Which is right on Trump: Bill Gross or Ray Dalio

Posted by Patrick Ceresna on Nov 16, 2016 11:18:13 AM

Ceresna Comment: Ray Dalio wrote an article reflecting on the Trump Presidency(click to read).  His initial view: Our very preliminary assessment is that on the economic front, the developments are broadly positive—the straws in the wind suggest that many of the people under consideration have a sufficient understanding of how the economic machine works to run reasonable calculations on the implications of their shifts so that they probably won’t recklessly and stupidly drive the economy into a ditch. 
On the other end, Bill Gross has taken a much more concerned view of the situation.  (click to read). His view centers on the idea that the populist movement is only beginning and that Trumps policies do not address the big picture headwinds of demographics, technological displacement, deglobalization and overleveraged balance sheets.  
I have to agree with Bill Gross on this one.  Trump cannot undo the global debt cycle that needs to deleverage. While this may not be immediately bearish, I do feel that the short-term optimism will have a reality check as soon as all the dumb money finishes its panic buying. 

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Topics: Trump, populism

Passive Negligence - Dangers in Passive Investing

Posted by Patrick Ceresna on Nov 6, 2016 8:42:30 PM

Ceresna Comment: Important article written by Michael Lebowitz highlighting the flaws in passive investing using indexing. I would summarize that as indexing becomes more popular, the more it will distort the market pricing and increase the risk to those believing it to be a conservative strategy. The more the public pours into the strategy, the more likely it is to be the epicenter to the next major market event.  The smaller and smaller the active management sector gets, the more likely that there will be considerable opportunities presented to the few dinosaur managers left using bazaar voodoo techniques like bottom up value investing. 

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Topics: passive investing, indexing

JP Morgan: Why Future Market Crash May Be Worse

Posted by Patrick Ceresna on Oct 30, 2016 1:28:00 PM

JP Morgan's Nikolaos Panagirtzoglou:
Markets become more brittle, risky: "The shift towards passive funds has the potential to concentrate investments to a few large products. This concentration potentially increases systemic risk making markets more susceptible to the flows of a few large passive products."
Crashes, when they happen, will be bigger and badder: "the shift towards passive funds tends to intensify following periods of strong market performance as active managers underperform in such periods of strong market performance. In turn, this shift exacerbates the market uptrend creating more protracted periods of low volatility and momentum. When markets eventually reverse, the correction becomes deeper and volatility rises as money flows away from passive funds back towards active managers who tend to outperform in periods of weak market performance."
Markets become less efficient: "if passive investing becomes too big, potentially crowding out skilled active managers also, market efficiency would start declining. In turn, this would present opportunities for active managers to extract arbitrage profits."

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Topics: Market Crash, indexing

The Pain in the "Buy and Hold" Strategy

Posted by Patrick Ceresna on Oct 27, 2016 2:15:13 PM

Ceresna Comments: The mainstream wealth management firms and the advisors that represent them firmly stand by the “Buy and Hold” mantra.  This stance is firmly entrenched in modern portfolio theory.  The idea that risk can be diversified away by owning a basket of uncorrelated assets.  These models are anchored in the world of academia.  This is the same world where negative interest rates and efficient markets make sense.  The problem with models is that they must make assumptions to be able to be able to be computed.  The problem is that these assumptions are unknowable and dynamically changing.  The truth is that the markets adhere far more to behaviour finance than fundamental rigor.  Investors are risk adverse and losses hurt.  When investors endure losses, they lose the appetite to stay the course and often seek change or to stem further loss. 

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Topics: buy and hold

Is the Chinese Yuan Devaluation Just Beginning?

Posted by Patrick Ceresna on Oct 26, 2016 11:28:55 AM

Ceresna Comment: The shortage of U.S. dollars globally has forced many central banks to start liquidating U.S. Treasuries to suppress the dollar rally. We believe that this is the single most significant macro event today.  I think the question asked in the article below is quite relevant -  "One wonders how much higher the USD will jump if and when China decides to halt its selling of US paper, and how much lower the Yuan will then tumble in response, leading to even faster capital outflows from China?" I would further add, the price suppression can only be sustained for so long. The only easy solution is for the Fed to provide liquidity, but as one can see, they are stubbornly focused on tightening. 

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Topics: chinese yuan,, treasuries

Volcker OP-ED on Ignoring the Debt Problem

Posted by Patrick Ceresna on Oct 24, 2016 7:58:56 AM

Insults, invective and pandering have been poor substitutes for serious debate about the direction in which this country is going — or should be going. And a sound and sustainable fiscal structure is a key ingredient of any viable economic policy.

Yes, this country can handle the nearly $600 billion federal deficit estimated for 2016. But the deficit has grown sharply this year, and will keep the national debt at about 75 percent of the gross domestic product, a ratio not seen since 1950, after the budget ballooned during World War II.

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Topics: Global Debt, us debt

Bank of America: "Imminent Recession"

Posted by Patrick Ceresna on Oct 21, 2016 9:30:41 AM

Bank of America's Savita Subramanian issued an overnight note titled "Is it about time for a recession?".  In the note, is suggests that they found evidence for an imminent recession.  Suggesting that if data were to continue to weaken in line with the recent pace, history would point to a recession in the second half of 2017.  Further explination suggests that not every bear market coincides with a recession, but the most painful ones do.  But my favorite part is that they caution Bank of America's long-term oriented investors from going to far in reducing their equity exposure suggesting that unless you can pinpoint the peak of the market within a 12-month timeframe, you are typically better off staying invested.

Ceresna Comment: Let me summarize.  There is risk and a lot can go wrong and it is imminent.  But don't worry, just buy and hold for the long-term.   Thanks for the advice Bank of America, but I think I will let you and your clients hold the bag on the way down.

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Topics: Recession

Calm Before the Storm

Posted by Patrick Ceresna on Oct 19, 2016 6:42:37 PM

John Hussman wrote a great article discussing the current market and the asymmetric risk facing 
investors today. The "BOLD" is our emphasis. 
John P. Hussman, Ph.D.  www.hussmanfunds.com 
Originally posted October 17, 2016

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Topics: Market Crash, S&P 500

VIDEO Part 1 of 4 - Are You Ready For a Canadian Real Estate Market Crash?

Posted by Patrick Ceresna on Aug 19, 2016 9:08:34 AM

Part 1 of 4 - You have heard it all before, houses are too expensive, foreign investors are inflating prices and speculation is rampant. Yet despite that, the numbers keep rising and people continue to believe that buying houses at these levels are a safe investment. So why is it different now? That's the key question.

Based on an overwhelming number of requests, we have broken down our widely viewed video into 4 smaller parts. 

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WATCH NOW - 2016 Mid Year Global Market Forecast

Posted by Patrick Ceresna on Jul 24, 2016 2:25:19 PM

Back in December 2015 we made some bold forecasts for the US Dollar, Gold, Oil, Interest Rates and the markets.  So now that 6 months have passed, how are the investment themes developing?  Has our opinion changed?

Watch the video and discover out thoughts on:

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