Investment Note

Market Insights 2014


Winning with the Collapse in Oil

TAM portfolios provide protection in the oil sell-off. “I’ve been on both sides of a lot of oil and gas price swings. Every time, the first question people always ask is who wins and who loses”. T. Boone Pickens, founder and chair of BP Capital.

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Has Santa tried to derail the economy?

The state of New York is no stranger to freak weather conditions but the current winter storm hitting the eastern sea board has already seen over 10 fatalities, thousands stranded in airports covered in snow and the National Guard called out. This time around it seems more than the Fifth Avenue shoppers who are going to have to take cover. No country on earth is immune from freak weather, nor are they immune from the financial and economic impacts Mother Nature leaves in her wake.

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Weighing it up

When you are in deep conflict about something, sometimes the most trivial thing can tip the scales. Stock markets appear to have regained some poise after a few frantic weeks that saw the FTSE100 fall around 10%, and 10-year Gilt yields, which move inversely to Gilt prices, fall from 2.5% to below 2% as investors were attracted by the perceived safe haven of Government bonds in response to a growth scare that could stave off interest rate hikes until after the election.

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Bill Gross "King of bonds"

In 1992, President Clinton’s adviser, James Carville, said that he wanted to be reincarnated as the bond market.  Using more colourful language than we can publish here, he was expressing his view that in the earliest months of his Presidency, Clinton appeared to think bond markets were more important than taxes and even the Pope.  But to many investors Bill Gross “the king of bonds” WAS the living embodiment of the bond market for four decades.

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JAPAN - Beware of bull

TAM clients may have noticed the successful investment into Japanese equities bought earlier in the Spring. At the time, we believed that the market had fallen unjustly out of favour and trading at levels we considered cheap relative to its western peers.  With the Nikkei 225 Index up around 13% from the lows, we ask if this is still the case and what we can expect for the rest of the year and beyond.

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Walking around the bear

Over the last couple of years, the list of things to worry about has grown ever longer but it’s been interesting to watch stock and bond markets ignore virtually all of them except for brief periods when it suited short term punters to cause a bit of trouble regardless of whether a new drama impacted the economy or not. This was initially true of the unfolding situation in Ukraine.  The annexation of Crimea, for example, came and went without any market reaction and the S&P500 went on to a new all-time high. 

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MH17. Realpolitik in action

The weekend’s 24-hour coverage of the downing of the Malaysian Airlines flight MH17 has revealed little about what the West intends to do about it. Whilst Putin has been placed in the dock by the media, it seems that, contrary to what David Cameron is pushing for, it’s business as usual in Moscow. This is unsurprising since Russia was already weathering the limited sanctions being imposed upon it and has seemingly escaped the EU’s notice of further punishment for annexing Crimea.

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Slamming the door before the horse bolts

You've got to sit up and take notice when you hear that Federal Reserve officials have been discussing measures to avert a potential run on bond funds.   Lurking beneath a few of the newspaper headlines and buried on the inside pages is one of those articles which becomes more alarming as you read on and it starts to feel like a potential time bomb. It seems that the Federal Reserve is mulling the idea of imposing exit fees on US bond funds in order to counter the threat of a run on funds in a crisis. 

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Bond Yields; that sinking feeling

In 2013 expectations that the US Federal Reserve would reduce (or ‘taper’) their quantitative easing program added to speculation that interest rate hikes would surely follow. This was an obvious catalyst for yields to rise on US government bonds.  And rise they did.  By the end of 2013 the yield on the ten-year Treasury bond had risen from a brief low of 1.7% to above 3.0%, its highest level since 2011.

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The Scottish Referendum: What would Paul say?

He shot to fame for his uncanny ability to pick the winners of matches throughout the tournament, including the final itself between Spain and the Netherlands. Remarkably, when presented with a choice of two boxes containing identical food but with the flags of the two competing nations, he correctly “predicted” the outcome of 11 of 13 matches. With the gap between the Scottish Yes and No vote narrowing, we wonder which way Paul would have voted ahead of the referendum on 19th September?

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35 percent. How low can you go?

“The President of the Commission, Mr. Delors, said at a press conference the other day that he wanted the European Parliament to be the democratic body of the Community, he wanted the Commission to be the Executive and he wanted the Council of Ministers to be the Senate. No. No. No.”

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The year that never was (April 2013 - March 2014)

On the face of it, there was a lot going on during the year.  Global markets dealt with a US government shut down, Federal Reserve tapering, Chinese economic slowdown and an emerging market rout. Closer to home, we had the never ending eurozone saga to deal with and, just in case anyone was getting a little bored with it all, it’s all kicked off in Ukraine and we have the alarming prospect of a new  “war” being seriously discussed for the first time in decades.

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Bull vs the Great Bear

It is understandable that, on the face of it, headline news of Russia invading a sovereign nation on the borders of the EU may give rise to some alarm for investors, but the media has been positively revelling in the word “Invasion!” as Russian President Putin dispatched 6,000 Russian troops to key strategic Russian assets in the Crimea.

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TAM Outlook 2014

The start of the long awaited withdrawal of Fed stimulus for the bond market is upon us and will have ramifications for global markets if handled badly.  But, like an energy drink, the stimulating effects saw equity markets finish 2013 on a high from which they seem reluctant to come down.

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