Katana Half Yearly Outlook: Extraordinary Times

Romano Sala Tenna

Katana Asset Management

The issue as we see it now, is that despite an unprecedented level of coordinated intervention, the central banks globally have only really succeeded in ‘kicking the can down the road’.  They have largely failed to create sustainable economic growth, improve credit quality, spur inflation and importantly increase sentiment and confidence.  

Moving forward we see four (4) key macro risks:

  1. The US equity market has rolled over technically after having rallied solidly from around 7,000 in early 2009 to an all-time high of 18,351 in mid-2015.  This reflects the clear change in investor sentiment and confidence.

  2. Debt markets are showing signs of stress, characterised by rising credit default swaps (CDS) and heightened volatility.

  3. Chinese Debt has increased from 121% of GDP in 2000 to 290%+ in 2015, a dramatic dollar rise from $US2.1 trillion to US$30 trillion (McKinsey Global Institute).

  4. Confidence in the ability of the central banks to resolve this crisis is waning.

    And it is this fourth risk which has us most cautious, as it indicates that the timing may be sooner rather than later.  To date, investors have been prepared to believe that central banks would be capable of managing the great credit deflation and orchestrate a return to growth and inflation.   However, if investors genuinely lose confidence in the ability of the Central Banks to manage this crisis, then it will become self-fulfilling and self-perpetuating. 

    We accordingly have maintained an overweight cash positon and where possible are focussing on short duration opportunities with imminent ‘triggers’. 



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Portfolio Manager
Katana Asset Management

Katana Asset Management was founded in September 2003 as a boutique investment management firm. Katana employs an all opportunity investment mandate being style, sector and market cap agnostic.

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