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The surety of Uncertainty

By Alistair Meadows on February 5, 2016

Everyone has a plan ‘til they get punched in the mouth.

– Mike Tyson

Analysts have got off to an inauspicious start in 2016: "The current stock market level is disconcertingly well below not just the Wall Street forecasts for 2016 (made a couple months ago), but also below those made for 2015... or for even 2014!" (via Zero Hedge).

All investors, including those in EBI Portfolios, have taken a bit of a beating recently. Nearly everything has fallen sharply in the last six weeks, and equity market correlations are once again approaching one, as the table below highlights. …

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Banking on Trouble?

By Alistair Meadows on January 26, 2016

The last month or so has seen a gut-wrenching fall in oil prices (and most asset prices in general). Declines so far have been (relatively) orderly - a 5% move for oil for example is par for the course - but some strange things have been happening in ETFs and ETNs . They should trade at fair value - that is, at a zero premium to the value of their assets. If they didn't, there would be an opportunity for risk-free profits (known as arbitrage). But, as this Barron's article relates, this has not been happening.

First, let's remind ourselves what an ETF is and what it does…

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The Value of Everything

By Alistair Meadows on January 22, 2016

Value Investors have had a hard time in recent years - what was cheap has remained so for what seems like an age. Does it still exist, or like the Betamax, Walkmans and the Lib Dems has it become a relic of a bygone era?

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The Lure of Certainty

By Alistair Meadows on January 15, 2016

A fanatic is one who can't change his mind and won't change the subject.

– Winston Churchill

OK, I know I have covered this before (here), but in the cacophony of market forecasts arising from the brokerage industry, and dutifully repeated by the financial media, I feel the need to purge myself of the temptation to listen to them. (This may be a form of therapy - bear with me.)…

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Stand or Deliver?

By Alistair Meadows on January 8, 2016

The new year has not started brightly - geopolitics in the Middle East, literal rumblings in North Korea and the chaos in Chinese asset markets has put equities on the back foot. The real concerns, however, may lie elsewhere.

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Reminiscences of a Stockbroker

By Alistair Meadows on December 11, 2015

[The title of this blog is penned with apologies to Edwin Lefevre, the writer of what is possibly the greatest book on the stock market ever written]

In February next year, I shall have worked in stock markets in various guises for 29 years, and will have to up-date the bio below. In the meantime, in what will be our last blog of 2015, I shall attempt to describe the similarities that have endured and the differences that have emerged in that period. It is by no means exhaustive, merely a personal account of what it was, and is, like to work in the City of London.

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Liquid(ity) Gold

By Alistair Meadows on December 4, 2015

Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price

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Safe as Houses?

By Alistair Meadows on November 27, 2015

A couple of weeks ago we looked at the European interest rate situation in the context of the Fed's dilemma over Interest Rates. Today, we look at one of the consequences of these super-low rates, as a result of the efforts to avoid currency appreciation: house price appreciation.

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Seeking Consensus

By Alistair Meadows on November 20, 2015

Contrarian Investing is an investment strategy that is characterized by purchasing and selling in contrast to the prevailing sentiment of the time.

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Breaking up is (not so) hard to do

By Alistair Meadows on November 13, 2015

Events in Europe appear to be moving in a decidedly dangerous direction. The initial huge sympathy for the migrants has given way to concern (and in some cases alarm) amongst the local populations. From welcoming refugees unconditionally a few weeks ago, Angela Merkel has changed tack, limiting their "rights" and preventing further inflows (as far as possible). This puts them on a par with the likes of Hungary, Croatia, Slovenia and others who are actively seeking to offload the problem to others. Meanwhile the EU itself, according to the Washington Post, predicts<

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From ZIRP to NIRP - The Monetary Twilight Zone

By Alistair Meadows on November 6, 2015

ZIRP- Another Japanese innovation, this time from the Bank of Japan, whose aim was to stimulate the Japanese economy by having a Zero Interest Rate Policy: so far (15 years and counting), it has had an extremely limited effect.

NIRP- A variation on the above theme, whereby Central Banks (particularly the ECB, but not limited to them ) employ a strategy of Negative Interest Rate policy: the likely economic result will be much the same.

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A Sequence of Errors?

By Alistair Meadows on November 2, 2015

The future depends on what you do today.

– Mahatma Gandhi

There has been much talk recently about "Sequence Risk" (a more detailed description of the opposing views can be found here and here ), as both sides ponder the Safe Withdrawal Rate (SWR) for retiring investors, and the effect of market returns on Retirement Pot longevity. …

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Till Debt Us Do Part?

By Alistair Meadows on October 23, 2015

Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.

– Ogden Nash

This week we shall focus on a number of (partially) related stories in lieu of a major theme. The common denominator is debt - how companies, states and even countries deal with the issue will shape the economic landscape for years to come.…

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Is the Tide Going Out?

By Alistair Meadows on October 16, 2015

Only when the tide goes out do you discover who's been swimming naked.

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The End Game for the Fed...?

By Alistair Meadows on October 2, 2015

In the wake of the Fed's non-decision on Interest rates last week, the markets have remained highly volatile and there are now questions being raised about the Fed itself.

As Vanguard's Chief US economist put it, "we are concerned with the Fed's acknowledgement of recent market volatility in its decision. The Fed runs the risk of being held captive to the markets as, paradoxically, much of that volatility is due to the anticipation and uncertainty around when the Fed will move".

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Can Corbyn win, and what if he does?

By Alistair Meadows on September 25, 2015

[The following is NOT a forecast - according to some bookies, Corbyn has only a 14% chance of being the next Prime Minister. What follows is an unlikely potential scenario which would have a high impact on markets - a so-called Black Swan event]

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.

– Donald Rumsfeld

Black Swan: An outlier event, with an extreme impact…

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Risk Aversion: A Crowded Trade?

By Alistair Meadows on September 18, 2015

There is always an easy solution to every human problem — neat, plausible, and wrong.

– H.L Mencken (writer, 1880-1956)

Declines in markets over the past three months have, as usual, led to an inquest into what went "wrong", conveniently ignoring the reality that losses go with the territory, and at around 10% is no more than a run of the mill correction. Some suspects have been hauled up in front of the court of public opinion: Hedge funds (a usual suspect if there was one), Factor investing in general (smart beta, alternative beta etc.), and risk parity in particular.

Hedge funds can be (partly) absolved of this charge. Losses, whilst large in some cases, were not generalised, and they may well not have been the catalyst for the chaos, but merely caught up in it all.

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The Long Term view on EM

By Alistair Meadows on September 11, 2015

It hasn't been a great period for all things Emerging recently.

Predictably, analysts have turned negative co-incidental with the market falls. EPS forecasts have collapsed as this chart shows.

As this article points out, however, that is a bullish sign for investors. Warren Buffet is often quoted as saying, "Be fearful when others are greedy, and greedy when others are fearful", and this may be one of those moments. Meanwhile, aggregate Developed Market Bond and Stock valuations are at their highest level of all time, according to Deutsche Bank.

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Keeping your Balance

By Alistair Meadows on September 3, 2015

You're not really diversified if you don't hate something in your portfolio at the moment.

– A Wealth of Common Sense, Ben Carlson 1/9/2015

Would you want to buy this market? We think that it can make sense…

Source: Bloomberg

One of the most important tasks in Long Term Investment is that of maintaining one's asset allocation. Once a risk tolerance level has been set, one invests in a portfolio of assets, but that Portfolio will "drift" over time as the investments will generate differing returns. If stocks outperform bonds, for example, an original 60/40 (e.g. EBI 60) could morph into EBI 75 or even higher, which may be above the clients risk tolerance. The Tech bubble and subsequent crash will have pushed the Portfolio weighting above (and then below!) the client's true risk level…

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This Too Shall Pass

By Alistair Meadows on August 25, 2015

[This post is intended to try to explain current market trends and what it means looking forward. As Yogi Berra said, "its tough to make predictions, especially about the future", so we won't try. But, we can try to understand what is causing this huge shift in investor sentiment, as it may help us withstand whatever lies ahead. The views expressed are my own.]

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