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We are Experiencing Some Turbulence...

By Alistair Meadows on February 09, 2018

On the day of Jerome Powell's inauguration as Fed Chairman (and before he had time to find out where the cafeteria is!), markets have greeted him with a big bang. There are precedents for this "bad luck". Alan Greenspan started his role as the Chairman in August 1987, 3 months before the Big One in October 1987 and Ben Bernanke also assumed the job in 2006, as the Financial Crisis was just unfolding. So, it is not a unique situation, but it must make him wonder whether the market gods are out to get him. I imagine, ever so quietly, Janet Yellen is having a chuckle...

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Of Dollars and Sense

By Alistair Meadows on February 02, 2018

"The best way to destroy the Capitalist System is to debauch the currency" - V.I. Lenin…

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Is it Worth Rolling the Dice?

By Alistair Meadows on January 26, 2018

“Green light, STOP - if you want to see where you are taking the most risk, look where you are making the most money.” - Paul Gibbons.

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Curiouser and Curiouser

By Alistair Meadows on January 20, 2018

"Alice laughed: "There's no use trying," she said; "one can't believe impossible things." "I daresay you haven't had much practice," said the Queen. "When I was younger, I always did it for half an hour a day. Why, sometimes I've believed as many as six impossible things before breakfast." - Alice in Wonderland.

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There's Risk in Credit Risk

By Alistair Meadows on January 12, 2018

"Risk comes from not knowing what you're doing" - Warren Buffett

A week ago, a bond mysteriously disappeared from the list of ECB assets being held under the Corporate Sector Purchase Programme (CSPP). The Steinhoff 1.875% bond due for 2025 had gone - the bond had neither been redeemed nor defaulted, so it would seem that it had been liquidated (i.e. sold).

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Is Progress Assured?

By Alistair Meadows on January 05, 2018

“And a step backward, after making a wrong turn, is a step in the right direction.” ― Kurt Vonnegut Jr.

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A Bit(coin) of a Bubble?

By Alistair Meadows on December 22, 2017

“A bubble is a bull market in which you don’t have a position.” - Eddy Elfenbein, (via Twitter).

“The trouble with quotes on the internet is that it’s difficult to determine whether or not they are genuine” -Abraham Lincoln

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The Trial of the Century

By Alistair Meadows on December 15, 2017

It is the year 2030; Brexit negotiations have made a breakthrough, after a last-minute concession that allows for both English AND French cheese to be served in the sandwiches being eaten at the next Summit. Prime Minister Alan Sugar calls it a victory for the cheese makers, but in all the excitement, one is tempted to think he has been misunderstood.

Meanwhile, as a result of a Global Decree by newly-elected US President Bruce Willis, Active Management is now illegal (so it's not just their charges that are criminal). We join the trial as the Defence Counsel cross-examines one of the accused, in an attempt to tease out the justification for their strategies. Active Manager Finder-General Burgess is acting for the Prosecution. Judge Jeremy Paxman presides, with able assistance from Tess Daley QC.

Defence: Could outline your investment philosophy?

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Credit where it's Due?

By Alistair Meadows on December 01, 2017

"We have low levels of arrears, strong credit risk management and a low risk balance sheet"- Adam Applegarth, Chairman of Northern Rock (2006).

Since the Financial crisis of 2007-09, High Yield bonds (previously known as Junk, but that name reduces their sale ability), have become as popular as a foreign exchange client at Wells Fargo. Credit risk has become less "risky" as Investors have piled into some bonds of dubious quality allowing company's, who would otherwise struggle to refinance to do so on extremely generous terms. Prices have duly responded, with returns over five times that of Investment Grade and Government equivalents (see below).

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Seeing the Future

By Alistair Meadows on November 24, 2017

"If you can look into the seeds of time, and say which grain will grow and which will not, speak then unto me. " --William Shakespeare.

Suppose you knew of events in advance of their occurrence. You could make money on this knowledge. Seems obviously true, but it isn't; even perfect foresight doesn't necessarily ensure a profitable investment- in many cases one would have lost money.

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The Nature of Risk

By Alistair Meadows on November 03, 2017

Records galore in Equities as Bloomberg reports, prices melt up, whilst volatility collapses. We are now in the second longest period without a 3% peak-to-trough draw-down, as (some) investors continue to take positives from almost all news. As we spoke about last week however, not all are feeling the love, as Professionals continue to look to sell/short markets, warning investors of crisis to come. They will be right eventually of course (as is a broken clock), so it may be time to examine risk tolerances in preparation for a correction (that may not occur, if at all, for a while). After all, forewarned is forearmed...

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Dealing with a Vertical Market

By Alistair Meadows on October 27, 2017

“Dear Optimist, Pessimist, and Realist. While you guys were busy arguing over the glass of water, I drank it. Sincerely, the Opportunist.”- Unknown

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Forever Blowing Bubbles?

By Alistair Meadows on October 20, 2017

I'm forever blowing bubbles,Pretty bubbles in the air,They fly so high, nearly reach the sky,Then like my dreams, they fade and die.

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Is Capitalism moral?

By Alistair Meadows on October 06, 2017

The grotesque juxtaposition of the deadliest mass shooting in US history and another 150 point surge in the Dow, following on from the seeming indifference to the prospect of nuclear war in the Korean peninsula has prompted me to wonder if capitalism (or at least it's current version) is in any way moral. It is often said that capital itself is amoral-it merely goes to where it is treated best, but participants can (or should) be. The excesses of executive pay of recent years and the Equifax stock sales by Executives prior to the disclosure of a major data leak, however, suggests otherwise. It is of course the case that without capitalism, we would all be living i…

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Needle in a Haystack...

By Alistair Meadows on September 29, 2017

It is becoming a bit of chore to keep up with the doom-laden predictions emanating from the twitter-sphere about the fate of markets, (though I am doing my best). The causes are variously, low volatility, passive investors, Central Bankers or market valuations or a combination thereof. The latest panic-du-jour concerns "market breadth", which measures the number of shares advancing compared to those declining; the theory is that if too few shares are rising relative to those falling, the market is due for a tumble. On the face of it, it seems intuitive, but the problem with using market breadth to foretell market moves is that it is hugely unreliable; consider these two articles (from the same source), dated December 2015 and Read in full

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How many is enough?

By Alistair Meadows on September 22, 2017

Evolution consists of two simultaneous but quite separate phenomena of adaptation and diversification- Ernst Mayr (Evolutionary Biologist).

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Are We at the Point of No Return?

By Alistair Meadows on September 15, 2017

'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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Portfolio Hedging - what is it good for?

By Alistair Meadows on September 08, 2017

“The fact that there’s a highway to hell and only a stairway to heaven says a lot about anticipated traffic numbers.” - Bill Murray. (re-quoted from The Price of Everything blog).

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Dumping the Dollar

By Alistair Meadows on September 01, 2017

"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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QE for the People?

By Alistair Meadows on August 25, 2017

"When you get something for nothing, you just haven't been billed for it yet" -Franklin Jones Journalist 1908-80.

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