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Results 101–150
of 163 found.
Unemployment Surprise or Conspiracy?
The blogosphere is overflowing with conspiracy theories about the household survey unemployment data in this pre-election period. I do not give any credence to these stories and believe the data is the data. But it needs to be interpreted carefully as it can be complex and volatile.
Has Unconventional Policy Helped Lower the Yield Curve?
by Zach Pandl of Columbia Management,
With the funds rate stuck at zero for nearly four years, the Federal Reserve (Fed) has used a variety of unconventional policy tools in an effort to push longer-term interest rates lower. We think these actions affect markets in a variety of ways, and also that some of their effects may overlap.
Is China Becoming Less Competitive?
by Dara White of Columbia Management,
Concerns about the pace of economic growth in China and the imminent change in leadership have continued to escalate. At the beginning of the year, we highlighted the potential for the rate of economic growth to slow significantly. I recently visited Asia to get a clearer perspective on the situation in China specifically, and Asia generally.
The Fed's "X" Factor
by Zach Pandl of Columbia Management,
The most surprising element in last week's Federal Reserve (Fed) decision was not the announcement of Mortgage Backed Securities (MBS) purchases or the extension of its funds rate guidance to "mid-2015," both of which were signaled fairly clearly in advance. Rather, it was the fact that the aggressive monetary easing occurred alongside an upgrade to the central bank's economic forecasts.
Is Europe Fixed? Not Even Close!
by Fred Copper of Columbia Management,
Euro Area (EA) equities have rallied 16% since European Central Bank (ECB) President Mario Draghi made his now famous July 26 pronouncement that "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough." Does this mean the EA is fixed? Not even close.
Rethinking How We Invest
by Matt Scales of Columbia Management,
Building portfolios to meet individual objectives is or should be a customized exercise, so this article should not be considered advice for any individual. Instead, it is an alternative philosophy to how investors have traditionally approached building portfolios. For the vast majority of us, we allocate our capital to asset classes with the highest expected returns.
Going for Gold: Lessons from London
by Colin Moore of Columbia Management,
Fiercely competitive professional athletes were able to join together for a common purpose of achieving gold for the U.S. Small teenagers were prepared to sacrifice family life to win gold for the U.S. If only our politicians could find a way to set aside traditional rivalries and find a team plan to reduce our debt and spur higher levels of growth on a equitable basis. Unfortunately, the opposite is occurring.
ECB Policy: Over-Promise and Under-Deliver, Investor Behavior: Over-Anticipate and Over-React
by Colin Moore of Columbia Management,
Last week was a good example. Investors anticipated a major announcement from Mario Draghi, President of the ECB on Thursday because of remarks he had made the previous week at a conference in London. When he did not announce any immediate monetary policy changes following the regular meeting of the ECB, the markets demonstrated considerable volatility, declining on Thursday and rising on Friday.
Austerity: Damned If You Do, Damned If You Don't!
by Fred Copper of Columbia Management,
This glib depiction could be applied to most of the developed world. Much of the world's attention is on the debt imbalances within Europe, but too narrow a focus will miss the fact that aggregate debt levels for the region as a whole are still disturbingly high. The same is certainly true of Japan, and to a lesser extent the U.S.
Global Bonds - Where To Now?
by Nic Pifer of Columbia Management,
Economic data over the past four months show a clear softening trend in global economic activity. From our perspective, the muddle-along, sluggish global growth scenario remains very much intact. Highly accommodative monetary policies by the major central banks are helping support activity and contain downside risk.
U.S. Equities - So Far So Volatile
The premise of our 2012 equity market outlook was very modest economic growth in an overall environment fraught with risks, predominantly brought on by the dangerously high debt loads facing the developed world. Within that environment, we have advocated a two-pronged focus.
Is Higher Inflation on the Horizon?
by Orhan Imer of Columbia Management,
For nearly two decades inflation in the U.S. has been fairly contained except for a few periods of moderate acceleration around peak levels of economic activity. More recently, headline inflation as measured by the year-over-year change in the CPI-U (Consumer Price Index for Urban Consumers) declined from 3.9% in September 2011 to 1.7% in May 2012 driven primarily by the slowdown in the U.S. economy and the sharp drop in energy and commodity prices.
European Summit - Something for Bulls and Bears
by Fred Copper of Columbia Management,
The European summit outcome was fascinating; it had something for everyone, both bulls and bears. The net result was a positive surprise with at least one major concession by Germany. In concurrent news, three of the four semifinalists in the Euro 2012 soccer tournament were PIGS (Portugal, Italy, Greece and Spain) and the other was Germany. Spain won the competition on Sunday, symbolic of the PIGS power within Europe it isnt all about Germany.
A Busy Weekend in Europe
by Fred Copper of Columbia Management,
The headline story is the election in Greece. The initial market reaction to the vote result was positive, with the Euro and Asian markets up strongly. Apparently, the market is realizing that though a disorderly Greek exit scenario has been taken off the table, at least temporarily, by the majority given to pro-bailout parties, we are really just back to where we were before, between the rock of an economy in free-fall and the hard place of an unsupportable and expanding mountain of debt.
Creative Destruction
Creative Destruction is always at play in competitive markets of all kinds. Given the metamorphic pressures caused by todays over-levered and structurally low- growth global economy, the forces of Creative Destruction are perhaps far greater than normal. Low overall growth and historically high profit margins create a particularly potent environment in which corporations compete for their share of a potential profit pool. Revenue growth is increasingly hard to come by and cost-reduction opportunities may have been stretched to their outer limits.
The Tip of the Iceberg For Dividend Stocks
by Team of Columbia Management,
Post-crisis equity investors seek to lower portfolio volatility. Dividend stocks have provided higher returns with less risk compared with non-dividend payers. Baby boomers are retiring now with much smaller nest eggs than they had anticipated. They need reliable sources of income and growth. Cash-rich companies are in a position to pay and potentially grow dividends, while dividend payout ratios are historically low. Active managers leverage in-depth research to uncover promising opportunities among companies likely to initiate or raise dividends.
Opportunities in Credit Higher Quality High-Yield Bonds
by Team of Columbia Management,
One of the more compelling opportunities across todays fixed-income landscape is within the higher quality segment of the high-yield market bonds rated BB and B. Strong underlying fundamentals driven by a wave of refinancing and solid operating performance have greatly diminished credit risk among these issuers, as demonstrated by exceptionally low current and expected default rates. Despite this, spreads, or yield premiums relative to Treasuries, are generally higher than long-term averages.
Saber Rattling
by Colin Moore of Columbia Management,
Tension between Iran and its Gulf Co-Operation Council (GCC) neighbors continues to rise. The GCC was formed in 1981 by the Sunni controlled states to bolster security after the 1979 revolution in Iran and the subsequent war with Iraq. Tension between Shiite Iran and Sunni Saudi Arabia escalated last year after Saudi troops entered Bahrain to quell protests. The members of the GCC held talks to discuss closer political, economic and military union.
Searching for Big Foot
For the past few years, the sovereign bond markets have pushed peripheral European countries to reduce public debt. This has meant adopting austerity measures whereby government budgets are slashed and taxes are raised. Such measures meet investors approval. However, the immediate impact of such efforts is less economic growth which is intolerable to the people in Europe. The path to sustainable growth is complicated and requires long-term investments. We believe despite decades of research on the topic, academic efforts have not found a clear answer. Perhaps finding Big Foot will be easier.
The Easy Money Has Been Made
by Rich Rosen of Columbia Management,
As investment professionals, we chafe whenever we hear that expression. Why? Because in this business, there is no such thing as easy money. All our investment decisions are the end result of a great deal of research. Rarely are our greatest expectations realized, but neither are our greatest fears. In either case, it is never easy. Having said that, we feel confident in forecasting that an investment in natural gas (once it bottoms this spring/early summer) will perform substantially better going forward than it has for the last several years and with less risk.
Does Quality Matter?
by Jeremy Javidi of Columbia Management,
Most investors take comfort in investing in high quality companies. There are several attributes that define quality including strong balance sheets and cash flows. Having a strong balance sheet allows a company to redeploy capital towards growth opportunities rather than debt reductions. We believe that these attributes persist in the market over the market cycle and are virtuous in the pursuit of higher returns. However, recently we asked, where has quality gone? Often an initial snap back in the market after a bear market favors companies with weaker balance sheets.
Sell in May and go away?
by Beth Vanney of Columbia Management,
Sell in May and go away is a popular Wall Street adage referring to the belief that returns from October through April tend to be higher than returns from May through September. We thought it a timely topic to investigate paying particular attention to the election year cycle. Sell in May and go away? Not based on this analysis. The returns for October-April may be higher in general, but the absolute level of returns from May-September is still good, and slightly higher in an election year.
Question for the ECB: What Now?
by Fred Copper of Columbia Management,
The ECB tipped its hand last week in terms of which direction it is likely to go. Board member Benoit Coeure indicated the ECB could step in and buy Spanish bonds. It is unlikely to be a sustainable solution. It wouldnt be surprising to see renewed stresses emanating from the peripheral sovereign debt markets. There is a limit to how much the ECB is going to be able to do in this situation. Ultimately, the real burden is going to have to be borne by politicians through substantial fiscal adjustments.
The Importance of Being Earnest
If the buy low/sell high investing maxim is self-evident, why dont more investors do it? In 2007, corporate pension funds had close to 70% of their assets in stocks, yet at the bottom, bonds and cash accounted for more than half of the mix. As an investor, how can you avoid being part of the buy high/sell low crowd? Fundamentals are more important than themes. Some people can time the markets, but that probably doesnt apply. We prefer a simple, get rich slow strategy, which may be possible if you maintain a disciplined investment approach in concert with a reasonable set of expectations.
Investment Grade Bonds Still Attractive
by Tom Murphy of Columbia Management,
We continue to find investment grade corporate bonds attractive. Even after a strong start to the year, corporate bond spreads are anywhere from 20-90 basis points above their 20 year averages. This historical absolute valuation advantage is also buoyed by attractive relative valuations versus Treasuries spreads as a percentage of overall yield are currently from 1.8 to 2.4 standard deviations above their 20 year averages. Aggregate corporate credit metrics are also basically as good as they have been any time over that 20 year period, and companies maintain tremendous financial flexibility.
The Outlook for the U.S. Dollar
by Nic Pifer of Columbia Management,
On a trade-weighted basis, the U.S. dollar was largely unchanged in the first quarter of 2012. We expect a broadly similar story in both the near- and medium-term, with the balance of structural and cyclical weakness across the major economies providing little clear direction for the U.S. currency. For sure, movements of 5% or more in the trade-weighted dollar are always possible, reflecting short-term swings in investor sentiment and the normal volatility of currency markets. But we do not expect sudden moves in either direction to be sustained.
Are You Going to the Doctor Less?
Throughout 2011, the healthcare sector saw another year of reduced medical consumption, measured by doctor visits, hospitalizations, elective surgeries and more use of generic pharmaceuticals over branded products. This led to better earnings for managed care companies (payers) and lower earnings for hospitals and device companies (providers). So far, 2012 looks to be similar, but investors are watching carefully indicators like gross domestic product and employment growth and procedure and pharmaceutical volumes for signs of an uptick in utilization (unit consumption) and trend (price).
Money Market Fund Reforms The Debate
by Guy Holbrook of Columbia Management,
When looking back over the last few years at the money market sector it clearly has been a tumultuous period for an industry that had traditionally been viewed as stable and secure, all while providing daily liquidity for shareholders. It became evident, however, when the Reserve Primary Fund Broke the Buck in 2008 that safeguards needed to be enacted in order to protect both shareholders and the industry. There are currently three main schools of thought being debated when it comes to potential additional reforms ahead for the Money Market industry.
In Japan, Eventually is Getting Closer
On the anniversary of the devastating tsunami and earthquake in northeastern Japan we wish to express our sympathy and support for the people of Japan. With the rightful attention on the anniversary of this tragedy and on the Greece/European debt/growth challenges, it is easy to forget about the massive structural challenges faced by Japan. Japans total debt load surpasses even the U.S. in absolute terms and is second (and a close second) only to Zimbabwe in terms of debt to gross domestic product (GDP) at over 200%.
Fiscal Fantasies
The Congressional Budget Office (CBO) just released updated budget and economic projections for the next 10 years in its monster annual report. The report looks a touch closer to reality in the very near-term, marking down expected growth rates for the economy. Real gross domestic product (GDP) growth of 2% is forecast this year (down from the original estimate of 2.7%), and only 1.1% in 2013 (down from 1.5%). Both these estimates are below those of the Federal Reserve by a third. Much rosier projections are assumed thereafter with no interruption via recession.
Dividends: Proposed New Tax Rates
We are in a very attractive period for dividend paying equities. With yields from higher credit quality bonds at historical lows, an investing public hungry for income has to consider an increased allocation to equity income. The backdrop is positive for them to do so with healthy cash flows and historically low payout ratios creating a solid foundation for reliable and growing dividend yields. Given the strong outperformance of the highest current yielders in 2011, we continue to advocate seeking out companies with the ability to grow their dividends sustainably in the future.
Greek Austerity Bill Passed But Many Challenges Ahead
by Fred Copper of Columbia Management,
Even assuming all the required approvals are garnered, the bailout funding is paid and the debt write-down is imposed, it seems highly unlikely that the situation will have been resolved. The Greek economy is in freefall, and the forced austerity is likely to exacerbate that fact, making any debt/Gross Domestic Product targets unlikely to be reached.
The Trend toward Less Economic Freedom
With a sluggish global economy hamstrung by the colossal indebtedness of the developed world, it is crucial to be aware of any changes in the forces that fuel or handicap growth. One issue I am particularly concerned about is the direction of global economic freedoms. Many studies strongly suggest a high correlation between changes in economic freedom and economic growth. Today, there is significant evidence that economic stresses and perceived imbalances are driving governments and politicians around the world in a populist direction that will limit economic freedoms.
The Doves are Flying Circles around the Hawks
by Colin Moore of Columbia Management,
Most of the members of the FOMC of the Fed remain concerned about the level of economic growth and inflation over the next few years. The Committee expects growth to be modest over coming quarters which appears to be a downgrade from moderate. As a consequence, the FOMC pledged to keep rates near zero into 2014 versus 2013, as previously indicated. Some members were slightly more hawkish. Six members thought monetary policy tightening should begin as early as 2012 or 2013. Five participants chose 2014. Six participants thought 2015 or later.
Bull Riding is Risky
by Fred Copper of Columbia Management,
One of the most important actions taken by the ECB is the creation of a new liquidity facility for banks known as the Long Term Refinancing Operation which offers 3-year loans against a wide range of collateral. In the first auction, approximately 489 billion euros were borrowed by multiple banks. The second 3-year LTRO auction scheduled for February 29 could have substantially higher interest.This will represent a major de-risking of the banking sector. However, there are two reasons why any continued run-up to that auction may be a good time to take risk off the table.
Has Gold Lost Its Luster?
by Josh Kapp of Columbia Management,
In the last few days, the price of gold appears to have found some footing on improved macroeconomic data and a weaker dollar, together with apparent support from physical demand. While recent volatility may have dented confidence in golds safe haven status, golds appeal may ultimately balance on moves toward austerity vs. stimulus. As we head into the new year, the scales appear to be tipped to austerity.
Euro Summit V More Sequels Than Rocky
by Fred Copper of Columbia Management,
The ongoing series of Euro summits continued on Friday with the fifth installation since the project began back in 2009. The good news is that those who make money off these productions set themselves up nicely for a long run of future sequels. The bad news is that market volatility is unlikely to abate anytime soon as more questions were raised than answered. Not to spoil the movie for those who havent seen it (or any of the four prequels) but little was resolved at Summit V al-though some important steps were taken on the path towards a future fiscal integration of the Euro Area (EA).
Treasury Inflation Protected Securities: Whats Next?
TIPS have performed relatively well in 2011. Over the next 12 months we expect TIPS to outperform equivalent maturity U.S. Treasuries, However, given the current historic low level of real interest rates, we believe that absolute returns for the asset class will be only slightly positive. Our view is based on three factors: U.S. economic and policy outlook, recent trends in the components of consumer inflation and current valuations versus our base case assumptions.
Should Germany Leave the Eurozone?
by Colin Moore of Columbia Management,
For the last few weeks, the debate over the European debt crisis has focused on the need to restructure the eurozone. And the question we keep hearing is how tenable is the position of countries such as Greece. Perhaps the better question is whether Germany should leave the eurozone. Last week Germanys failure to get bids for 35% of the 10-year bonds offered for sale pushed European bond yields higher and global equities and the euro lower. Investors appear to be having second thoughts about the relative safety of investing in German bunds.
REITs: A Market Update
by Arthur Hurley of Columbia Management,
The Real Estate Investment Trust market experienced significant volatility during the third quarter with three different +/-15% moves. Global macro events continue to impact the REIT market, and the issues during the summer within the credit markets reminded investors that 2008 was not that long ago. With that said, earnings reported during the third quarter were generally in line or better than expected and most management teams had positive commentary with cautiously optimistic outlooks.
Should Greece Leave the Euro Area?
by Fred Copper of Columbia Management,
Under the terms of the proposed bailout agreement, the answer is YES, Greece should leave. The consequences of leaving would be extraordinary, almost inconceivable. In fact, legally, there is no mechanism that permits either a forced or voluntary departure from the Euro Area (EA). However, the terms of the currently proposed arrangement are so punitive that it is worthwhile for Greece to leave the EA despite the near-term pain it would cause.
Should Greece Leave the Euro Area?
by Fred Copper of Columbia Management,
Under the terms of the proposed bailout agreement, the answer is YES, Greece should leave. The consequences of leaving would be extraordinary, almost inconceivable. In fact, legally, there is no mechanism that permits either a forced or voluntary departure from the Euro Area (EA). However, the terms of the currently proposed arrangement are so punitive that it is worthwhile for Greece to leave the EA despite the near-term pain it would cause.
Is the U.S. to China what Greece is to Germany?
by Colin Moore of Columbia Management,
As the U.S. and peripheral Europe each try to adjust their economies to lower budget deficits, they risk recession over the next year or two. However, the impact on Germany and China may be more prolonged. Each region will struggle or refuse to adapt to a greater balance between external investment/export growth and domestic demand. An important conclusion of the book The American Phoenix Why China and Europe Will Struggle After the Coming Slump, as its title suggests, is that the U.S. will eventually deal with its issues and emerge relatively strong compared to Europe.
Breathing Space in an Unhealthy Environment
by Mark Burgess of Columbia Management,
Within Europe, while breathing space has been achieved, the outlook is still very clouded. The crisis has highlighted the eurozones structural flaws; how does the system work without fiscal and political integration? Achieving this is going to be very difficult and may ultimately lead to a smaller eurozone. Whatever the politicians think about closer integration, winning public support is going to be impossible for many governments. According to reports, for Greece, even with the 50% debt haircut, they are still forecast to have net debt to GDP of 120% by 2020, not exactly sound finances!
Whats next for Libya?
by Tom Abrams of Columbia Management,
Qaddafi has left the stage so we now turn our attention to the myriad of subplots that is Libya in transition. When we think about the oil markets and the impact of Libya's return to production and exports, we invariably turn to both the political possibilities in the country as well as the physical state of their oil and gas infrastructure. We believe the future pace of political progress in Libya and the pace of the recovery in oil production will be related. More political agreement on the disbursement of oil revenues would likely mean a more coordinated and quicker recovery in production.
Europe The Plan to Have a Plan
by Fred Copper of Columbia Management,
We are at a critical point in Europe and the outcome of the situation has the potential to resonate around the globe and across all the asset classes. When evaluating Europe, there are two main considerations: First, a recession is likely over the course of the next 12 months. Many of the metrics of economic activity in the stronger core markets such as Germany are hovering right on the border of contraction. Second, the ongoing sovereign debt crisis is now morphing into a banking crisis.
Global Economic Crisis = Social Unrest
I fear that our fragmented political process may go from bad to worse as polarized factions face off over how to respond to a fraying of the Western social contract. Inefficiency in developing effective policy in that environment is likely to be a further drag on economic growth, potentially creating a negative feedback loop. We run the risk of crossing a dangerous tipping point where economic pain fuels dramatic social unrest, which in turn makes a path to recovery more difficult. I do not see equity risk premiums sustainably falling until we begin to witness that change in direction.
Implications of United States Downgrade for Tax-Exempt Market
If negotiations stall or fail to meet intended goals, forced budgetary cuts could have greater impacts on certain credits in the market than under a more thoughtful plan. We continue to believe that broad generalizations of implications in the tax-exempt market are misguided and fundamental credit analysis of each security is crucial. Our credit analysts will continue assessing the credit strength of securities on an individual basis, which has always incorporated the reliance on federal government transfers.
Results 101–150
of 163 found.
