Brian Bollen's Blog

From Here To Annuities

Here is a fuller bulletin from Jonathan Davis, addressing many of the major macro and micro economic issues that affect us all, from the arrival of Mark (jumping ship?) Carney as the new Governor of the Bank of England, to the cost of having children and shopping around for pension annuities. Read it and weep...

Download Economics and Wealth Management Update Summer 2013 copy

Economic Boom, Doom And Gloom

This arrived yesterday from Jonathan Davis, a financial expert whose opinion I respect highly. Even if I don't always agree with his views on the economy his factual comments on Government debt levels, the FTSE, the S&P 500, make compelling reading. As he quotes Milton Friedman as saying, That which is unsustainable will not sustain.

Download Bulletin Summer 2013 copy

EMs Face Fresh Challenges: Ashmore

Ashmore Investment Management draws attention to the latest Emerging View by Jan Dehn, its head of research

Entitled Convergence, global imbalances, and the role of infrastructure in EM, this month’s paper addresses the macroeconomic case for Emerging Market infrastructure. Dehn explains how Emerging Markets are now entering into a stage of their development, where they begin to face fresh challenges on their path of convergence to rich country status.

UK Green Shoots Safe: Coutts

James Butterfill, Global Equity Strategist at Coutts, explains that Chancellor Osborne’s axe won’t slay UK green shoots

https://blog.coutts.com/category/all/

Chancellor George Osborne continued to wield his axe in the Government’s latest spending review, as expected, but that won’t stop green shoots from emerging in the UK economy. And don’t let all the talk of tapering US stimulus discourage you - central bankers around the world have been at pains to remind us that they remain committed to ensuring sustainable economic recovery. This all bodes well for UK equities.

Oops there goes another rubber tree plant...

Mint – Blain’s Morning Porridge  - June 28 2013

As the half time whistle sounds on 2013, it’s been an exciting first half. Expectations raised and expectation cruelly dashed. In the great game of Market vs Investors, it’s looking pretty bleak for many asset buyers after Market pulled off a classic "shock the maximum number of folk" offside trick. Triple whammy of crashing bonds, reversing stock markets and an unhealthy injection of uncertainty leaves players flollopping looking to re-jig/catch up strategies for the rest of the year. Not going to be easy.

So what happened?

Welcome To Zombie Britain Mr Carney

Azad Zangana, European Economist, Schroders, provides an insight into what Mark Carney can expect upon his arrival and comments on what the future may hold for Britain. 

"The annual London gathering of the world’s top tennis players is under way with Wimbledon in full swing. One regular attendee likely to spend more time there in the future is Sir Mervyn King, who will retire after a decade of service as the Governor of the Bank of England, and Chairman of the Monetary Policy Committee.

"His replacement, Mark Carney, departs the Bank of Canada after five years as governor. Carney was handpicked by Chancellor George Osborne to provide more monetary activism to offset the government’s efforts in implementing austerity. Expectations are already high about the impact Carney will have on monetary policy and the range of new measures that he will introduce. Can Carney deliver?"

What will Carney find?

Why The ECB Needs To React To Taper: PIMCO

PIMCO has just alerted us to new Eurozone Market Update by Myles Bradshaw, now available on eurozonedevelopments.pimco.com

Why the ECB Needs to React to the Fed's Tapering Language

Last Wednesday’s FOMC (Federal Open Market Committee) meeting helped bring havoc to global markets. Federal Reserve Chairman Ben Bernanke confirmed that the Fed is looking to ease up on its expansionary policy and surprised markets by stating that its current economic outlook was consistent with asset purchases ceasing around June 2014.

The Fed’s past liquidity injections had resulted in a correlated rise in most asset classes as investors took on more risk and leverage. And last week saw many of these trades unwind.

Signs Of Life In UK: Coutts

James Butterfill, Global Equity Strategist at Coutts, says in a new briefing paper that he detects signs of life in the UK economy, with recent economic data surprising to the upside.

Among the reasons to believe in brighter times ahead for the UK economy are signs of improvement in the UK housing market, falling borrowing costs for small businesses and a declining trend in jobless claims. With central banks across the developed world committed to supporting growth, this combination bodes well for equities in particular.

Key opportunities and risks

CSFI To Host Brexit Panel

Another invitation to what sounds like an interesting lunchtime discussion has just arrived from CSFI director Andrew Hilton. I'm reproducing it in full below.

What would 'Brexit' mean? A round-table on the impact of the UK's potential exit from the EU on the financial services sector, with Hugo Dixon (Breakingviews), Jaques Lafitte (Avisa) and Dr Denis MacShane.

To be held on Wednesday, July 10, 2013, from 12:30-2:15pm.

At the London Capital Club, 15 Abchurch Lane, London, EC4N 7BW.

Learning From Japan

Standard Life Investments scrutinises the outlook for the Japanese economy, in the light of ‘Abenomics’, and compares its problems and potential solutions with those facing the Western economies in general and Europe in particular.

The latest edition of Global Horizons highlights that the Japanese economy currently faces severe structural problems, which if not addressed, could lead to a major economic crisis. In “Learning from Japan” Standard Life Investments uses its Focus on Change approach to examine the specific structural reforms that are necessary to raise Japan’s potential growth, as well as manage the enormous fiscal and demographic challenges that still lie ahead.

Opportunity Knocks: Coutts

In the latest Spotlight from Coutts, Stephen Rees, head of real estate advisory, sets out to provide a comprehensive view on UK residential property, including key risks and opportunities and top tips on investing in this market.

Policymakers have clearly targeted the log-jam in the UK residential property market with a series of new initiatives this year, which we think will be a catalyst for house prices to rise. In this document we look at how these policies should drive residential property prices higher in the short term. We focus on the longer-term outlook, opportunities and pitfalls of investing in the UK residential rental market and set out the key factors every potential landlord should understand before investing.

Key opportunities and risks

The Unexpected Charity Of Bankers

If you don't want to read something nice about banks, stop reading now.

New research (from a body of which I've never previously heard) suggests that despite the financial crisis, rate-rigging and tax-avoidance scandals the financial sector gives far more to charity than any other industry sector (the press release actually uses the word 'reveals' rather than 'suggests' but my first editor hammered into me a loathing of 'reveals'; it's for the Ten Commandments and the Virgin Birth, he always insisted).

But I digress, as is often my way. Findings published (rather than 'revealed') in the first ever Company Giving Almanac, from the charity Directory of Social Change, show the UK financial sector provides the lion’s share of money given by companies to UK charities and voluntary groups.

China Crisis: Don’t Fall For Cheap Prices

By Gary Dugan, Chief Investment Officer for Coutts in Asia & the Middle East.

China has lurched into crisis - gross domestic product (GDP) forecasts are falling, credit is expensive and policymakers do not appear to be prepared to offer any short-term props to growth. Shares may look cheap, but investors should be cautious.

At the heart of China’s crisis is the determination of the new government to bring much more economic discipline to the system and to rebalance growth away from (wasteful) investment and into consumption. However, this is a very delicate task that the economy has few effective levers to deal with. If growth were to collapse too far as investment spending is restrained then consumer confidence would fall back, and consumer spending with it.

Fixed Income: The Sleeping Elephant

A more unconstrained approach can potentially find and capitalise on pockets of better value that may exist in the broader fixed income universe. In a just published paper Jonathan Smith, UK strategic solution at Schroders, discusses two such approaches and how they might fit into a pension scheme’s investment strategy.

“Following on from the credit crisis of 2007-2009 and the subsequent sovereign crisis, in some countries across the developed world interest rates and bond yields are now close to the lowest levels in recorded history.



Collateral Access: Brought To You By BNP Paribas Securities Services

BNP Paribas Securities Services reports that it has boosted its collateral management solution by launching Collateral Access, an integrated and comprehensive offering to cater for both buy-side and sell-side clients.

Market dynamics and the search for increased transparency are pushing participants to implement a robust risk mitigation framework around collateral management. Incoming regulation, in particular EMIR and Dodd-Frank, has increased the need for collateral for all OTC derivatives, whether cleared or non-cleared. The new liquidity standards of Basel III will also affect future demand for high quality liquid assets.



It’s a miracle Oh Lord,

Mint – Blain’s Morning Porridge  - June 26 2013

It’s a miracle Oh Lord, and I should know because I've seen enough of them...

Lots of scary stuff out there! Redemptions from bond funds this week look set to top $22bn – an absolute record. Trim Tabs reported $47bn already pulled from bond market in June. Over last four years some $1.2 trillion went into bond funds, and it’s looking like some 5% has been pulled out in a single month. Not a positive sign. Outflows from the US muni market, investment grade, and emerging markets bond funds are at record levels.

Meanwhile, there has also been a massive sell out in ETFs - $9bn this week, largest outflow in years – triggering major ETFs trading well below net asset value. Does that mean the market is cheap? Or is it going to get worse? Is the sell off overdone?  Where is all the cash going? (Hint: markets feel oversold!)

US Equities: Slow And Steady Wins The Race

As July 4 approaches Joanna Shatney, head of US equities at Schroders, shares her views on the outlook for the US

"We are only half way through 2013 and US equity market returns have surpassed our initial return expectations for the year; yet we remain optimistic that further appreciation lies ahead over the long term and see the current pullback as an opportunity.

"While the market is now digesting worries about higher rates, it is important to keep in mind that the US market is already up 10% this year; and we think this period of contemplation is healthy.  As we settle into a slightly higher rate environment, it is not surprising to see short-term market consolidation; in fact it wouldn’t be unexpected for markets to be tumultuous for the next several weeks. We remain believers in a stronger growth profile for the US economy, and think that continued US equity market strength could be seen as early as later this year.  So far, US equity market performance has been a function of higher multiples. We believe the next leg of market outperformance will be driven by improved earnings growth, with a focus on companies that can exceed expectations with regards to earnings growth and cash redeployment.

Shale We Dance?

Shale oil – evolution not revolution, by Gary Dugan, Chief Investment Officer, Coutts, Asia and the Middle East

When we wrote about the US oil renaissance last year, we were already looking at the secondary impact of this huge shift in energy markets. While investors focused on the implications for the oil price and the exploration and production (E&P) industry, the potential was much wider.

Significantly lower energy costs have helped competitiveness, and driven a broader renaissance in US industry and investment in infrastructure to deliver these benefits across the economy.

Carney: Expect Change, But No Immediate Fireworks

By Darren Williams, European Economist, AllianceBernstein

On July 1, former Bank of Canada Governor Mark Carney will replace Sir Mervyn King as Governor of the Bank of England. For many observers, this will herald a new dawn in the conduct of British monetary policy. We agree, but think the process will be more evolutionary than revolutionary.

We certainly don’t expect any fireworks at Mr Carney’s first Monetary Policy Committee (MPC) meeting on July 3 and 4. Neither the prevailing view of the MPC nor recent strong economic data supports an immediate change in policy.

But this doesn’t mean that important changes aren’t coming - and the reasons aren’t hard to find. Notwithstanding recent figures, the UK’s economic performance since the credit crunch has been dire. Many independent forecasters expect the economy to be operating below full capacity for at least the next five years.

BNP Paribas Securities Services Extends Dealing Services to Australia

You wait all year for a story about asset services in Australia then two come along at once. Arriving in my in-tray just minutes after I posted the story about NAB and BNY Mellon strengthening their alliance in the country is a release detailing how BNP Paribas Securities Services is expanding its global dealing services solution to asset managers and asset owners in Australia.

A dealing desk is used to identify and access liquidity in markets and follow best execution practices, which requires a team of professional dealers and significant investment in IT infrastructure.  Until recently this function has largely been the domain of asset managers; however as superannuation funds are increasingly making their own investments and investment managers seek efficiency gains, the need for outsourced services is increasing.

BNP Paribas says