Posts Tagged ‘ 2011 ’

Lack of Confidence – A Key Driver of Investment Returns in 2011 – An Opportunity and Risk for 2012

December 20, 2011
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Lack of Confidence – A Key Driver of Investment Returns in 2011 – An Opportunity and Risk for 2012

2011 has been a difficult year for most investors. Market sentiment oscillated throughout the year and generating returns has been exceedingly difficult to come by, let alone maintain. The world experienced at least three distinct crisis; Japanese nuclear disaster, Arab Spring, and Sovereign Debt contagion through Europe. All three of these events were enough to knock the market down for a spell but the global economy was resilient enough to keep growing. Growing global GDP created an environment where corporate earnings rose, achieving new highs on the year. S&P 500 earnings will come in at close to $97 in 2011, up from about $86.50 in 2010. Earnings will register double digit growth of around 12% while the S&P is down 4% ytd. It isn’t difficult to see that the...

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Excesses Cause Recession – A Comparison of 2008 and 2011

October 4, 2011
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Excesses Cause Recession – A Comparison of 2008 and 2011

Recessions are typically caused by some sort of an excess. Real economic activity stretches too far and the subsequent unwind causes a retrenchment via a sudden and abrupt change in business and household behavior. There have been a number of excesses that have built up in the global economy over the past couple of decades. Japan had a speculative bubble in terms of corporate borrowing and real estate investment at stratospheric prices in the late 1980s. The US and world saw a technology driven CAPEX boom in 1999-2000 which was unsustainable, and created the lead-in to the 2001 recession. 2008 saw the culmination of two decades of loose credit expansion which fed into the US housing market bubble. Ex-post the cause of the retrenchment is often clear. Today, most...

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Why the Market Will Bottom Higher than 2009 – An Analysis of S&P 500 Free Cash Flows

September 13, 2011
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Why the Market Will Bottom Higher than 2009 – An Analysis of S&P 500 Free Cash Flows

The market is in the midst of a crisis. The US sovereign credit rating has been downgraded. Developed market economies are demonstrating an inability to create jobs. Greece is about to default on its sovereign debt which will lead to contagion through the financial system in Europe. French and other European financials will be downgraded this week and markets are in a period of exceptional volatility and uncertainty. How does one invest in the crisis that everyone sees coming? I continue to hold a constructive view with respect to investing and taking risk. In order to be rationally bullish, one must have some view with regard to the amount that will be lost if a crisis gets out of control. Knowing what you can lose ahead of time, while an...

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Here’s how it’s different this time

August 19, 2011
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Here’s how it’s different this time

How is 2011 different than 2008? As the financial press quotes “investment professionals” each and every morning on the front page of the WSJ or the TOP bloomberg story with mention of how dire the market and economic situation is, and how there are many similarities to the feel of 2008 – I thought it was a good time to highlight how things are actually different: 2008 vs 2011: 1)  In 2008, the housing market imploded, which was a seminal event in terms of US household wealth destruction. House prices ran unabated (up) for three decades and were proclaimed to “never go down”. The value of the national housing stock is down 33% from the peak. The wealth destruction from leveraged ownership to housing has and is impacting consumer...

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