December 2013
All Tapered out at Year End
If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. After months of speculation, the Federal Reserve has decided that it’s finally time for the markets to spit the dummy and announced that it will reduce, or taper, the quantitative easing program which currently sees $85 billion a month being used to buy up a mix of US Treasuries and Mortgage Backed Assets (MBAs) in order to retain low interest...
Read the Full NoteNovember 2013
Reflections on a good year
Reflections on a good year "The recent trading environment has felt something like walking into a place and having a sense that something is wrong and dangerous but not knowing exactly what will happen or when”. Paul Singer, Elliott Management October has been quite an interesting conference season and a good opportunity to test the consensus view of markets running into Q4 and speculate about what might happen in 2014. And it all seems remarkably calm. The FTSE100 Index is sitting at an agreeable 6,800, the S&P 500 at 1,750 and the Gilt/Treasury yields are nicely corralled in their trading...
Read the Full NoteOctober 2013
What Default Crisis?
Investors and commentators alike are understandably getting a little anxious over the current US shutdown and potential default. The media have latched on the affectionately named “drop dead” date of 17th October when the next Treasury payment is due although this would probably pass through even without a resolution in the meantime. The market is actually much more concerned with the next payment date of 24th October. It stretches credulity to think we could get that far without a resolution but in a world where the improbable has become routine, the markets will inevitably keep factoring in the likelihood of...
Read the Full NoteSeptember 2013
Summer's gone
So President Obama's favoured choice to take over as Federal Reserve Chairman, Larry Summers didn't fancy the fight then? To be fair, it’s been a difficult month for President Obama, encumbered as he is with the curse of all recent Presidents - a foreign war. So President Obama's favoured choice to take over as Federal Reserve Chairman, Larry Summers didn't fancy the fight then? To be fair, it’s been a difficult month for President Obama, encumbered as he is with the curse of all recent Presidents - a foreign war. Perhaps Summers worked out that his retreat from the race...
Read the Full NoteAugust 2013
Overheated summer daze
“…and the stock market has its best week since July…Take that, Karl Marx”. From the film “Uncle Buck” 1989. What a scorcher! And the weathers not too bad either. Murray is champion, Froome is victorious and the cricket is all sewn up. For those yet to depart on holiday, the stock markets aren't looking too shabby either. What a scorcher! And the weathers not too bad either. Murray is champion, Froome is victorious and the cricket is all sewn up. For those yet to depart on holiday, the stock markets aren't looking too shabby either. The FTSE100 Index has recovered...
Read the Full NoteJuly 2013
Fed hawks, feral hogs, wild turkeys… and cold turkey
“I don’t want to go from Wild Turkey to cold turkey overnight” - Narayana Kocherlakota, hawk, President of Minneapolis Fed. “We haven’t forgotten what happened to the Bank of England. I don’t think anyone can break the Fed… but I do believe that big money does organize itself somewhat like feral hogs. If they detect a weakness or a bad scent, they’ll go after it.” - Big Fed hawk, Richard Fisher, Dallas Federal Reserve This nice little menagerie of metaphors comes in the wake of Ben Bernanke’s, now infamous, speech hinting at an earlier than expected tapering of quantitative easing,...
Read the Full NoteJune 2013
Play it again TAM
The idea that the future is unpredictable is undermined every day by the ease with which the past is explained. Everything makes sense in hindsight, a fact financial pundits exploit every evening as they offer convincing accounts of the day’s events. And we cannot suppress the powerful intuition that what makes sense in hindsight today was predictable yesterday. The illusion that we understand the past fosters overconfidence in our ability to predict the future. Thinking, Fast and Slow by Nobel Memorial Prize winner in Economics, Daniel Kahneman (2011). It is perhaps understandable that it is usually only the most successful...
Read the Full NoteJune 2013
TAM waits for no man
Citywire’s Wealth Manager magazine recently interviewed six investment management firms and asked how they were getting on with transferring their clients’ current investments to non trail-paying fund classes. While the rules have allowed some legacy investments in retail classes to remain, some investment managers have publically stated a commitment to convert all their clients’ investments to RDR compliant share classes. For those that make the full switch, the cost savings for clients are significant. But the transition has not been at all smooth for some advisers and managers, particularly those that have historically relied on trail commission income for revenue....
Read the Full NoteMay 2013
Sell in May and go away?
The pernicious school of thought advocating selling in May and going away has, in these short sighted times, built up something of track record. In the last four years, equity markets have been shaken out of their complacency by any number of scare stories circulating around the markets in the first few weeks of spring. There are some unavoidable seasonal factors penned in the diary at this time of year and the US earnings season, which we are halfway through, can be a tricky time despite the fact that it is arguably the least important of the four. But this...
Read the Full NoteApril 2013
Red Herring Alert
As news of erroneous fish stocks entering the food chain across the US and Europe appear to have attracted little attention, so too have a few red herrings that have recently entered the headlines threatening to derail the rally in equities. Last week, while the financial news stations ran 24 hour commentary and discussion about whether the Cyprus bailout could lead to a disastrous bank run across the eurozone, the S&P 500 index of leading shares hit an all time high in the USA with just one stock, Apple, holding it down. Even this week, the FTSE 100 index is...
Read the Full NoteMarch 2013
Is Cash still King?
“It may not be rational to start a bank run, but it is rational to participate in one once it has started.” Mervyn King, Governor of the Bank of England Cyprus has taken the extraordinary step of imposing a wealth tax on all depositors at Cypriot banks as the Government attempts to raise EUR5.8 billion to contribute to the EUR17billion bailout. German demands for a depositor contribution were backed by other northern European governments,and the ECB threatened to withhold emergency liquidity assistance to Cyprus’s largest bank if no agreement was struck as Nicos Anastasiades, Cyprus’s new president, attempted to walk...
Read the Full NoteFebruary 2013
The man with the plan?
“In the wake of the UK losing its AAA status, does the Bank of England governor elect have what it takes to get the UK economy moving quickly? The arrival in the UK of ex-Bank of Canada Governor, Mark Carney, has stoked a flurry of excitement from economists and the media ahead of his appointment as Governor of the Bank of England this coming June. While Sir Mervyn King keeps his seat warm until then, Mr. Carney has been doing the rounds and giving some hints as to what role he believes the Bank should be playing in the midst...
Read the Full NoteJanuary 2013
TAM Outlook for 2013
“As last year, our elected (and un-elected) leaders will be faced with tough decision to ensure the economic recovery remains on track.” – Lester Petch, CEO TAM Asset Management Ltd We believe that 2013 will be another year of opportunity for investors able to proactively position themselves to deal with periodic volatility and market dislocation. The fragile economic recovery which started in 2009 remains weak but resilient enough to overcome the many headwinds it faced last year.The unprecedented efforts undertaken by governments and central banks around the world underline the fragility of the recovery and will be a key factor...
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