Today I write about the following puzzle: Over 90 per cent of the equity raised by Australian companies is funded via the domestic stock market. Yet when these same companies issue safer debt (or bonds), which have predetermined returns and rank above shares in bankruptcy, local capital is suddenly missing... Show More
With rates marching higher in the US, higher risk asset classes such as emerging market equities are seeing rising volatility. As risk reprices across the market, this will cause problems for weaker companies and countries. There’s one group in particular that faces significant challenges, explains Alex Duffy, Portfolio Manager at... Show More
How can investors generate returns regardless of which way the market moves? In today’s article, I review the unique process which Vega Capital uses to achieve this goal. Show More
The feedback I often get from readers of my articles is that I must be an investment bear. That’s understandable given my last two articles were “The Dirty Dozen Sectors of Global Debt” and “The Coming High Yield Downturn will be Big, Long and Ugly”. However, the performance of Narrow... Show More
When considering where the global credit cycle is at, it’s often easy to form a view based on a handful of recent articles, statistics and anecdotes. The most memorable of these tend to be either very positive or negative otherwise they wouldn’t be published or would be quickly forgotten. A... Show More
...Or that is what some equity pundits masquerading as bond experts want you to believe. They predict that a ‘bondcano’ of rising interest rates will lead to collapsing prices for bonds and bond-like proxies. Show More
If Australia has an Achille’s heal it’s the high and still rising level of household debt that has gone hand in hand with the surge in house prices relative to incomes. Whereas several comparable countries have seen their household debt to income ratios pull back a bit since the Global... Show More
A recent working paper from the IMF titled “Credit Booms – Is China Different?” provides a good summary of many of the key issues facing China’s economy. Rapid credit growth since the global financial crisis is record setting for both its total expansion and its duration. Credit is being poorly... Show More
There’s an overwhelming sense of déjà vu as far as the gold market is concerned. Two years ago during December 2015, we witnessed the first US Fed rate hike since the 2008 GFC – a 25-basis point increase. This followed years of promises, threats and jawboning by the US Federal... Show More
With high quality, growth-focused Australian small cap businesses enjoying a stellar run of recent outperformance, this month we have shared with investors some thoughts on macro risk identification and how our portfolios are currently positioned should we see an unexpected shift in the current investment climate. Show More
Economic news was strong in October, led by US Q3 GDP coming at an annualised rate of 3.0%. Quarterly earnings and sales for S&P 500 companies are beating estimates by more than usual. One standout was bellwether stock Caterpillar, which after four years of declining revenue has seen sales up... Show More
Much is being made of the record level of household debt in Australia. The media is full of stories screaming about the risks of debt for the economy. Here I look at the truth about our debt. Show More
The Bank for International Settlements (BIS) quarterly report is always worth the read. Whilst it is academic in style and length, it consistently raises material that matters. Taken from the September report, the graphic below highlights the big issues for global corporate debt. The rest of this short article explains... Show More
There’s been a steady stream of recent articles claiming that austerity is dead. This one from James McCormack at Fitch argues that populist politicians are responsible for killing off pragmatic economic policy. Whilst I don’t deny the medium term tide is against austerity, the very high levels of sovereign debt... Show More
It's worth reflecting upon the staggering level of international debt. Financial crises are invariably caused by debt. The Bank of International Settlement (BIS) has recently warned that a new financial crisis is looming. Part of this is simply its job and it's routinely warning against this. But it does have... Show More
Last month I wrote about how we are ten years on from the beginning of the credit crisis, but are seeing many of the same signs of hubris that were present then. There’s no reason to believe that this time is different, highly priced assets and easy credit are likely... Show More
Another month of small gains in equities and credit, whilst commodities continued to fall back. Equities were up in Japan (2.4%), China (1.5%) and the US (1.2%) with Europe pretty much flat (-0.1%). Australian equities (-3.4%) were the standout loser. High yield and investment grade credit in the US and... Show More
While the profit and loss statement is doubtless very important for investors, the balance sheet should not be underestimated; it may even be more important. Below we run through the top points to consider when coming face-to-face with a balance sheet. Show More
It is widely acknowledged that the outlook for economies and markets is unusually uncertain, given the huge political changes that we are witnessing globally. It is also widely acknowledged that most assets are expensive and priced to offer sub-normal prospective returns. Why then is volatility (the VIX) so low? History... Show More
We recently attended the well supported Capital Economics (CE) Conference on The Outlook for Global Growth. In total there were more than 90 slides and charts presented. At the risk of over-simplification, 6 key points stood out to us: Show More
