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Are We at the Point of No Return?

Are We at the Point of No Return?

Evidence Based Investing   |  

‘Please, sir, I want some more.’- Oliver Twist (Charles Dickens) That we are living in a low return world is now so widely accepted as to be bordering on a cliche- but HOW low will long term returns likely be? With the caveat that no one really knows, it is possible to come up with a reasonable set of assumptions that can provide us with a range of potential outcomes. We looked at this issue around a year ago, so now might be a good idea to revisit the prospects from a slightly different angle, as there are many ways to arrive at a conclusion, some of which will be similar.

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Dumping the Dollar

Dumping the Dollar

Market Commentary   |  

“The strength of the dollar has historically been tied to the strength of the U.S. economy and the faith that investors have in doing business in America” – Steve Mnuchin (US Secretary of the Treasury). The Dollar is currently about as popular as a rattlesnake in a lucky dip; earlier this week the US Dollar Index hit lows not seen since December 2014, and is down nearly 12% since the start of the year. Speculative positioning in the US Dollar has also reversed sharply, with Hedge funds etc. now net short for the first time since 2013 (note the confluence of short positions with major market lows!). Since the Dollar is the world’s reserve currency, it is an important indicator of risk appetite across the globe. We wrote about Dollar negativity in October last year and it seems to have returned.

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It's looking Grim up North

It’s looking Grim up North

Market Commentary   |  

“The Americans will always do the right thing… after they’ve exhausted all the alternatives” . (attributed to Churchill, though there is doubt as to its veracity). The row between the US and North Korea has been escalating, with increasingly angry words and threats (whose intensity is mirrored 5000 km away on the Indo-Chinese border) being exchanged. After studiously ignoring the rise in the diplomatic temperature for nearly a month, last week it suddenly exploded into life with markets, especially Asian markets, understandably taking fright. Buying resumed this week as nuclear Armageddon didn’t occur over the weekend, (though one must wonder who these “investors” think they will be able to sell to in the event of a holocaust), but the situation remains tense as both sides contemplate their next moves.

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Factoring it all in

Factoring it all in

Evidence Based Investing, Factor Based Investing   |  

Entia non sunt multiplicanda praeter necessitatem.No more things should be presumed to exist than are absolutely necessary. (Occam’s Razor). One of the defining trends of recent years has been the rise of ETF’s /Index funds which have taken hold over the course of the period post the Financial Crisis. There have been a proliferation of “Factors”, or possibilities of Alpha generation, many of which turn out to be either useless (i.e. they never worked) or redundant (they don’t now). This study suggests that there have been 59 new Factors “discovered ” between 2010 and 2012 alone!

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'Til Debt us do part...

‘Til Debt us do part…

Evidence Based Investing   |  

After only the briefest of pauses post 2007-09, debt in all its forms is on the rise again and on a global scale; it now represents a staggering 327% of World GDP (or output). From Chinese state enterprises, to US Auto loans and here in the shape of consumer borrowing, debt is back and in a larger way than ever. As the chart below demonstrates, undeterred by Brexit, Trump’s victory or worries over North Korea etc, outstanding Credit Card debt is at all time highs (again).

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