Asset Allocation
Livewire Exclusive

Chris Watling from London-based Longview Economics has been a vocal bear for some time and recently called for an Australian recession. The real question now though is what can investors do with this information? We asked him and his responses were quite surprising. Chris, who also argues that the Fed... Show More

Macro
Livewire Exclusive

The world’s most powerful central bank, the Fed, has hiked rates nine times since 2015. After a policy of providing guidance, and sticking to it, the Fed abruptly turned dovish in December. Fed policy is one of the key drivers for markets globally, particularly given the backdrop of quantitative tightening,... Show More

Macro
Livewire Exclusive

Chris Watling, CEO and Chief Market Strategist at Longview Economics, recently sounded the recession alarm on the Australian economy. We had the chance to sit down with him to explore his view, hear where he’s seen a very similar set up before, and to learn just how bearish he really... Show More

Chris Watling

There are a number of reasons to switch weightings out of one asset class and into another. One of those reasons, which is often an effective strategy, is an absolute or relative valuation which has become stretched (one way or the other). Show More

Chris Watling

The debate over whether a value or a growth style produces better long term investment returns continues, with staunch advocates on both sides. Certain high profile investors such as Warren Buffett continue to champion the Benjamin Graham school of value investing while, in contrast, recent BAML fund managers’ surveys have... Show More

Chris Watling

Chinese steel consumption is the most significant variable in determining the iron ore price. China consumes over half of the world’s iron ore each year. As such, and while supply themes play a role, cycles of Chinese credit growth and housing activity are the key factors in determining iron ore... Show More

Chris Watling

Whilst the diagnosis of the driver of the deficit might be wrong, Trump' actions viewed through the lens of the history appear more logical. Indeed if the models of the rise and fall of Great Powers laid out by Paul Kennedy, Charles Kindleberger and more recently, by Professor Graham Allison... Show More

Chris Watling

Structurally, Australia’s growth model has been deteriorating for most of the past two decades and is now arguably one of the poorer examples in the developed world. In the years of the last commodity bull cycle, instead of saving in its ‘times of plenty’, Australia funded a large consumption and... Show More

Chris Watling

Sharp moves in US interest rate expectations, 10 year bond yields and consequently the dollar has brought about some significant rotation within global financial markets. That initial shift in US rate expectations, likely driven by last week’s Fed ‘DOTs’ signalling their clear intention to hike in December coupled with Yellen’s... Show More

Chris Watling

US technology has been mentioned by fund managers as a crowded trade. Given its strong gains over the past 6 and 12 months, that’s perhaps not surprising. Earlier this week, we published a sector switch recommendation - ‘out of tech and into financials’. Show More

Chris Watling

Last Wednesday’s wobble sent market participants and commentators scrabbling for the history books. With reports that Trump asked ‘James Comey to end a probe into the former national security adviser’, geopolitics seemingly became front and centre of investors’ minds (with markets wondering about possible impeachment). Show More

Chris Watling

China’s central bank balance sheet is the biggest central bank balance sheet in the global economy, and has been for several years. That reflects China’s two bouts of QE over the past 10 years. Initially China carried out a type of QE we label ‘FX QE’, i.e. from 2009 through... Show More

Chris Watling

Historically the Aussie Dollar has been regarded as a play on both commodities (specifically iron ore) and its higher interest rates relative to the rest of the world. In the past 12 months, though, the correlations of the currency with those two key factors has broken down. As iron ore... Show More

Chris Watling

A turn higher in oil prices in coming months and quarters, if forthcoming, should result in considerably weaker Chinese demand growth, as the authorities scale back their aggressive stockpiling policies. Weak underlying Chinese oil consumption, as well as high inventory levels, suggest that reduced stockpiling activity could be reasonably sharp.... Show More

Chris Watling

US 10-year government bonds reached an all-time closing yield low on 8th July 2016 of 1.37%. That just surpassed the prior record low of 1.43% in July 2012 during the depths of the Euro crisis. Prior to that, US 10-year yields had only been meaningfully below 2% in one year... Show More

Chris Watling

Gold prices are up 20% YTD, having almost halved over the past 4 years. Almost all this year’s price gain can be explained by investment flows. ‘Investment demand,’ including gold bars/coins, ETFs & OTC buying, doubled in H1 this year from average 2014 & 2015 level (fig 8). In contrast,... Show More

Nicholas - Thank you for your feedback, we have some sympathy, but we are not entirely convinced by your comments (or more precisely Buffett/Munger’s comments). Theoretically, it is possible to distinguish ‘value’ and ‘growth’. Historically, stocks have been assigned as ‘value’ or ‘growth’ dependent upon their book-to-market ratio (i.e. the inverse of the price-to-book ratio) as outlined by the work of French & Fama in the 20th century. Other modern definitions include other fundamental factors such as recent EPS growth rates, dividend yields, and sales per share growth rates (full definitions are available on index providers’ websites). Whilst the terms ‘value’ and ‘growth’ may be misleading and some investors may not feel they are appropriate, they do refer to clear, well laid out fundamental screens that are widely used by equity fund managers. Indeed the chart we show in the blog shows that different ‘styles’ appear to perform well in different macro environments; specifically, as we illustrate, with those different environments dictated by the trend in the nominal risk free rate (i.e. US bond yields). Whilst we appreciate that one may take issue with the concepts’ labels, the relative performance resulting from their different fundamental characteristics is relevant to equity investing.

On Value vs. growth -