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Britain's
top fund managers - This item
from the Telegraph.co.uk may be of interest to some readers and not just from
the UK. Here is the opening:
Stock markets can be volatile beasts you can be sitting on handsome gains
one minute and hefty losses the next. With
many investors nervy about a possible correction, the key is to find a fund manager
who delivers the goods irrespective of whether share prices are rising or plummeting.
We asked
fund analysts Financial Express to highlight which managers have proved that they
can consistently deliver the goods. Using a mixture of methodology including consistent
outperformance against its benchmark, performance when markets fall or rise and
a so-called risk-adjusted Alpha rating, which takes into account volatility, they
have come up with a list of managers that cut the mustard.
In total
they have collated a list of 110 managers that they suggest investors should
consider when buying a fund, but to make it easier for you we have cherry-picked
the top manager in several main sectors over a five-year period.
Some
of the names will be familiar to you, others less so, while we have also canvassed
the opinions of advisers to see if they agreed with the Financial Express ratings.
My view - While a good investment
manager can make a difference, the first paragraph above is misleading. Even
the best long-only equity funds will suffer if share prices are plummeting.
The huge variance in performance over five years by the managers mentioned shows
that choosing the right sector or region is considerably more important than
the actual manager.
Orin S Kramer: Unfunded Benefits Dig States' $3 Trillion
Hole - My thanks to a subscriber for this recent
and topical item,
published by Bloomberg. Here is the opening:
Everyone
seems to know the current path of federal fiscal policy is a deathtrap over
the long term. What's peculiar is the relative inattention to the balance sheets
of state and local governments.
Hidden behind accounting fictions, the politically unspeakable reality is that
public employee pension systems are under-funded by more than $2 trillion. Add
more than $1 trillion in unfunded health-care benefits for retired public employees,
and state governments face protracted structural deficits ranging from challenging
to insurmountable.
Unfunded promises are the equivalent of government debt. The burden of promises
made by state governments to their employees -- effectively an invisible wealth
transfer from future taxpayers to current and prospective public-sector employees
-- amounts to about one quarter of U.S. gross domestic product. The strength
and durability of the current economic recovery are unknowable; that state and
local governments, which employ one in nine workers, will be a drag on that
recovery is certain.
Ultimately, mathematically unsustainable trends must reverse. As with New York
City in the late 1970s, eventually the federal government may get involved in
redefining the services state and local governments provide, the benefits paid
to public employees and the burdens on taxpayers. States cannot kick the can
down the road ad infinitum.
My
view - The subscriber who forwarded this also said
that it was "a timeless piece on the psychology behind the investment decisions
at public employee pension funds." I agree.
I would
also make another point. Unfunded public sector pension liabilities are a huge
and growing problem for all heavily indebted countries, from Greece to many
other European states, the UK and USA. These countries have three ways out of
this crisis: 1) grow their way out of trouble; 2) slash benefits; 3) inflate.
Path
1) is preferable but difficult and takes a long time under the best conditions.
2) is probably sensible but also divisive. 3) is too often inevitable.
Amor Fati: Moving Toward Our Maximum Regret -
My thanks to a subscriber for this interesting report by Marc Chandler of Brown
Brothers Harriman. It is posted in the Subscriber's Area but here is a brief
sample:
Life
Blood
Nearly all policy makers share two key interests: lay the foundations for a
sustainable economic recovery and unwind the emergency facilities and spending.
There appeared to have been a consensus, giving more weight to the former than
the latter this year. The bond vigilantes have instigated a disruption of that
consensus much to the chagrin of the popular will. Indeed, those countries that
capitulate the most to the vigilantes are likely to experience the most social
push back. Stay tuned.
Ironically,
the effect of the bond vigilantes and the social resistance may be similar insofar
as the economic impact is negative. Ultimately what is at stake is how the costs
(broadly understood) of the bailouts and stimulus are going to be distributed,
not just in terms of classes, but also sectors, industries and countries.
This
is taking place along another potent but yet somewhat less personal of a force.
Like a victim in a trendy vampire show, the life blood of the two largest economic
regions, the US and Europe, is being sucked out.
Money
supply, measured by the ECB's M3 has collapsed. In January 2009 it was growing
at a 6% year-over-year pace. By the end of the year it was contracting at a
0.2% pace. It was contracting in both November and December. The next report
is due January 25th and even if one is not a monetarist, the situation is worrisome.
It has
been lost in the light of the preliminary 5.7% Q1 US GDP, but in the Fed's statement
there appeared what seems like the first official recognition of the ongoing
contraction in bank credit. The FOMC implies that this is being offset by improved
financial market conditions. We thought so too.
But the
capital markets are fickle and given the surge in volatility and the general
deterioration of market conditions (should it persist), the risk is that it
no longer is sufficient to offset the contraction in bank credit. Even if this
is just a normal market correction, it could stall the economies at a crucial
time.
The real
tragedy is not what is happening in Athens, as painful as the adjustment promises
to be. Rather the real Greek tragedy is that we are running quickly, even if
not irrevocably yet, into precisely that which we wanted to avoid the most.
My
view - This is a worryingly pessimistic, hopefully
too pessimistic conclusion, but let's have a look at various money supply figures.
This
item continues in the Subscriber's Area.
Emails of the day (1&2) - On
gold:
(These
items appears in the Subscriber's Area.)
Additional
commentary by Eoin Treacy
Estonia - The Return of a Baltic Tiger? - Thanks
to a subscriber for this interesting article
by Andreas Hoffmann in the ThinkMarkets blog. Here it is in full:
The new
member states of the EU were hit hard by the current crisis. Especially the
former Baltic tigers (Estonia, Latvia, Lithuania) have seen a tremendous decline
in GDP. While our economies face difficulties to cope with a decline of about
five percent of the GDP, they lost 10 to 15 percent. In my opinion, Estonia
is the most interesting of the three as it chose a distinct way to deal with
the crisis.
Like many economies, Estonia saw an artificial boom driven by cheap credit rates
until the latest crisis. From 2003 to 2007 growth rates reached up to 12 percent.
At the same time wages grew rapidly. Huge current account deficits reflected
the increase in wages, influx of capital and the credit boom. However, unlike
most other economies and even though it lost by two digits, Estonia managed
to keep the budget relatively balanced in the current crisis. Estonia was even
able to contribute to the IMF-program for its formerly "growth mate"
Latvia. What is the reason behind it?
With a tradition of a fixed exchange rate to first Germany and now the euro
area, Estonia has been waiting to enter the euro area as soon as possible. Even
though the boom brought about real convergence as the GDP per capital caught-up
with the former EU-15, nominal convergence was out of sight. The credit boom
fuelled inflation, not only in real estate prices but also in consumer prices.
Nominal and real convergence did not go hand in hand. This caused a problem
in not fulfilling the Maastricht inflation criterion, necessary to introduce
the euro.
Thus the Estonian government reacted in a way to the current crisis that should
bring tears of joy into the eyes of any free market economist: First, they did
everything to hinder a devaluation of the Estonian kroon, as a relatively stable
exchange rate to the euro is a prerequisite for euro introduction. Secondly,
they did not overspend. Instead they cut wages heavily with the fall in per
capita GDP - even in the public sector. And third, unlike most economies, Estonia
did not sacrifice economic freedom for crisis management. Instead, officials
wait for the crisis to heal the market.
At the same time lower spending is assumed to bring inflation down. The crisis
is seen as a chance to (readjust and) fulfill the Maastricht inflation criterion,
which was impossible during the boom period.
Thus, as Estonia allowed for an adjustment process, malinvestment from the previous
boom should be dismantled soon. This should bring about lucrative future investment
possibilities in an economy with solid macroeconomic fundamentals, a high degree
of economic freedom and prospects to enter the euro zone. At the moment interest
rates are much higher there than in the euro area and a credible fixed exchange
rate assures against depreciation. These facts should attract new investors.
Therefore it is likely that we soon see the return of at least one Baltic tiger.
My view - The subscriber also attached this additional
informative commentary
on the Estonian economy by John Dizard for the Financial Times and a further
comment:
"Friend
of mine in Tallinn runs a Baltic fund. She tells me her friend who owns a fancy
restaurant in the old town paid his waitress EUR 5.50 in early 2007. Now it's
EUR1.50. That is just the kind of adjustment that Estonia will make, and Greece,
Portugal etc will not. Also defaults have not been that high as bankruptcy is
socially frowned-upon and people have very little to live on for some years
after bankruptcy. Instead people have taken much higher paying jobs in Helsinki."
Estonia's
fiscal adjustment is one of the more extreme undertaken by a European government
since the credit crisis unfolded and it appears to be helping lay the foundation
for an economic recovery. However, as with just about every other country that
has an overhang of debt, convalescence is going to take time.
This
section continues in the Subscriber's Area.
Email of the day (1) - on
lumber:
"Kudos
for a job well done with Friday's big picture long term outlook. You mentioned
timber which had an emphatic breakout to the upside last week. However, stocks
like West Fraser, Plum Creek, Rayonier, and Weyerhaeuser actually sold off and
are lower for the week whereas the price of timber is up by approximately 15%.
Is this a warning sign for timber stocks as in the gold market the mining stocks
typically lead the bullion price or is this a buying opportunity. Can you please
comment on this divergence?"
My comment
- Thank
you for your kind words. Lumber concluded
a remarkable advance on Friday having been limit up at least once intraweek
and is attracting increased investor attention both because of its absolute
and relative performance compared to the wider commodity markets. It broke the
5-year progression of lower rally highs in November, consolidated below $250
for two months and broke emphatically upwards last week; reasserting the medium-term
uptrend. It is somewhat overextended in the short-term but a downward dynamic
would be required to check the advance beyond a brief pause, while a sustained
move back below $235 would be needed to question the consistency of the medium-term
advance.
This
section continues in the Subscriber's Area.
World Equity Index Valuations Tables - The monthly
list of 99 global indices ranked in descending order by dividend yield, then
in ascending order by P/E, Price / Book and Price / Cash Flow is posted in the
Subscriber's Area. .
This section continues in the Subscriber's Area.
Email of the day (2) - on whether it would be possible
to add a column for Estimated P/Es to the World Equity Index Valuations Tables:
"Nine months from subscribing I am still an avid reader of your daily commentary.
"I
am wondering about P/E ratios around the world. While your monthly list from
Bloomberg is helpful, the data is historic. While I recognise that forecasts
of P/E ratios are subjective, I and other readers might find it useful to know
what the pundits are forecasting. A Google search led me to Consensus Economics
who seem to produce surveys of forecasts. Does in Investors' Intelligence subscribe
to their service, or some similar one, such that you could publish forecast
P/Es from a fairly reliable source?"
My comment - Thank you for this reasonable request
and we are delighted to hear you are enjoying the Service. However, the only
data feed we receive is from Bloomberg and they do not publish Estimated P/E
data for the indices in this report.
Email of the day (3) - on adding the gold/silver
ratio to your Favourites:
How can
I save a Gold/Silver ratio chart in the Favorites chart area?
My comment
-
Thank you for this question which I'm sure will be of interest to other subscribers.
You will find the Gold/Silver ratio in the Relative Charts section of the Chart
Library, about a third of the way down the left hand column. There should be
a green '+' sign to the left of it. Simply click on this '+' and it will be
added to your Favourites. For more on how to customize your Favourites such
as how to add sections and filter the constituents have a look at the Help
Pages.
Email of the day (4) - on finding funds in the
Chart Library:
"Where
can I look for Gold ETF and for Indian stock market ETF which is traded in USA
and UK? Please help"
My comment
- Thank
you for this question. The Chart Library contains a number of funds devoted
to both India and Gold. The easiest way to find either would be to use the Chart
Library's search engine with either 'gold' and 'India' as the respective search
parameters. For Gold, you will find all of the related funds in the Commodity
Indices - Funds, ITs & ETFs section of the search results. All of the UK
listed funds have (UK) following the title. For India you will find all the
related funds in the Asia & Asia Pacific - Funds, ITs & ETFs section
of the results and again all the UK listed funds will have (UK) following the
title.
Email of the day (5) - on an addition to the Chart
Library:
"Can
you please include in the chart library: Franklin Templeton China A Distribution
GBP"
My comment
-
Thank you for this suggestion which has been added to the Chart Library.
Email of the day (6) - on measuring a decline:
"One
basic question - when analysts talk in terms of percentage decline, is it measured
as:
"-decline from the highest high to the lowest low; or
"-decline from the highest closing high to the lowest closing low
"Thanks in advance for the clarification."
My comment - Thank you for this question which
others may also be curious about. Terminology tends to differ between analysts.
At Fullermoney, when we talk about a high or low we means from the highest value
to the lowest value. If we mean highest closing value or lowest closing value
we will generally state that.
Last two-week's signups for the Free (Abbreviated) Comment
of the Day - For the week beginning January 24th new signups, including
subscribers and pre-subscribers, live in the following countries or regions:
Australia, India, Ireland, Netherlands, Singapore, South Africa, the UK and
the USA - 8 in total. In descending order, which topped the list in terms of
the last week's new signups? It was the UK, Australia and the USA.
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