Fund Architects Commentary
Global equity markets have experienced a sharp sell-off over the last week perhaps causing unusual emotional pain to those investors tracking every tick. Many spellbinding headlines are likely contributing to investor fear but the one pundits are calling “Made in China” is likely the largest culprit elevating anxiety. So what is going on?
China’s economy is now expanding at a slower rate compared to the last couple of decades when the country primarily focused on exporting goods. The size of China’s economy has grown exorbitantly and simply cannot maintain the same growth rate as years past. Lots of economic data suggests China may be experiencing a slowdown greater than what is commonly forecast, though few are calling for a “hard-landing.” Additionally, China took measures to devalue their currency last week, which spooked investors, never mind the huge appreciation experienced over the last six to seven years. Some reckon this was a tactic to help boost exports while many true experts believe it was a move in a process to eventually gain world currency reserve status. Despite the varying schools of thought, the action added to nervousness in markets. Continue reading »
Far and away the biggest news on the global economic front last week was China’s surprise devaluation of its currency. The move to weaken the yuan (which believe it or not is pronounced just like it’s spelled, at least according to an analyst named Wang Xiu Ying who calls himself Bob), allegedly reflects the country’s desire to allow market forces greater play in setting its currency’s exchange rate.
Meanwhile, some guy whose name sounds like Snuffleupagus was paying his Greek mechanic with a handful of olive pits and two Chris Demetral baseball cards. Continue reading »
THE WOLF(S) OF WALL STREET
Mark Hanna: “The name of the game, moving the money from the client's pocket to your pocket.”
Jordan Belfort: “But if you can make your clients money at the same time it's advantageous to everyone, correct?”
Mark Hanna: “No.”
Ever heard of “total-return swaps”? We hadn’t either, but, like boiler rooms, cold calling, and other forms of unkindness, they’ve been around for years. Essentially, these gentle-sounding derivatives mimic the effects of owning a stock without actually taking possession of a real asset. A fund using swaps strikes an agreement with a bank to receive any gains or losses over a pre-determined period – if the stock goes up, the fund gets paid; if it goes down, the fund owes money to the bank. Continue reading »
PULLING NO PUNCHES
So, activist investor Carl Icahn and the unfortunately-named Larry Fink, boss of BlackRock Inc., were brought to CNBC’s optimistically-titled “Delivering Alpha” conference last week. Their expected debate, to be moderated by “Judge Wapner” no less, was ill-advisedly promoted as “A Conversation About Activist Investing.” Uhh, not hardly. The Judge should’ve been a referee.
BlackRock became the world’s biggest money manager in 2009 following acquisitions of State Street Research, Merrill Lynch Investment, and Barclay iShares Continue reading »
U.S. equity indices posted mixed results for second quarter 2015 (2Q15) led slighter higher on a total return basis by large cap stocks as measured by S&P indexes. International stocks and emerging market equities as measured by MSCI EAFE and MSCI Emerging Markets achieved positive gains for the quarter. Both domestic and international bonds as measured by Barclays U.S. Aggregate Bond and Barclays Global Aggregate Bond ex U.S. indexes provided negative returns as investors anticipate the U.S. Fed raising the Fed Funds rate and as the European Central Bank (ECB) continued their bond-buying program. Domestic and international REIT indices were lower as investor appetite diminished for these higher yielding sectors. Commodities, in a broad sense, rose during the quarter as oil prices rebounded from a near-term low set in March 2015. Continue reading »
Quick update: Greece has defaulted on its debts, corporate earnings have hit the wall, and the U.S. economy still meanders. Interest rates are expected to go up, bonds are expected to go down, and the stock market isn’t expected to go much of anywhere.
And, oh yeah, the bitcoin just broke out to its highest level since March 23. Nobody expected that. Continue reading »
A REAL GREEK TRAGEDY
It’s fairly well known that Greek tragedy is a form of theatre from Ancient Greece, Athens specifically. Less known, perhaps, is that players in 5th century BC established “rules” for their heartbreaking dramas. Indeed, plots were told in a trilogy – a series of three narratives designed to tell one long depressing story. Amazing how life imitates art.
The tragedy begins with a “prologue” where the background of the ensuing story is explained.
The IMF and eurozone governments have been keeping Greece afloat with some $279 billion in emergency loans for the past five years. But the eurozone portion of that bailout runs out June 30. With little sign of progress in talks on Greece’s international bailout, policy makers are considering whether dispirited nation should stay in the Eurozone. Continue reading »
OUT WITH THE OLD, IN WITH THE…OLD
Hey, guess which fabled bond manager just won a new mandate from an investor not named Bill Gross? Why, it’s Bill Gross, of course! Story goes that Old Mutual Global Investors, the South African relic with an anchor for a logo, announced that the erstwhile PIMCO chief will be taking over management of $270 million in assets for its Total Return USD Bond Fund. This is the first sub-advised win for Mr. Gross at his new employer – Janus and real chunk of cash for him to manage coming from anywhere other than the Morgan Stanley office in La Jolla, California. Proving once again there are no friends like old friends, Gross won the mandate from none other than PIMCO. Continue reading »
HEY…WAIT A SECOND
Fact: Greenwich Mean Time is derived from measuring the sun’s position in the sky at the Royal Observatory in London.
Fact: Coordinated Universal Time is based on a weighted average of the times of more than 400 atomic devices that measure the passage of time through the vibrations of atoms.
Fact: Nobody knows exactly what time it is. Continue reading »
GHOSTS OF GREENSPAN
Lest our investing spirits become a little too exuberant, current Fed Chief and aspiring market mystic Janet Yellen took time out last week to cast a chill over the irrational crowd. Indeed, speaking before the International Monetary Fund spooks in Washington, the Chairwoman suggested that, one, the years-long stock rally may have driven equity prices too high, and, two, debt-market investors are taking excessive risks. Eeeek! Continue reading »