A Different Perspective
Asking the Right Questions
Shut gates in high yield bonds & the slide in oil
High yield bond funds: shut gates….
While the turmoil in the commodity markets has been on everyone’s radar for the last year, the deterioration in the high yield bond market has been rumbling beneath the surface. However, on Friday it began to bubble over after Third Avenue Management, a New York investment firm founded in 1986, announced it was closing their Focused Credit Fund, which invested in high yield bonds, to subscriptions and redemptions. (See Shareholder letter) In other words, you can’t have your money back now! Read More
Thoughts from Feurteventura: Health & Retirement
My commentary is late this week because I was away for a short trip to Fuerteventura, Spain. The reason I bring it up is not to tell you about the amazing scenery there, but to share with you a lesson I took from the person I stayed with during my trip. I booked the trip short notice so I decided to go with Airbnb and on the basis of some strong reviews I selected a room in a house owned by a Spanish woman. As it turned out it was just herself and her three dogs in the house, and they were all very welcoming. Read More
Lofty Expectations: The ECB & LFC
Just as market participants were guilty of getting carried away, in terms of their expectations of the next round of monetary policy measures from the European Central Bank on Thursday, I must admit a similar guilt in being overly exuberant about Liverpool’s title hopes going into the weekend premier league fixtures. Read More
Weekly Market Recap: W/E November 27th
Market Recap
Many of the major equity indices moved marginally higher last week, but Chinese equity markets closed Friday on a sour note as the local regulator launched investigations into the practices of a number of leading Chinese brokerage firms. While there has been no formal charges for violation of securities law, investors were spooked and the Shanghai Composite index of mainland shares fell -5.35%. Read More
Society: Thoughts from the Week
Give thanks to our consumer society….
The major US equity indices were relatively flat in what was a holiday shortened trading week in US markets, with Americans ‘giving thanks’ on Thursday before splurging in the madness that is the Black Friday frenzy. There is some debate on the origins of the term “Black Friday” (see The Origins of Black Friday) but either way it represents everything that is wrong with the advertising driven consumer society we live in. When you watch some of the YouTube clips (see CNN YouTube) of people acting like wild animals in the battle for a deal on some electric appliance, one can’t help but question the direction the human race is taking. Read More
Weekly Market Recap: W/E November 20th 2015
Market Recap
Global equity markets ended the week sharply higher, while European government bond yields continued to move lower, as European Central Bank (ECB) President Mario Draghi upped the rhetoric on more action to reflate the Eurozone economy.
Investors fretting about a possible US Fed rate hike over the last few months are now apparently ‘relaxed’ about a rate rise in December. The implications of a stronger US dollar are yet to be fully considered and sentiment around a US Fed rate hike could change quickly. Read More
The Elusive Search for Alpha: Natural Enthusiasm
I have written recently about the importance of having a clear process in place for the evaluation, selection and monitoring of active investment managers. A well-defined process can help sidestep serial underperformers and shortlist managers actually worth considering. For those managers that make the cut, you then want to find the ones who have a genuine passion for what they do. Read More
Weekly Market Recap: W/E November 13th 2015
Market Recap
Many of the major equity indices ended last week sharply lower, as some of the issues that caused the market sell-off in the third quarter came back to the fore. Economic data – a mixed picture from China, slower than expected Q3 Eurozone GDP growth, weak US retail sales – added to concerns about the loss of momentum behind the global economy. The decline in commodity prices resumed with little in terms of the economic backdrop or the supply/demand dynamics to provide comfort that the bottom has been reached. As a result, energy related companies were hit hard, intensifying the declines across the major equity indices. Read More
Active Investment Management: The Jose Mourinho Dilemma
Trustee groups I work with face a plethora of choice when implementing an investment strategy. One important decision is whether to use passive or active investment managers. Passive managers simply look to replicate a particular index. For example, for broad exposure to global equities, trustees could use a low cost passive fund to replicate the performance of the FTSE World equity index, a global equity index of over 2,500 companies.
Active funds, on the other hand, aim to outperform their benchmark index, for a much higher fee of course. Active investment managers are skilled at building the case for why they can do what very few active managers can do, deliver persistent outperformance. In football parlance, you are looking for a Sir Alex Ferguson of the investment industry, a one-firm manager that can consistently deliver. They are not easy to find! Read More
Weekly Market Recap: W/E November 6th 2015
Market Recap
Most of the major equity indices ended last week in positive territory, but the big move came in the bond markets with yields moving sharply higher. Helping to push yields higher was the much stronger than expected jobs data from the US on Friday, as expectations rose that the Fed will finally increase interest rates in December.
The other main benefactor was the US dollar which rallied strongly on the news. While a Fed rate hike seems to be drawing closer, the Bank of England are projecting that it will more likely be 2017 before the first rate hike happens. The lower for longer tune which has kept market participants dancing continues to blare loudly from the major central banks! Read More
