Posts Tagged asset
Mobius Says Fresh Financial Crisis Is Around Corner
Posted by Oksana Grebenjuk in Favourites, Investing on Май 30th, 2011
Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group, said another financial crisis is inevitable because the causes of the previous one haven’t been resolved.
“There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis,” Mobius said at the Foreign Correspondents’ Club of Japan in Tokyo today in response to a question about price swings. “Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes.”
The total value of derivatives in the world exceeds total global gross domestic product by a factor of 10, said Mobius, who oversees more than $50 billion. With that volume of bets in different directions, volatility and equity market crises will occur, he said.
The global financial crisis three years ago was caused in part by the proliferation of derivative products tied to U.S. home loans that ceased performing, triggering hundreds of billions of dollars in writedowns and leading to the collapse of Lehman Brothers Holdings Inc. in September 2008. The MSCI AC World Index of developed and emerging market stocks tumbled 46 percent between Lehman’s downfall and the market bottom on March 9, 2009. Read the rest of this entry »
Europe Failed to Clear `Skepticism’ on Debt Crisis
Posted by Oksana Grebenjuk in Trading Markets on Январь 18th, 2011
Europe has yet to allay investor “skepticism” about the sustainability of the region’s debt, and any spread of the crisis would cloud the global economic outlook, the International Monetary Fund’s No. 3 official said.
“At least for now it looks like the spillover from the European sovereign crisis to areas outside of the region will be limited,” Naoyuki Shinohara, deputy managing director at the IMF, said in an interview in Tokyo yesterday. “However, if the European sovereign-debt problems were to become bigger, we need to keep in mind that that could bring about considerable downside risks.”
European officials have indicated they’re ready to expand their efforts to contain the crisis that erupted last year and has led to bailout packages for Greece and Ireland. German Chancellor Angela Merkel this week expressed willingness to take whatever steps are needed to stem the turmoil.
The extra yields investors demand to hold Greek and Irish bonds rather than German bunds “still remain very high, despite the rescue packages,” Shinohara said.
“That means skepticism over the sustainability of their debt in the market hasn’t been cleared away,” said Shinohara, 57, a former top currency official at Japan’s Ministry of Finance. “It’s important that countries reduce their budget deficit, but they also need to tackle structural issues including boosting growth and lowering unemployment.” Read the rest of this entry »
IMF: HK economic growth robust, but risks remain
Posted by Oksana Grebenjuk in Trading Markets on Ноябрь 23rd, 2010
Hong Kong’s economic growth is likely to reach 6.75 percent this year and moderate to 5-5.5 percent in 2011, the International Monetary Fund (IMF) said on Wednesday.
«The Hong Kong economy is now back onto a robust growth trajectory with the key sources of demand firing on all cylinders,» the IMF said. «Net exports have been buoyed by vigorous growth in the Mainland and the ongoing global recovery. Investment has benefited from the implementation of various multi-year public infrastructure projects and private investment in machinery and equipment has picked up. At the same time, consumption bounced back as labor market conditions improved and confidence returned.»
Hong Kong Financial Secretary John Tsang welcomed the IMF’s positive outlook for the SAR, noting «the continued broad-based recovery of the economy shows Hong Kong has weathered the global financial storm well».
However, the IMF also pointed out that Hong Kong now faces a very different set of challenges from those of the past two years.
«As the output gap closes, inflationary pressures are likely to rise in both factor and product markets,» it said. «At the same time, strong domestic growth prospects and abundant global liquidity have the potential to attract further capital inflows. Finally, accommodative monetary conditions imported from abroad-combined with tight domestic supply conditions for new housing units-are already fueling property price inflation. Read the rest of this entry »
How Far Could Stocks Fall?
Posted by Oksana Grebenjuk in Fund Markets on Ноябрь 18th, 2010
With the financial markets facing uncertainty about the balance sheets of banks and governments in Ireland, Spain, and Portugal, continued weakness in stocks, commodities, and precious metals remains a possibility. From a risk management standpoint, it is important for us to understand the possible downside risks in the short-to-intermediate-term.
Since risk assets (stocks, commodities, precious metals) have been primarily driven by liquidity, their correlations have been strong since the 2010 summer lows. Therefore, the S&P 500 Index can be used as a proxy for all risk assets. If the downside risks are muted in stocks, they are also somewhat muted in commodities as well.
Due to the following factors, we continue to believe the downside risks in the stock market are manageable in the short-to-intermediate-term:
Quantitative Easing (QE): The Fed plans to inject freshly printed money into the economy well into 2011, which will place upward pressure on the price of stocks, commodities, and precious metals. While it is beyond the scope of this study, if you are unclear of the potential impact of quantitative easing on asset prices, you can review these QE resources. Read the rest of this entry »
The Fed Forcing Us Into Risk Asset?
Posted by Oksana Grebenjuk in Fund Markets on Ноябрь 10th, 2010
By signalling its intention to purchase another $600bn of longer-term Treasury securities by the end of June 2011, the Fed hopes its injections of cash will lower interest rates, bolster asset prices, increase wealth and encourage households and companies to spend and hire. Moreover, by noting the possibility of doing more if the data disappoint, it is also hoping that markets could price in the institution’s future asset purchases, turbo-charging the direct policy impact before those purchases have even been specified.
For a little more color you can check in with Cullen Roche, aka Pragmatic Capitalism who has been writing about this in a lot of detail. My focus has been to be more concerned with portfolio implications as this is my job, not trying to solve the world’s problems.
However, it is important to be cognizant of what I will call a malignancy in the US stock and bond markets being unleashed by Ben Bernanke and his Federal Reserve Posse. Between all of the commentary on what the Fed is doing and Bernanke’s op-ed in the Washington Post you should realize that policy is now targeting asset prices. If you do some blog reading you will find comments saying that the Fed is making it so that just holding cash is stupid, that by keeping interest rates so low investors are forced into buying risk assets. To the extent this is true it is heinous.
It is heinous for what could be several different bad outcomes, outcomes that could be worse than what is trying to be fixed. While I don’t know if that will be the outcome this is one conclusion to draw from keeping interest rates at 1% for too long seven or eight years ago (although this was only one factor and not the biggest factor). If the rally in US equity prices we have enjoyed for the last few months has nothing but air under it then the consequence could be another painful decline—this would not be unprecedented obviously but could push any non-government induced recovery further down the road if the wealth effect actually does matter. Read the rest of this entry »
When Average Earnings Are Not Representative
Posted by Oksana Grebenjuk in Business on Сентябрь 3rd, 2010
For various reasons, value investors are encouraged to use an average of several years worth of earnings as an estimate of a company’s earnings power. But when a company grows quickly (e.g. through the acquisition of a competitor), average earnings are no longer representative of earnings power. In such cases, other methods of estimating a company’s earnings may be more useful.
Consider Canam Group (CAM), a company that has gone on a buying spree in the last year or so. As competitors have been shutting down units to conserve cash, Canam has been strategically purchasing competitor plants at attractive prices. As many industries are currently at overcapacity, the benefits of these acquisitions won’t be seen for years. But the costs of these acquisitions (i.e. the cash used to finance the purchases) are seen immediately. How does one value the fact that future earnings will be higher than past earnings?
One method applicable to manufacturing companies is based on a company’s historical return on its fixed assets. If similar assets to the company’s current assets have been purchased, the company may be expected to generate the same type of returns on those fixed assets that it generated over the last business cycle. Of course, this exercise only results in a starting point for estimating future earnings. Adjustments may have to be made based on the age of the assets acquired, their quality, and a whole slew of other factors (e.g. geography).
When times are good, companies will often fall over themselves in bidding wars to acquire potential targets or business units. Value investors realize, however, that the best time for companies to acquire such assets is when business conditions are poor (financing in general is hard to come by, there is overcapacity in many industries, and sellers are desperate to raise cash), due to the great price discounts that are available. Read the rest of this entry »
4 Investment Ideas That Provide Income
Posted by Oksana Grebenjuk in Investing on Июль 1st, 2010
As of this moment, the S&P/TSX Composite index is down 384.58 point or -3.27% year to date. The S&P 500 is down 67.32 or -6.04% year to date. That is your market update. When the global economic outlook appears uncertain and on the brink of another recession, equity markets reflect this reality in terms of greater than normal volatility. In markets like these, what we should be looking for are non-correlated assets and managers that have demonstrated the expertise to preserve capital during uncertain times like today.
In addition, one should also be focusing their efforts on receiving some form of income while the economic climate sorts itself. The following 4 ideas should hopefully accomplish both those goals. While we cant speak to the best/worst time to buy/sell particular securities, as that depends on one’s personal circumstances, the approach we usually take, especially with closed end funds, is to purchase them when they are trading at the steeper than normal discount to their Net Asset Value (NAV). The only other thing we would like to add is that you should do you own due diligence.
Trident Performance Corp.
This closed end fund is managed by CI Investments. Its investment objective is to provide tax-efficient risk-adjusted long term rates of return by obtaining exposure to a Global Macroeconomic Portfolio, advised by Trident Investment Management. Co-Founded in 1998, by Nandu Narayanan, Trident Investment Management seeks to exploit macroeconomic trends to generate attractive risk-adjusted rates of return with low or negative correlation to traditional ‘long’ investments. This is exactly what Mr. Narayanan did during the financial crisis, when the CI Global Opportunities Fund recorded positive performance of 109% in 2007 and 42.6% in 2008. Since inception in March 1995, the fund has averaged 19.69% as of the end of May 31, 2010. Read the rest of this entry »
Bank Issues, Jobs Data Drives Euro To 4-Year Low
Posted by Oksana Grebenjuk in Currency on Июнь 8th, 2010
After holding steady for a few days, the Euro plunged through the recent bottom to post a 4-year low. This morning’s move came as a surprise to many traders who had expected the single-currency to hold its range until after the release of the employment number.
Traders are saying that this morning’s sharp break was a reaction to new concerns about the health of European banks. Investors are concerned that mounting debt issues across the Euro Zone will erode investor confidence in the Euro and slow down the rebound in the global economy. Many traders were surprised by this morning’s move which caught traders off guard as they awaited the release of the important U.S. jobs data report.
The GBP USD is also under pressure because of the drop in risk appetite. The charts indicate that a test of 1.4499 to 1.4435 is likely over the near-term.
Plunging equity markets are triggering a possible reversal top in the USD JPY. Traders are dumping risky assets following the plunge in the Euro and the weaker than expected U.S. jobs data report. The Dollar/Yen is trading back under a .618 retracement level at 92.41 which makes 91.61 a new downside target.
Falling demand for higher risk assets is helping to drive the USD CAD higher. The main trend is down, but upside momentum is building which could trigger a reversal of this trend on a breakout over the last swing top at 1.0573. Read the rest of this entry »
Whistle-Blowers Become Investment Option for Hedge Funds
Posted by Oksana Grebenjuk in Fund Markets on Май 21st, 2010
Hedge funds have found a new market to invest in: whistle-blowers.
Informants who turn in tax cheats have to wait years to get their share of any reward from the I.R.S.’s recently expanded whistle-blower program. So hedge funds, private equity groups and other big investors are offering an alternative. They are essentially agreeing to buy a percentage of those future payouts in exchange for a smaller amount upfront to the whistle-blowers.
The surging size of the potential awards is driving all the interest. Three years ago, the I.R.S. began offering bigger rewards — 15 percent to 30 percent of whatever money the government recovered — in a move that has turbocharged the agency’s whistle-blower program.
Where it once handled only a trickle of tips, often involving relatively small amounts of unpaid taxes, I.R.S. offices now receive a torrent of big money claims. Accountants and company employees have taken to trooping in bearing computer records and boxes of documents to back up their claims of underpayment by big companies.
In what is believed to be the first of these structured tax payouts, an I.R.S. informant who reported that an overseas multinational corporation had underpaid its taxes by billions of dollars received $4 million last month from a private equity firm. In exchange, the firm will receive a portion of the award the informant expects to collect eventually. Read the rest of this entry »
Winfrey Hires a Star Manager
Posted by Oksana Grebenjuk in Budget on Май 20th, 2010
Oprah Winfrey has made a fortune in television, magazines and movies. Now she has hired someone to manage it.
Ms. Winfrey, one of the most powerful brands in media, has begun setting up a so-called family office to handle her personal investments, according to people familiar with the situation. Her first hire: Peter Adamson, a well-regarded investor who currently serves as chief investment officer for Eli Broad, the Los Angeles billionaire and philanthropist.
The move comes as Ms. Winfrey begins a new chapter in her professional life. In January she plans to launch her own channel, the Oprah Winfrey Network, a joint venture between Ms. Winfrey’s Harpo Inc. and Discovery Communications Inc. that aims to reach 80 million homes in the U.S.
A spokeswoman for Ms. Winfrey confirmed the hire but declined to elaborate. Mr. Adamson didn’t return emails and telephone calls seeking comment.
Ms. Winfrey historically has been private about her financial affairs, but this is believed to be the first time she has established a full investment organization around her fortune.
Wealthy investors typically hire managers at banks and brokerage firms to handle their financial affairs. A family office is considered a step up from such an arrangement, with a team of advisers working exclusively, and directly, for the client. Read the rest of this entry »
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