ND DEC 21 19
SIT EC y POL
ND denounce Global-neoliberal
debacle y propone State-Social + Capit-compet in Eco
ZERO
HEDGE ECONOMICS
Neoliberal globalization is
over. Financiers know it, they documented with graphics
“Predictions Are Difficult...
Especially When They Are About The Future”
….
Ni modo de predecir el pasado. Quiza se quiso
decir “The Future
of neoliberal economics & politics”
When it comes to trying to
predict what will happen in the financial markets over the next year, which is
an annual event, it is essentially an act of futility. Given the markets are
affected by a broad spectrum of inputs from economics, to geopolitics, monetary
policy, rates, and financial events, any prediction should be taken with a very
high degree of skepticism.
So, with that said, here is how we are preparing for 2020.
Odds Have It
In our portfolio management
practice, we begin with the basic assumption there is a 69% chance the market
will finish the coming year at a level greater than where it started. That 69%
probability comes from the fact that over the last
120-years, the market has (on a total real return basis) finished the year in positive territory 83 times, and
negative only 37 times.
See Chart:
Positive vs Negative Years ( Annual Total Real Return)
The reality is that we can’t
control outcomes. The
most we can do is influence the probability of certain outcomes through the
management of risks, and investing based on probabilities, rather than
possibilities, which is important to capital preservation and investment
success over time.
So, as we head into 2020, here
is a short-list of the things we are either currently hedging portfolios
against, or will potentially need to:
- China fails to comply with the terms of the “Phase One” trade deal which reignites the trade war.
- Earnings growth fails to recover, and valuations finally become a concern for the markets.
- Corporate profits, which have been essentially flat since 2014, deteriorate due to slower economic growth both domestically and globally.
- Excessively high consumer confidence converges with low levels of CEO Confidence as employment begins to weaken.
- Interest rates rise which trips up heavily leveraged consumers and corporations.
- Investors become concerned about excess valuations.
- A credit-related event causes a market liquidity crunch. (Convent-Lite, Leveraged Loans, BBB-rated downgrades all pose a potential threat)
- The Fed’s “repo-crisis” continues to grow and turns out to be something much more significant.
- Similar to 2016, a shocking election result.
While I am not going to address
all of these concerns, I do want to touch a few that we feel are significant
risks heading into the first half of the decade.
Valuations
While valuations are a terrible
market timing device, they do impact long-term returns and investment outcomes.
Currently, at 30x earnings, valuations are elevated, which suggests that the
next decade of returns will be significantly lower than the last.
Statistically, returns in the very low single digits should be expected.
Importantly, it is worth noting
that negative returns tend to cluster during periods of declining valuations. These “clusters” of
negative returns are what define “secular
bear markets.”
See Chart:
Positive vs
Negative Years ( In Valuation-Expansion/ contraction markets )
The Debt Risk
One of the common
misconceptions in the market currently, is that the “subprime mortgage” issue
was vastly larger than what we are talking about currently.
Not by a long shot.
Combined, there is about $1.15
trillion in outstanding U.S. leveraged loans — a record that is double the level five years ago — and, as
noted, these loans increasingly are being made with
less protection for lenders and investors.
See Chart:
Risky Corporate Debt is growing
Just to put this into some
context, the amount of sub-prime mortgages peaked slightly
above $600 billion or about 50%
less than the current leveraged loan market.
Of course, that didn’t end so
well.
Currently, the same explosion in low-quality debt is
happening in another corner of the US debt market as well.
See Chart:
Growth
in BBB-Rated Corporate debt
As noted by John
Mauldin:
“In just the last 10
years, the triple-B bond market has exploded from $686 billion to $2.5
trillion—an all-time high. To put that in perspective, 50% of the investment-grade bond
market now sits on the lowest rung of the quality ladder.
And there’s a reason
BBB-rated debt is so plentiful. Ultra-low interest rates have seduced companies
to pile into the bond market and corporate debt has
surged to heights not seen since the global financial crisis.”
See Chart:
Non-Financial
Corporate debt to GDP Ratio
CONTINUE
SEEING more charts & comments
CONCLUSION
Statistically speaking, the
odds suggest that the market could
indeed be higher in 2020. However, there are numerous risks which
could derail the markets which should not be dismissed.
This is not a “bearish
forecast.” It is just an assessment of trends, statistics, and
probabilities given the current monetary, financial and economic backdrop.
If we are wrong, and
stocks do post gains in the coming year, being more conservative will only mean
a small relative under-performance in your portfolio next year.
If we are right, the preservation of capital will be far more beneficial. As
we have stated previously, participating in the bull market over the last
decade is only one-half of the job. The other half is keeping those gains during the second half of the full
market cycle.
As we enter into 2020 it may
pay to be a little more cautious after such a large rise in the financial
markets.
Let me leave you with Bob Farrell’s 10 Rules:
- Markets tend to return to the mean over time
- Excesses in one direction will lead to an opposite excess in the other direction
- There are no new eras — excesses are never permanent
- Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
- The public buys the most at the top and the least at the bottom
- Fear and greed are stronger than long-term resolve
- Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names
- Bear markets have three stages — sharp down, reflexive rebound and a drawn-out fundamental downtrend
- When all the experts and forecasts agree — something else is going to happen
- Bull markets are more fun than bear markets
Our job is managing risk to
conserve principle and create absolute returns over time. What matters most to
us is that we provide a disciplined management process suitable for our clients
who seek long-term performance as measured by annualized and risk-adjusted
returns, and conservation of investment principle.
….
----
----
US DOMESTIC POLITICS
Seudo democ duopolico in US is
obsolete; it’s full of frauds & corruption. Urge cambio
We are, all of us, living in a fiction. A fiction authored by those in power to serve
the interests of those in power...
====
“America is a corpse being consumed by
maggots. Liberals are rooting for the maggots. Conservatives are
rooting for the corpse...”
====
"The base, deep in the
California desert near Death Valley National Park, is where the Navy develops and tests its newest weapons."
====
We are asleep, naive, and unaware of the creep of Big Tech...
====
The most
important 5G applications will not
be intended for civil use, but for the military domain...
====
“The base case is that Trump will
win...because the Democrats are a
mess.”
....
Here we have more than 2 undergraduate naïve
fallacies:
1-type of “ad hominems”: to attack not the arguments or reasons in
other persons but their personal characteristics. In Politics this is
known as “mudslinging”
(tirarle barro o basura al opositor, lo que refleja ignorancia y deshonestidad).
2-Straw
Man fallacy. Se ataca en otra oponente una posición o defecto que no tiene o si la
tiene se la exagera, a pesar de que el acusador practica el mismo defecto (se
mira la paja en el ojo ajeno y no el basural que lleva en el propio cuerpo) .
Si uno practica lo que se acusa en el otro, eso además deshonesto es
hipocresía. This also contain
other falacies like Slippery Slope: from unrelated issue or weak premise is
derived a strong wrong & derogatory
conclusion without evidence and
3-Circular Argument where
a derogatory conclusion appears as
premise in the argument of the accuser. If both Dems
& Reps are in Political mess (no one can deny this reality) it is ridiculous to take one as premise & the other as
conclusion. Besides: there is not causation-effect-relation between
bond’ Investors and Politics. SO, It is just stupid to
conclude that “Trump will win, because Dems are a mess”. In fact, what we have here is wrong
premise (mere wishful thinking) as the base for idiotic conclusion.
----
----
"He needs to be
humiliated..."
====
US-WORLD ISSUES (Geo Econ, Geo Pol & global Wars)
Global depression is on…China,
RU, Iran search for State socialis+K-, D rest in limbo
“(This clause) troubles some of
our political analysts and public figures...”
====
What could possibly go wrong?
====
SPUTNIK
and RT SHOWS
GEO-POL n GEO-ECO ..Focus on neoliberal expansion via wars
& danger of WW3
--
Jailbreaks, Secret Tunnels, Hunts for
Missiles: Top-4 Soviet Counterintelligence Operations Revealed
----
----
NOTICIAS
IN SPANISH
Lat Am search f alternatives to
neo-fascist regimes & terrorist imperial chaos
REBELION
----
----
PRESS
TV
Middle East n world news
- Cuba names first prime minister in over 40 years
- Netanyahu rejoices as UAE FM floats Israel-Arab alliance
- Serie A: Inter Milan 4-0 Genoa
- Australia's PM apologizes for being on vacation while wildfires raged
- Trump invites Britain's Johnson to White House in new year
- Iranians celebrate Yalda Night in Vienna
- 18 prisoners killed in clashes at Honduras jail
- Macron urges suspension of strikes during Christmas
- No Xmas vacation for France’s Yellow Vests
- West retaliates after Russia, China veto UN resolution on Syria
- EU, Russia, Germany blast US sanctions on gas pipeline
- Hamas praises ICC plan to probe into Israeli war crimes
- PROGRAMS
- US prison industry
- US, Iran tensions
- Iran nuclear deal
----
===
No hay comentarios:
Publicar un comentario