What is the single biggest risk facing global markets in 2018? According to Deutsche Bank’s chief international economist the biggest risk is the end of European quantitative easing. The FT has a feature on the potentially profound impact that the end of central bank support will have on bond markets. The coming year promises to be an inflection point for central banks. The Fed has started reducing the pile of the bonds it acquired after the financial crisis — a process that will accelerate. The ECB started to trim its QE programme in 2017 and is expected to end it altogether in 2018. Even … [Read more...]
What Will Pensions Buy in 2018?
Securities valuations are at the highest levels they've ever been. You can see on my price-to-sales ratio chart of the S&P 500 that valuations are higher today than they were during even the dotcom era. While stocks are valued at record levels, the situation in fixed income markets isn't any better. With such high valuations for stocks and bonds, there is nowhere to go for pension funds looking for bargains. Despite the expensive markets, pension funds are still buying assets. Heather Gillers reports in The Wall Street Journal: In the public pension world, the willingness to chase … [Read more...]
The Global Manufacturing Boom Marches into 2018
Purchasing managers indexes from around the world are indicating a global manufacturing boom. The U.S. Markit Manufacturing PMI rose today to 55.1, it's highest reading since 2015. Bloomberg's Fergal O'Brien reports: A slew of Purchasing Managers Indexes published on Tuesday from China, Germany, France, Italy and the U.K. all pointed to deeper supply constraints, with a U.S. gauge to be released at 9:45 a.m. Washington time. Shrinking capacity may mean companies have to hire or invest more to avoid overheating, yet it could also force them to push up prices, propelling inflation … [Read more...]
Happy New Year!
Investment Views on 2018
John Authers gives his summary of markets in 2017 and his outlook for 2018 in the FT this morning. John argues that long-term interest rates are the key risk to watch in 2018. Sans a rise in long rates, known risks look benign. As for unknown risks, well… there is a reason we have long advised a balanced approach, diversified across asset classes and regions. Below are some of the highlights from John Authers' FT column. You can read the full article here (subscription required): Record Low Volatility in 2017 This can’t carry on, can it? This is the last Long View of 2017, the most … [Read more...]
Your Survival Guy: Most Popular Posts of 2017
As the year draws to a close I want to review some of the most read posts on Yoursurvivalguy.com in 2017. These are the posts that got the most attention from readers like you. The Last Issue of Intelligence Report After Dick Young announced his last issue of Intelligence Report, I wrote a series of "What now?" posts for readers. Here's an excerpt from Part III: In his first issue of Richard C. Young’s Intelligence Report, Dick wrote, “Hugh Johnson is known worldwide as an expert and writer on gardening and wine. In Connoisseur’s June/85 issue Michael and Ariane Batterberry wrote about … [Read more...]
New Autos Will be Built by America’s Most Established Businesses
While brand new businesses like Tesla, Uber and Waymo receive a lot of attention for the ways they are pioneering auto-transport, it will be old companies with powerful innovation pipelines that feed the auto industry the parts and ideas it needs to continue advancing. Companies like 3M, which builds touchscreen displays, and DowDuPont which makes advanced polymers, will develop the basic technologies needed to make the car of tomorrow drive. Andrew Tangel reports at The Wall Street Journal: Auto makers and popular ride-hailing apps aren’t the only companies looking to cash in on the shift to … [Read more...]
Is 2017’s Most Popular Strategy in Peril?
After nine years of a bull market that has been aided by the most aggressive and sustained period of monetary stimulus in history (you didn’t forget about that did you?) index-based investing has become the go-to strategy for many investors. Year-to-date, EPFR estimates that globally, investors have dumped $436.5 billion into index funds. Actively managed funds have experienced net outflows of over $150 billion in the U.S. alone. Jack Bogle would likely be proud, but does index-based investing still make sense when a majority of the money being invested in funds is flowing to vehicles that … [Read more...]
The Truth Behind the S&P 500: Part V
As I've written to you before, the S&P is constructed somewhat like an actively managed fund. Real people choose which stocks go in, and which remain out. Robin Wigglesworth writes in the Financial Times that David Blitzer, the current head of the S&P Dow Jones' index committee, has done what few others have been able to do by created decent low risk returns. But Wigglesworth also points out that it is unlikely Blitzer's success can be maintained (that's not a knock on Blitzer who isn't attempting to generate maximum returns with his picks). It's just math. As volatility increases … [Read more...]
Trying to Prepay Your Property Taxes? Read This First
For those rushing to pre-pay 2018 property taxes in order to maintain full deductability of those sums, it might be time to examine new IRS guidance on the subject. At Bloomberg, John Voskuhl explains: U.S. taxpayers can deduct their 2018 state and local property taxes on their 2017 returns if they pay those tax bills before the end of the year -- and only if the taxes were assessed before 2018, according to the Internal Revenue Service. The federal authority’s guidance reflects an effort to address some of the confusion triggered by the tax overhaul signed by President Donald Trump last … [Read more...]
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