Market Commentary

Everyone has a plan ‘til they get punched in the mouth. – Mike Tyson Analysts have got off to an inauspicious start in 2016: “The current stock market level is disconcertingly well below not just the Wall Street forecasts for 2016 (made a couple months ago), but also below those made for 2015… or for even 2014!” (via Zero Hedge). All investors, including those in EBI Portfolios, have taken a bit of a beating recently. Nearly everything has fallen sharply in the last six weeks, and equity market correlations are once again approaching one, as the table below highlights. …

The last month or so has seen a gut-wrenching fall in oil prices (and most asset prices in general). Declines so far have been (relatively) orderly – a 5% move for oil for example is par for the course – but some strange things have been happening in ETFs and ETNs . They should trade at fair value – that is, at a zero premium to the value of their assets. If they didn’t, there would be an opportunity for risk-free profits (known as arbitrage). But, as this Barron’s article relates, this has not been happening. First, let’s remind ourselves what an ETF is and what it does…

A fanatic is one who can’t change his mind and won’t change the subject. – Winston Churchill OK, I know I have covered this before (here), but in the cacophony of market forecasts arising from the brokerage industry, and dutifully repeated by the financial media, I feel the need to purge myself of the temptation to listen to them. (This may be a form of therapy – bear with me.)…

The new year has not started brightly – geopolitics in the Middle East, literal rumblings in North Korea and the chaos in Chinese asset markets has put equities on the back foot. The real concerns, however, may lie elsewhere.

Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset’s price

Events in Europe appear to be moving in a decidedly dangerous direction. The initial huge sympathy for the migrants has given way to concern (and in some cases alarm) amongst the local populations. From welcoming refugees unconditionally a few weeks ago, Angela Merkel has changed tack, limiting their “rights” and preventing further inflows (as far as possible). This puts them on a par with the likes of Hungary, Croatia, Slovenia and others who are actively seeking to offload the problem to others. Meanwhile the EU itself, according to the Washington Post, predicts<

ZIRP- Another Japanese innovation, this time from the Bank of Japan, whose aim was to stimulate the Japanese economy by having a Zero Interest Rate Policy: so far (15 years and counting), it has had an extremely limited effect. NIRP- A variation on the above theme, whereby Central Banks (particularly the ECB, but not limited to them ) employ a strategy of Negative Interest Rate policy: the likely economic result will be much the same.

Some debts are fun when you are acquiring them, but none are fun when you set about retiring them. – Ogden Nash This week we shall focus on a number of (partially) related stories in lieu of a major theme. The common denominator is debt – how companies, states and even countries deal with the issue will shape the economic landscape for years to come.…