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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 1, 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 3, 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 6, 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 8, 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 1, 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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It's looking Grim up North

By Alistair Meadows on August 18, 2017

"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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Who's the Dummy?

By Alistair Meadows on August 11, 2017

“If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.” - Warren Buffett

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University Challenge

By Alistair Meadows on August 4, 2017

“There are times when wisdom cannot be found in the chambers of parliament or the halls of academia but at the unpretentious setting of the kitchen table.” ― E.A. Bucchianeri

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Factoring it all in

By Alistair Meadows on July 28, 2017

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...

By Alistair Meadows on July 21, 2017

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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The Consultant will see you now.

By Alistair Meadows on July 14, 2017

"A consultant is someone who saves his client almost enough to pay his fee". -Arnold Glasow (US Businessman, Humourist). 1905-98.

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The Demographic Deficit

By Alistair Meadows on June 30, 2017

"Aging seems to be the only available way to live a long life"- Kitty O'Neill Collins. (US Author).

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