddies and they are telling you a different story. I know many of you engaged an almost messianic belief in munis. It´s just time to get honest about the reality of the muni market. It was a prudent play ten years ago. It is not, now.
The United States Marketplace For Assets (Real Estate and Financial Securities) Is Not What It Used To Be
Posted by blodmell in Uncategorized on August 23rd, 2010
I keep telling clients that the writing is on the wall in the USA. Don´t expect healthy long term returns in real estate assets and don´t expect the domestic securities market to pay off either. Interestingly, the times had two relevant reports this morning.
Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group.
Meanwhile, The “Recovery Fears” Story Throws The Week Into A “Risk Off” State
Posted by blodmell in Uncategorized on August 21st, 2010
It ´s like watching someone try to kick start a car and then it stalls. Then, they try again. Every time it seems like the car cuts off, its a “risk off” day. Every time the car starts and stays running, its a “risk on” day. The debate about what governments should is nicely stated by the Institute of New Economic Thinking ” Cut now to inspire private growth or keep public investment to avoid stagnation?” Last weeks wall of worry was a worrying turnround in US factory activity which sparked a wave of selling at the end of the week, pushed further by a surprising move to downgrade the eurozone’s growth outlook. Interestingly, this is just after Germany´s star GDP numbers. Then, there is US jobs. Nobody knows if the new world economic order means the Americans don´t have to do all the consuming any more. We tell clients to keep focused on the big picture. The daily whip saw is tiring but the global economy muddles on. I found it telling that the mergers and acq. activity this week put the Materials sector front and center.
The Economist Magazine’s Leader This Week Is Declaring This China and India’s Century
Posted by blodmell in Uncategorized on August 19th, 2010
Here is the punchline, “Globally, the rules-based system that the West set up in the second half of the 20th century brought huge benefits to emerging powers. But it reflects an out-of-date world order, not the current global balance, let alone a future one. China and India should be playing a bigger role in shaping the rules that will govern the 21st century. That requires concessions from the West.”
Recent Comments