MacroScope

from Global Markets Forum Dashboard:

GMF @HedgeWorld West, World Bank/IMF and Financial & Risk Summit Toronto 2014

(Updates with guest photos and new links).

Join our special coverage Oct. 6-10 in the Global Markets Forum as we hit the road, from the West Coast to Washington to the Great White North.

GMF will be live next week from the HedgeWorld West conference in Half Moon Bay, California, where we’ll be blogging insight from speakers including Peter Thiel, former San Francisco 49ers great Steve Young and other panelists' viewpoints on the most important investment themes, allocation strategies, reputation risk management ideas and more.

 

 

Eric Burl, COO, Man Investments USA

Eric Burl, COO, Man Investments USA

Our LiveChat guests at HedgeWorld West include Jay Gould, founder of the California Hedge Fund Association, on Monday; Rachel Minard, CEO of Minard Capital on Tuesday; and Eric Burl, COO of Man Investments, on Wednesday discussing the evolving global investor. If you have questions for them, be sure to join us in the GMF to post your questions and comment.

Follow GMF’s conference coverage and post questions live via our twitter feed @ReutersGMF as well, where we’ll post comments from other HedgeWorld panelists. They include: 

    Peter Algert, Founder and CIO, Algert Global Adrian Fairbourn, Managing Partner, Exception Capital Nancy Davis, Founder & CIO, Quadratic Capital R. Kipp deVeer, CEO, Ares Capital Judy Posnikoff, Managing Partner, PAAMCO Caroline Lovelace, Founding Partner, Pine Street Alternative Asset Management Cleo Chang, Chief Investment Officer, Wilshire Funds Management Brian Igoe, CIO, Rainin Group Mark Guinney, Managing Partner, The Presidio Group

In a preview of the HedgeWorld West conference, Rachel Minard said what matters most to investors today is "not so much what something is

Rachel Minard, CEO of Minard Capital

Rachel Minard, CEO of Minard Capital

called but what is its behavior," she told the forum. "What investment instruments are being used -- what is the ROI relative to cost, liquidity, volatility, market exposure, price/rates and is this the most "efficient" method by which to achieve return. What's great from our perspective is the meritocracy of the business today -- the proof necessary to validate the effective and sustainable ROI of any fund or investment strategy."

from Global Markets Forum Dashboard:

More volatility expected as Fed rate rise looms – Cumberland Advisors’ David Kotok

David Kotok, Cumberland Advisors

David Kotok, Cumberland Advisors

A healthy dose of fear has re-entered financial markets in the final three months of the year. The Chicago Board Options Exchange VIX, a widely tracked measure of market volatility, rose to a two-month high on Wednesday.

Varying news reports offered threats from the Ebola virus and a stagnating European economy as tangential reasons. Perhaps another point is many investors view the U.S. Federal Reserve’s pending decision to raise interest rates as a rumbling train far off in the distance that they now hear headed their way. Closer to the horizon are headlines that can no longer lean on “Fed easing” to explain away rising asset prices and a rising stock market.

“We are in a new period of volatility and it's been developing for the last two or three months,” David Kotok, chairman and chief investment officer of investment advisory firm Cumberland Advisors told the Global Markets Forum on Wednesday. “When you suppress all interest rates to zero you dampen volatility and you distort asset pricing. Now the outlook for interest rates is changing so we are restoring volatility.”

Swedish shift

Opposition leader Stefan Lofven speaks at the election night party of the Social Democrats in Stockholm

Sweden’s centre-left Social Democrats topped the poll in Sunday’s election but fell well short of an overall majority to the extent that it will struggle to form a strong coalition.

The Social Democrats and the Greens and hard Left, who would be natural coalition allies, garnered 43.7 percent of the vote. The anti-immigrant far right emerged as the third biggest party to hold the balance of power with nearly 13 percent.

It looks like there will be plenty of time for market jitters before a government is formed.
What looks more certain is the ousting of the centre-right means years of falling taxes and liberal economic reforms may come to a juddering halt.

A Marshall Plan for Greece

The spectacular failure of “expansionary austerity” policies has set Greece on a path worse than the Great Depression, according to a study from the Levy Economics Institute of Bard College.

Using their newly-constructed macroeconomic model for Greece, the Levy scholars recommend a recovery strategy similar to the Marshall Plan to increase public consumption and investment.

“A Marshall-type recovery plan directed at public consumption and investment is realistic and has worked in the past,” the authors of the report said.

Priceless: The unfathomable cost of too big to fail

Just how big is the benefit that too-big-to-fail banks receive from their implicit taxpayer backing? Federal Reserve Chairman Ben Bernanke debated just that question with Massachusetts senator Elizabeth Warren during a recent hearing of the Senate Banking Committee. Warren cited a Bloomberg study based on estimates from the International Monetary Fund that found the subsidy, in the form of lower borrowing costs, amounts to some $83 billion a year.

Bernanke, who has argued Dodd-Frank financial reforms have made it easier for regulators to shut down troubled institutions, questioned the study’s validity.

“That’s one study Senator, you don’t know if that’s an accurate number.”

Allocation to herd: 100 percent

They’re bleating and buying. And you had better not let them run you over.

The latest Reuters surveys of global asset managers confirm what we’ve all been watching over the past month: a mad rush out of safe havens and into stock markets. There seems to be little else to report out of financial markets.

That stampede, particularly into U.S. shares by U.S. money managers, clocked the single biggest rise in equity allocations since at least 2007, before the financial crisis began, according to the latest Reuters poll data. The rush into global stocks by investment firms all over the world was the biggest in at least three years.

Other reports are saying the same thing.

What is more puzzling, other than a desperate need for change, is why.

It’s clear that most people any way connected to debates in financial markets are tired of all the doom and gloom and don’t mind taking a more positive view. But is that enough?

Ambling through the archives: Don’t blame the deficit, 1983 edition

The battle over the amount and nature of government spending is the focus of the current U.S.presidential campaign and is unlikely to go away even after the November election is well in the rear view mirror.

In such a setting, a paper presented by economist Albert M. Wojnilower at the October 1983 Bald Peak Conference sponsored by the Federal Reserve Bank of Boston, sounds as timely today as it did then. Wojnilower, then chief economist at First Boston, prepared his “Don’t Blame the Deficit” talk as a commentary on “Implications of the Government Deficit for U.S. Capital Formation,” a paper by Benjamin M. Friedman, a professor of political economy at Harvard.

Here is the jist of Wojnilower’s argument, made almost three decades ago when the Ronald Reagan presidency was almost three years old: If the United States is under-investing, the “villain” is not the Federal budget deficit, he said.

Nigeria’s mighty economy

In a world of slowing growth (China), minimal growth (United States) and outright recession (Britain),  it is startling to hear that Nigeria’s economy is likely to shoot up by 40 percent in the second quarter this year. Yep. Forty percent. Four – O.

An investigation by Reuters Lagos correspondent Chijioke Ohuocha came up with this staggering figure — which if borne out will lift Nigeria close to continental rival South Africa and raise it about 10 places on the IMF’s global list to around 3oth.

This mighty rise, however, is not actually because Nigeria has had a sudden spurt of growth. You can read Chijioke’s exclusive story here, but the gist is that the country is changing the base year for its GDP calculation to 2009 from its current 1990.  One big reason is that data is better; another that it is more modern, taking in things like  mobile phones and the internet, for example. It is the latter, and things like it,  that have built up growth over thr years.

from Global Investing:

Retail volte face confirms India as BRIC that disappoints

Jim O'Neill, the Goldman Sachs banker who coined the term BRICs to capture the fast-growing emerging-markets quartet of Brazil, Russia, India and China,  has fingered India as the BRIC that has disappointed the most over the past decade in terms of reforms, FDI and productivity. New Delhi's latest decision to put on hold a landmark reform of its retail sector will only confirm this view.

The government's backtracking on plans to allow foreign investment in supermarkets will not surprise those accustomed to New Delhi's record on key economic reforms. But it means India's weak performance on FDI receipts will continue and that's bad news for the worsening balance of payments deficit.  Speaking of the retail volte face, O'Neill said: "They shouldn’t raise people's hopes of FDI and then in a week, say, 'we’re only joking'".

Various Indian lobby groups that oppose the reforms contend that foreign giants such as Wal-Mart and Tesco will kill off the livelihoods of millions of small traders.

from Jeremy Gaunt:

Why is the euro still strong?

One of the more bizarre aspects of the euro zone crisis is that the currency in question -- the euro -- has actually not had that bad a year, certainly against the dollar. Even with Greece on the brink and Italy sending ripples of fear across financial markets, the single currency is still up  1.4 percent against the greenback for the year to date.

There are lots of reasons for this. The dollar is subject to its country's own debt crisis, negligible interest rates and various forms of quantitative easing money printing -- all of which weaken FX demand. There is also some evidence that euro investors are bring their money home, as the super-low yields on 10-year German bonds attest.

Finally -- and this is a bit of a stretch -- some investors reckon that if a hard core euro emerges from the current debacle, it could be a buy. Thanos Papasavvas, head of currency management at Investec Asset Management, says: