Jim O’Neill Says Get Used to U.S. Yields Nearer 4% Than 2% – Bloomberg 06-11-13

Salient to Investors:

Jim O’Neill said:

The US is returning to normality so expect 10-yr T-yields to rise toward 4 percent  in the next couple of years as the 30-year bull market in bonds comes to an end. There will be quite ugly days.

The global economy is in the early stages of the recovery of the equity culture and perhaps the end of a 30-year growing love affair with bonds.

Speculation the Fed may taper may damp demand for emerging-market bonds as well as US debt.

When the game starts to change with central banks, it is inevitable bonds will suffer and we will see further reaction in many emerging markets, particularly where those with current account deficits, like Turkey.

India is the weakest BRIC and sometimes smothers decision-making.

Prefer Bangladesh assets over their Indonesian counterparts.

There remains value in assets from China and peripheral euro-area nations, and the safest bonds may become less fashionable.

Read the full article at http://www.bloomberg.com/news/2013-06-11/jim-o-neill-says-get-used-to-u-s-bond-yields-nearer-4-than-2-.html

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Investors Expecting U.S. Markets With Best Return in Poll – Bloomberg 05-15-13

Salient to Investors:

Bloomberg Global Poll:

  • International investors are the most bullish on the US and Japanese markets in more than 3.5 years as both economies are seen to be improving.
  • Over 40% will reduce gold exposure over the next 6 months, close to 3 times more than those who plan to increase it.
  • 54% said equities will offer the highest returns over the next year – the best reading in the nearly 4-yr history of the poll
  • 20% said real estate will offer the highest returns over the next year. 42% plan to increase their exposure to the property market in the next 6 months, versus 36 percent in January.
  • Over 60% said the US economy was improving, the most since September 2010.
  • 40% plan to increase their exposure to the US dollar over the next 6 months versus 20% in January, while only 9 percent said they were reducing exposure.
  • Over 50% expect the S&P 500 to rise over the next 6 months versus 62 percent in January.
  • Over 60% expect the Nikkei 225 to rise over the next 6 months, 16 percent expect it to fall.
  • Close to 50% say the Japanese economy is improving versus 14 percent who said it is deteriorating.
  • Over 25% expect China markets to offer the second worst opportunity after the EU over the next year. 45% would avoid China. 30%  believe slowing Chinese growth as the biggest risk to the global economy in 2013, second to 36 percent who see Europe as the largest danger.
  • 60% expect a debt default by Cyprus, 35% expect a debt default by Slovenia.
  • Only 6% see a high risk that Syrian civil war would escalate and affect oil prices. 67%  said US intervention would damage regional stability.
  • 20% said commodities were the asset to be most shunned over the next year.
  • 56% believe deflation will be a greater threat to the global economy than inflation over the next year, versus 75% who thought inflation was the bigger danger in January 2011.

Charles Doraine at Doraine Wealth Mgmt is upbeat on the US as housing is coming back and the US can be energy independent in the not too distant future.

Peter Fitzgerald at Aviva Investors says the US equity market rally will continue because the US growth is reasonable, monetary policy is extremely accommodative, housing continues to recover, businesses have cash and have underinvested for years. Fitzgerald said inflation simply has not been a problem, while deflation poses a much greater risk with current debt levels.

Ryan Longhenry at CJS Trading said the US dollar should benefit in the months ahead as the Fed looks to scale back its stimulus while other central banks add to theirs.

Sangwook Lee at Shinhan Bank said the US economy will grow at least 2.5 percent in 2014 while as long as the BOJ keeps QE until 2015, major Japanese corporates and banks’ equities will outperform other markets.

Read the full article at http://www.bloomberg.com/news/2013-05-16/investors-expecting-u-s-markets-with-best-return-in-poll.html

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Gross Says Decades Needed to Normalize From Too Much Debt – Bloomberg 06-28-12


Bill Gross said:

  • It will take economies and financial markets decades to normalize after the debt crisis, keeping U.S. securities the safest bet for investors. This is an authentic debt crisis and can only be ultimately cured by default or printing more money to inflate it away. A debt crisis can’t be cured with more debt when national- and household-debt levels as a percentage of GDP or household income become imbalanced. The current burden of global debt is only being lightly alleviated via zero-bound interest rates.
  • Don’t underweight Uncle Sam in a debt crisis – safe haven money will find it in America’s deep and liquid, almost Aaa rated, bond and equity markets. The U.S. Treasury market is the cleanest “dirty shirts” for investors.
  • He favors debt of the U.K. and the U.S. as Germany is in a bond-market bubble because of its rising liabilities from Europe’s debt crisis. German bonds have little room to rise further, except in a scenario such as Germany leaving the euro.

Read the full article at http://www.bloomberg.com/news/2012-06-28/gross-says-decades-needed-to-normalize-from-too-much-debt.html

Havens Hard to Find as Bonds Lose Risk Status, BIS Says – Bloomberg 06-24-12

Salient to Investors:

The Bank for International Settlements said government bonds losing their risk-free status are depriving investors of wealth-preservation opportunities while Europe’s debt crisis boosts demand for havens. The global pool of safer assets has shrunk just as demand has risen due to a flight to safety, leading to a major shortage of safe assets in the global financial system – The deterioration in the perceived creditworthiness of a sovereign raises the funding costs of virtually all private borrowers in its jurisdiction.

Germany is the only euro currency nation with a stable outlook on its AAA rating.

Read the full article at http://www.bloomberg.com/news/2012-06-24/havens-hard-to-find-as-bonds-lose-risk-status-bis-says.html

Soros Pushes EU to Start Joint Debt Fund or Risk Summit Fiasco – Bloomberg 06-24-12

Salient to Investors:

George Soros said:

  • A failure to produce drastic measures could spell the demise of the Euro.
  • Europe should create a European Fiscal Authority to purchase sovereign debt in return for Italy and Spain implementing achievable budget cuts – funding to come from the sale of European Treasuries, which would have low yields because they would be backed by each euro member.
  • Merkel is worsening Europe’s crisis because countries need growth, not austerity, to pay down their debt – she has been leading Europe in the wrong direction.
  • Greece cannot meet the conditions that have been set, and Germany is absolutely determined not to modify them, so expect Greece to be forced out of the euro.
  • Neither Spain nor Italy can print money, making it likelier that financial markets can push one of them out of the bloc. Spain is likely to need a full bailout unless leaders announce drastic measures at the meeting.
  • Stock and bond markets will react negatively if Europe fails to announce a plan this week to ease pressure on Spain and Italy.

Read the full article at http://www.bloomberg.com/news/2012-06-24/soros-pushes-eu-to-start-joint-debt-fund-or-risk-summit-fiasco.html

Euro Crisis Hits Profits Globally as P&G Cuts Forecast – Bloomberg 06-25-12

Salient to Investors:

Europe’s debt crisis is pressuring global earnings.

Analysts predict S&P 500 companies will report a 1.1 percent average drop in Q2 earnings, the first decline in 11 quarters and after a 6.2 percent average increase in Q1. A stronger dollar threatens earnings as U.S. exports become more expensive.


Tim Ghriskey at Solaris Group doesn’t expect favorable corporate outlooks given Europe and slowing growth in the U.S. and China.

Mark Luschini at Janney Montgomery Scott said Philip Morris is a canary in the coal mine for many companies who will use currencies as an excuse for declining profit.

Read the full article at http://www.bloomberg.com/news/2012-06-24/euro-crisis-hits-profits-globally-as-p-g-cuts-forecast.html

Buying Europe Banks Is Easy for Herro as Cheap Stocks Fall – Bloomberg 06-21-12

Salient to Investors:

The cheap valuations of European banks, Japanese carmakers, Hong Kong developers and Russian oil producers are attracting investors, indicating that most investors are more concerned with preserving capital than earning higher returns. Shares with the lowest price-to-book ratios lost an average 10 percent since March 2012 and trailed the most expensive shares by 7.2 percentage points, the widest gap since Bloomberg began tracking quarterly data in 2002.

Bloomberg data show over 580 companies in MSCI indexes sell for less than their net assets – the cheapest trade at an average 0.7 times book value; the most expensive trade at 9.6 times book value, led by health-care and consumer products companies whose earnings aren’t tied to the economy. Stocks with the lowest price-to-book ratios have returned an average 6.2 percent per quarter during the past decade, versus 4.3 percent gain for shares with the highest valuations.

Global investors cut equity holdings in Russia and Japan, and had their biggest underweight positions in banks.


David Herro of Harris Associates been significantly adding to European banks, Japanese carmakers, Hong Kong developers and Russian oil producers. Herro says the gloomy environment makes his job quite easy, and investors who focus on good quality companies at low prices are getting very enthused.

Kathy Xu at Aberdeen Asset Management is finding many value stocks and has been has been adding Hong Kong developers at valuations at a five-year low versus global peers. HSBC Global Asset Management likes Russian energy companies at a 45 percent discount to net assets, the cheapest level since 2009.

David Semple at Van Eck Global is not yet ready to buy deeply undervalued but still risky stocks.

Gareth Morgan at F&C Investments dislikes Russian stocks.

The cheapest stocks are favored most by analysts, who predict average gains of 24 percent for the group and 27 percent earnings growth during the next 12 months. The average return predicted for the most expensive companies are 14 percent and projected profit growth of 20 percent during the next 12 months

Ed Conroy at HSBC Global Asset Management likes the long-term prospects of the Russian oil industry – largest holdings are in Russia where current valuations are a buying opportunity.

Read the full article at http://www.bloomberg.com/news/2012-06-21/buying-europe-banks-is-easy-for-herro-as-cheap-stocks-fall-most.html

Pimco’s Gross Warns of Risk Assets as Aberdeen Avoids Stocks – Bloomberg 06-22-12


Bill Gross warned that risk markets are vulnerable as the monetary bag of tricks empties. Gross prefers U.S., Mexico and Brazil debt with intermediate maturities over the next few years, and stocks in companies that produce stable cash flow in high growth markets. Gross increased the proportion of U.S. government and Treasury debt in the Total Return Fund for the first time  since January.

Peter Elston at Aberdeen Asset Management is underweight equity positions on the expectation that economies will continue to contract and the realization that governments are not as able to act as they have been in recent years.

Bob Baur at Principal Global Investors sees a pickup in economies.

Noah Weisberger at Goldman Sachs recommends shorting the S&P 500 due to incremental U.S. monetary policy on hold and a deteriorating growth picture near term; sees the index dropping to 1,285.

Read the full article at http://www.bloomberg.com/news/2012-06-22/gross-warns-of-risk-assets-as-aberdeen-underweight-on-equities.html

Stocks, Commodities Drop on China Manufacturing, U.S. – Bloomberg 06-21-12


Stefan Angele at Swiss & Global Asset Management says uncertainty about Europe and the slowdown in China remains – the extension of Operation Twist was largely symbolic and will have no significant effect on either economic growth or the markets.

Read the full article at http://www.bloomberg.com/news/2012-06-21/asian-stocks-gain-after-fed-extends-stimulus-as-oil-euro-drop.html