Commentary

Absolute Return Letter - December 2020

Zombies are firms that are neither dead or alive. They are in so much debt that virtually all their free cash is used to service their debt, and that is very damaging to GDP growth. This month, we explain why there are more and more zombies all over the world, and why they do immense damage to the global economy.

Commentary

A Constitutional Crisis in the Making?

We are earlier than usual this month because of the upcoming presidential election. See why a US constitutional crisis could unfold in the days and weeks to come if Trump delivers on his earlier ‘promise’ not to accept the outcome, should he lose on the 3rd November.

Commentary

Modern Monetary Theory Explored

Modern Monetary Theory (MMT) is a rather unconventional economic concept – at least if you are a classically trained economist as I am. That said, over the years, I have learned that, every now and then, it pays to think out of the box, so I am willing to take a closer look.

Commentary

The Sad Case of TINA

Tina is an old friend of mine, but she is also a sad case of hubris, over-confidence and misguided pride. I first met Tina about 38 years ago but, more recently, I have been reminded of her presence every single day. Sometimes valuations get so much out of whack that I get goose bumps all over, and this is one of those situations.

Commentary

The Road to Equality

As if the Coronavirus outbreak wasn’t enough of a problem for society to deal with, shortly afterwards, two American police officers ended the lives of two American civilians. Why that will affect financial markets for a long time to come you can read here.

Commentary

Five Lessons from History (5/5)

Wounds heal but scars last. That’s an old lesson from history and will also be the case as far as COVID-19 is concerned. We already know from empirical evidence in China that consumers are in no rush to come back on the streets of the big cities, and why would it be any different elsewhere?

Commentary

Five Lessons from History (4/5)

Why is it that a fire on the other side of the planet attracts far more attention than a new innovation about to be rolled out, and how can investors take advantage of that? This is a question more relevant than ever, given the impact of the current Covid-19 outbreak.

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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.