Global Investing

Gold offers double-edged shine

It was Goldman Sachs who famously predicted oil prices to reach $200 a barrel last year, but there are a school of bullish investors who forecast a substantial rally in gold.

Take Gold and Energy Advisor, which predicts gold will soon reach $2,500 an ounce (from today’s $895) then to $5,000. The Florida-based firm argues that gold is the only asset class that’s not only private (as opposed to state-owned), but also liquid, portable, fungible, divisible, and valuable enough that a small amount can store a massive amount of wealth.

It also argues that of $11.5 trillion stored in offshore accounts and other assets, if one percent were transferred into gold, that would be almost four times the entire annual investment demand for gold.

Perhaps not as bullish, but Investec Asset Management also reckons that gold could perform well in either an inflationary or deflationary environment.

Investec also argues the potential areas of concern for gold investors: an increasing supply of recycled gold and the potential return of the “Goldilocks” scenario, where the economy sustains moderate growth and inflation in a “not too hot, not too cold” environment.

Words matter less

Colin McLean, Managing Director of SVM Asset Management, has done striking research on how much positive spin corporates can put in their annual report.

McLean analysed an annual report of a British life insurer in 2007. The report contained the following words:

underperform 2
disappointed 0
bad/worse/worst 8
poor/poorly 1
weak/weakness 5
challenges 7
achieve/achievement 85
good/better/best 150
excellent 15
grow/growing/growth 207
improve/improvement 73
strong/stronger/strength 150

How low will hedge funds go?

How bad will hedge funds’ year-end performance figures look?

According to Credit Suisse/Tremont, funds fell 6.30 percent in October after a 6.55 percent drop in September, taking losses for the first ten months to 15.54 percent.

Seven strategies are now nursing double-digit losses, with only two — managed futures and dedicated short bias — in positive territory.

Even global macro, which bets on the likes of global equity markets, world currencies, sovereign debt and commodities, is now back in the red. These funds are down 7.10 percent after substantial losses in September and October.

Fund manager sees ‘once in a generation’ opportunity

rtx9qop.jpgStock markets have fallen so far that they now offer brave, long-term investors a ‘once in a generation’ opportunity, according to LV Asset Management’s Tom Caddick.

While there is little sign of the bad news letting up, stock markets tend to look forward, rather than backwards, and will anticipate a recovery before it happens.

He’s backing up his brave talk by investing his own money in his funds.

However, he warns that while it could feel great in the long-term, don’t expect markets to rise immediately.

Going back to Quakers?

InvestorIn these troubled times, go back to basics.

Theo Zemek, AXA Investment Managers‘ global head of fixed income, says investors should adopt “Quaker investment policies” – sober and safe investment strategies that can be explained to their grandmothers.

“Anyone who utters the word ‘hedge’, after all these CDS (failures), ought to be taken out and be shot,” the 25-year markets veteran told a media briefing.

“This is the scariest market I’ve ever seen in 25 years. The world of complex instruments, credit guarantees… That world is very much an ancient history… It’s a darn tough market. Who is left standing among our counterparties?”

Fund manager Insight’s parental problems

rtr220n7.jpgLloyds TSB’s acquisition of HBOS will give it a supersized asset management arm with over 200 billion pounds in assets, but this new funds powerhouse will nevertheless be born somewhat inadvertently.

The combination of Lloyds’ SWIP and HBOS’s Insight will be the biggest active manager – i.e. funds that try to beat markets rather than just match them – in the UK.

Its access to Lloyds and HBOS’s huge branch network will give the funds unit a commanding position in distribution and a big slice of sales to ordinary investors.