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It's a Game of Two Halves, Brian...

By Alistair Meadows on March 30, 2016

A new phenomenon of the 2000s and beyond has been the rise of Financial Television. As the markets have soared, so has interest in them, to the point where even Channel 4 news (not an outlet known for its pro-capitalist views), now feel compelled to announce how stock markets have done that day. Meanwhile, at Bloomberg TV, CNBC, Fox Business News etc, they maintain a hectic pace, often spending as long as 3 minutes covering in depth the latest news stories of the day (hour?), and discussing economic issues with all the gravitas they can muster. One of the first casualties in all this is thought, which they replace with cliches of varying vacuity. Below are some of the best (or worst, depending on your view).

1): "China will have a Hard/Soft landing".

It is by no means clear how a country can get airborne in the first place.

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2015 from an EBI perspective

By Alistair Meadows on March 24, 2016

[We intend to repeat this exercise (hopefully, in a more timely fashion), every year. The next up-date will be in January 2017. This will be in addition to the regular Quarterly Review].

Review of 2015:

We at EBI thought it might be useful for Advisors to have an overview of the last year to help them show clients how our Portfolios performed, and more importantly, why they did what they did. Of course, one year is of little relevance in ascertaining the effectiveness or otherwise of a particular strategy, but it is important to understand the drivers of returns so that we can make any adjustments should the Investment landscape change. Below is an overview of what happened to our Portfolios and a brief discussion of the factors behind this performance.

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Bringing Down the House (of Saud)?

By Alistair Meadows on March 18, 2016

"If you want to know what God thinks about money, just look at the people He gives it to." - Dorothy Parker

[This post was prompted by a discussion with an Oil- industry employed client, who was speculating on the motivations behind the Saudi policy on production etc. and what it meant for the future price of oil. We thought it worth weighing in on the subject, as the oil market is still one of the most important cost inputs into economic decision-making, and thus growth]

The oil market continues to confound expectations. Since the low point in mid-February, it has risen nearly 40%, leading some to call the oil bear market over. This may prove to be premature however.

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Losing Momentum?

By Alistair Meadows on March 11, 2016

There is nothing permanent except change

– Heraclitus

In the early 1990's Fama and French demonstrated that Company Size and Price-to-Book (Value) explained the majority of investment returns, in what was dubbed the Three Factor model. This was the addition of two factors to the market risk (Beta), that the CAPM stated was the cause of stock returns. These have since expanded to 5 (operating profitability and investment policy), and more recently to 6, as investors have judged Momentum to be a "factor". It is the last of these that has had the most influence on market behaviour over the past few years, in both directions.…

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Brexit Stage Left?

By Alistair Meadows on March 4, 2016

[Update: in a further sign of the Elite trying to "steer" opinion, the British Chambers of Commerce have announced the suspension of it's former Director General, John Longworth after he voiced pro Leave views. The Government have denied putting pressure on the BCC to remove him. When an official denies something, it is normally a sign that it is true].

Your imagination is your preview of life's coming attractions.

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The SpOILs of War

By Alistair Meadows on February 26, 2016

Monkey killing monkey, killing monkey

Over pieces of the ground.

Silly Monkeys, give them thumbs

They make a club and beat their brother down.

"Right in Two"- Tool

Things appear to be hotting up in the Middle East once again. The European refugee crisis has focussed attention on the on-going civil war raging in Syria, and the potential for escalation in fighting if the Turks and the Saudi's get drawn into the battle for control of the country.

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Connections

By Alistair Meadows on February 19, 2016

Last week's imposition (taking effect this week) of the Bank of Japan's negative interest rate policy, could represent the last throw of the dice for central banks. The premise is that savers are to be so heavily punished for so doing that they feel compelled to spend money to avoid paying interest on their savings. Central banks appear to have run out of ideas, and are resorting to one that cannot work. If one is living off savings, and rates are negative, one will be more likely to save yet more, to avoid future impoverishment. Of course, this policy has been in operation for a while in Europe and one has to wonder for whom this policy is being enacted. One economics professor thinks he knows; the chart below may also provide a clue:

[Disclaimer: I have always wanted an excuse to show this chart]

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Losing by Default

By Alistair Meadows on February 8, 2016

The markets are starting to exhibit signs of economic stress: from oil to stocks across the globe, investors appear to be in full "risk off" mode.

One portfolio manager described the situation thus:

"Credit default swaps continued to soar last week, particularly among European banks. Given that risks surrounding China and the energy sector are widely discussed, European banks continue to have my vote for “most likely crisis from left field...in the fixed income market, we wouldn't touch low-grade credit at present [nor would we - only in our case it would be full stop]. Once credit spreads widen sharply, the default cycle tends to kick in several quarters later. The present situation is much like what we observed in early 2008, when we argued that it was impossible for financial companies to simply “come clean” about bad debts, because then as now, the bulk of the defaults were still to come."

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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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