Posted On 27 Dec 2016
27/12/2016 In 2016 we got many things right. China didn’t collapse. Brazil rallied hugely. The US Dollar went up. Bonds sold off. Emerging Market currencies sold off, except for the Russian Ruble. We were on the wrong side of Brexit, but still managed to take advantage of a falling GBP. We hoped that Trump wouldn’t win the US elections as that would change many dynamics. But he did win and some changes will happen and on many others even his administration will be constrained. These are our thoughts on what 2017 may have in store for us: USD We are probably more than ¾ of the way in the US Dollar rally. Infrastructure spending under Trump will push up US rates and US Inflation more significantly compared with European Rates and European Inflation. But the weaker EUR, GBP, JPY and weaker EM currencies will feed inflation all over the world.
Posted On 01 Dec 2014
Gold has been on a tear today! Lower oil prices are deflationary on the surface only. Lower oil prices are a big stimulus to the economy. People start to drive more and spend more when they save money at the gas pump. Air fares go down and one travels more. Food prices go down and one ends up buying the more expensive cuts of meat and perhaps a more expensive bottle of wine. Consumption is a much bigger driver of inflation compared with reduction in energy costs. Consumptions spread throughout the economic system. It is the same amount of money that is being transmitted from energy savings to the rest of the economy, but its impact on markets and equity prices is disproportionate. Consumption turns companies that may be otherwise on the verge of bankruptcy into viable businesses. This is the basic principle of economics. A little stimulus can go
Posted On 02 Nov 2013
Gillian Tett asks very pertinent questions in the FT of November 1, 2013 (Money mirage poses emerging markets danger), “If a shock were to hit Brazil, India, Indonesia – or any other emerging market country – tomorrow, how would investors react? Would asset values adjust smoothly, amid an explosion of trading flows? Or would markets instead freeze up, as liquidity evaporated? She points out that, “Earlier this year, when investors started to speculate about an American “taper” – or wind-down from quantitative easing – this conjecture was enough to spark a dramatic gyration in the value of some emerging market assets, such as Indian or Brazilian equities.” Algoam Comment: Here she should have pointed out that this caused the EM currencies to decline in relative value, which has caused,…those markets to have more than recovered. “The real problems are not to do with growth or capital inflows which could