Monthly Archives: August 2013

EM Decoupling, Yet Again!

photo (7)Really, I thought we put this argument to bed years ago. I took a bash at it on CNBC in 2009, when I pointed out that EMs were in better condition than DMs. Then too, as now, charlatans were preaching that EMs were in an uncontrolled tail spin, suffering the effects of an abrupt end to easy money and having missed the opportunity of good times to execute responsible reform. The result? Near-certain doom and disaster.
That incidence of the decoupling debate is oddly missing from the FT’s desperate bid to predict disaster. It is missing, because the FT’s thesis only maps to the times when there were significant impacts from global capital flow reversals (of course, we’ve seen many other reversals that have proven less dramatic, but these don’t fit the narrative).

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Are Equities Expensive Yet?

photo (7)Discussions with perma-bears tend to oscillate around persistent themes. Recently, a friend and I have been discussing whether equities are expensive. The investigation has great importance as valuation at time of purchase is by far the most important driver of equity returns. There is great merit to the argument that equities tend to reward over the long-term, but this fact is highly dependent on not buying when the market is overvalued.

For some months, my view has been that the market is not cheap, but it is certainly not expensive either. As such I have continued to recommend buying equities. But how “not-cheap” is the equity market?

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Markets Officially In The Doldrums

photo (7)In the past I have stated that I do not believe an end to quantitative easing is a threat to asset prices, my main argument has been that tapering would not start until economic momentum is enough to counteract the impacts of reducing stimulus.

Today, my concerns are on the rise, as tapering – justified or not – seems to remain the Fed’s base case for later this year, yet markets have been confused by the Fed’s efforts to prevent prices from naturally preparing for this.

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