Commentary

The Economic Cost of Social Distancing

The economic costs associated with the coronavirus case outbreak are nothing short of staggering. Expect Q2 to collapse which is not good for equities and not good for bonds either.

Commentary

Five Lessons from History (2/5)

Lesson #2: Reversion to the mean occurs because people persuasive enough to make something grow don’t have the kind of personalities that allow them to stop before pushing too far.

Commentary

Five Lessons from History

Financial hardship often drive people to adopt views that were previously unthinkable. It is a very powerful behavioural pattern and has significant implications for financial markets. In this month’s Absolute Return Letter, we take a closer look at what it really means.

Commentary

The Known Unknowns of 2020

Trump's decision to take out the Islamic Republic's most celebrated military leader, Qassem Soleimani, was a timely reminder that we face many problems. An armed conflict between the US and Iran is clearly one of them but far from the only one. Here is a list of the ones we worry mostly about, going into 2020.

Commentary

A Future Embedded in the Present

We have reached a stage in the cycle where you need to think out of the box in order to deliver respectable returns. Investing like most of us have done in the great bull market will not deliver returns anywhere near the levels we have enjoyed over the past 35-40 years. This month’s Absolute Return Letter offers a solution.

Commentary

How to Invest in a Low Growth World (Part 2 of 2)

The evidence is overwhelming that automation has positively impacted total factor productivity (TFP) for years, i.e. GDP growth continues to benefit from the digital revolution despite the fact GDP growth is rather pedestrian these years.

Commentary

How to Invest in a Low Growth World (Part 1 of 2)

A classic approach to economic theory suggests low GDP growth in the years to come. Why and what to do about it is what this month’s Absolute Return Letter is about. Next month, we’ll look at the impact of advanced robotics – why a rapidly ageing workforce might not be the problem it is often portrayed as. Could robots simply replace humans in the work process?

Commentary

Is Ageing Inflationary? Really?

For years, economists have disagreed whether ageing is inflationary or dis-inflationary. Ever since IMF published a controversial paper in 2015, the debate has raged, but I have finally concluded that ageing is most definitely dis-inflationary (and perhaps even outright deflationary), and here is why.

Commentary

Energy Misconceptions

Investors are not always told the full story before they invest. In this case, we are constantly told that electric vehicles offer the way forward, but evidence is mounting that they are actually polluting more than petrol or diesel cars. The penny just needs to drop as far as our political leadership is concerned.

Commentary

The Cost of Rising Populism

25% of Europeans vote for a populist now, and rising populism has a devastating impact on GDP growth, as more and more capital is misallocated which is an economic term for capital being deployed unproductively. Rising populism is obviously not the only reason why more and more capital is misallocated, but it is nevertheless an important reason.

Commentary

The New ARP+ Service

New rules do not allow us to provide research free of charge any longer. Consequently, our business model is changing.

Commentary

Addicted to Oil?

Apart from the 2014-15 supply shock, oil prices have proven to be extremely elastic more recently with only modest changes to either supply or demand having an outsized impact on oil prices. We look into the implications of that and find that oil prices could possibly rise a fair bit further this year even if they are already up 40% year-to-date.

Commentary

Is Life Expectancy Falling? Really?

Life expectancy has started to decline in some of the world's most prosperous countries, and there seems to be a powerful link between that and falling real wages. Come to think of it, there is even a link between austerity and falling life expectancy as the Greeks learned in 2010-2012.

Commentary

More on the Productivity Conundrum

With the workforce starting to decline in many countries, we need brisk productivity growth for the economy to prosper, but exactly the opposite is happening. Why is that? In this month's Absolute Return Letter, we take a closer look at a number of negative productivity agents that hold back GDP growth.

Commentary

Another Zimbabwe In the Offing?

What will central banks do with all the bonds they have acquired through QE? Could it ultimately lead to (much) higher inflation? These and other questions to do with QE will be addressed in this month’s letter.