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Investment Outlook: How to Make Money
Because of the secular headwinds facing global economies, currently labeled as the “New Normal” or “Secular Stagnation”, investors have resorted to “making money with money” as opposed to old-fashioned capitalism when money and profits were made with capital investment in the real economy.
Brainteasers
A recent Internet blog posed the predicament of many medium/long-term relationships: At some point couples run out of historical stories or even topical things to say. After all, there are only so many Trump tweets you can talk about, and you've long since agreed to disagree about the meaning of life.
February 2017 Investment Outlook: "Happiness Runs"
I think a lot about happiness - what makes a person happy, whether or not happiness should even be a life's priority - things like that. A good high school friend stunned me at the early age of 17 by suggesting we should not necessarily try to be happy. Sacrifice, service, devotion to a cause were higher orders, he felt, although presumably, since those were choices, their pursuit could secondarily lead to happiness.
Increasingly Addled
Long ago and far away in the adolescent cauldron known as Los Altos High School,
I attended a senior U.S. history class with a man-child named Delos Roman. He was
appropriately christened it seems, because his body resembled that of Zeus, the God
of Thunder, and at 6’4”/230 pounds, he rumbled down the football sidelines like a
Mack truck on a downhill mountain road.
It's a Xanax World
The Romans gave their Plebian citizens a day at the Coliseum, and the French
royalty gave the Bourgeoisie a piece of figurative “cake”, so it may be true to form
that in the still prosperous developed economies of 2016, we provide Fantasy
Sports, cellphone game apps, sexting, and fast food to appease the masses.
Keep them occupied and distracted at all costs before they recognize that half of
the U.S. population doesn’t go to work in the morning and that their real wages
after conservatively calculated inflation have barely budged since the mid 1980’s.
Breaking News!
Tired of reading about the Kardashians? Sick of
egocentric politicians? Disgusted with endless war in
the Middle East? Getting bored reading these monthly
Outlooks? (not that bored or you wouldn’t be reading
this). Here’s some “breaking news” that I find really
interesting and I hope you will too. It’s a recent summary
of some things that scientists have discovered over the
last few decades. Prepare to be amazed.
It’s the Zero Bound Yield Curve, Stupid!
I have been increasingly suspicious since late 2011 that Sir Thomas Gresham (1519-1579) may be the modern John Maynard Keynes. I said as much in a Financial Times op-ed when I wrote in December of that year, that the famous “Gresham’s Law” needs a corollary. Not only does “bad money drive out good money” but “cheap money” may do harm as well. Just as Newtonian physics breaks down, and Einsteinian theories prevail at the speed of light, so too might easy money, which has invariably led to stronger economic recoveries, now fail to stimulate growth close to the zero bound.
Saved by Zero?
So the Fed has chosen to hold off on their goal of normalizing interest rates and the ECB has countered with the threat of extending their scheduled QE with more checks and more negative interest rates and the investment community wonders how long can this keep goin’ on. For a long time I suppose, as evidenced by history at least.
Say A Little Prayer
I’m not what you would call a “prayerful” type of guy. Even at 30,000 feet, when the air gets rough, I never invoke the “God” word, settling instead for promising myself that if I ever get back to terra firma, I will never fly again, which I promptly forget days or even hours later. It’s not that I’m a non-believer in prayer’s ultimate destination, but more of a cynical take on why the Lord would hand out party favors to everyone that asked, or to those that asked most intently.
It Never Rains in California
Ted Cruz recently suggested praying for rain in Texas, and apparently someone did a few weeks ago, producing a deluge resembling a modern day Noah’s Ark of sorts. California’s Governor Brown on the other hand, has taken a more secular approach. He believes that Mammon, not God, bears responsibility for the Golden State’s record drought and that I, we, all of us simple folk should cut back water usage by a minimum of 25%.
Mr. Bleu
“It’s a spectacle of excess at the highest level”, quoted an art consultant to the N.Y. Times. Perhaps it was. Christie’s, even not counting its archrival Sotheby’s, had bagged $1 billion in sales during its May auction week – rivaling even the frenzied bidding for Manhattan high rise condos. As with high flying stocks, the logic was that the money had to go somewhere and why not a wall instead of a monthly portfolio statement.
A Sense of an Ending
Having turned the corner on my 70th year, like prize winning author Julian Barnes, I have a sense of an ending. Death frightens me and causes what Barnes calls great unrest, but for me it is not death but the dying that does so. After all, we each fade into unconsciousness every night, do we not?
Games People Play
My mother taught me how to play Monopoly ? the game ? and the markets over 40 years past have taught me how to play Monopoly ? the financial economy. Financial markets and our finance-based economy are actually quite similar to the game in terms of the rules and strategies it takes to win. Monopoly?s real-time bank (the Fed) distributes money to players at the beginning and then continues to create more and more credit as the economy passes go.
Inflection Points
U.S. equities surged over the last six years as the economy regained its footing after the financial crisis, and companies underwent substantial cost cuts to improve profitability. Today, many international companies and regional economies are early in the process of making similar positive, transformative changes.
How Could They?
Punch and Judy fought for a pie. Punch gave Judy a sock in the eye. Said Punch to Judy, "Would you like any more?" Said Judy to Punch, "No my eye is too sore." Mother Goose nursery rhyme. Ah, nursery rhymes! Intended for kids no less! The above little ditty could serve as a modern day NFL domestic playbook, I suppose, while a century ago it was but one of many lesson plans on what not to do when you grow up.
How the Long Bond Stole the Trophy
The aggressive bet many investors made on long-end rates in 2014 was the equivalent of betting on a Hail Mary pass to win the game. It has been rewarding, but is it repeatable? Probably not. Janus Fixed Income CIO Gibson Smith reflects on why he believes consistency beats the long shot, in sports and in investing.
The Trouble with Porosity and Prosperity
I am a philosophical nomad disguised in Western clothing, a wondering drifter, masquerading in a suit near a California beach. Sand forms the foundation of my being and its porosity is at once my greatest strength and deepest wound. I have become after 70 years, a man who believes that no belief is sacred. I have ideals and moral standards, but I believe them specific to me. Had I inherited your body and ego, I could just as clearly have assumed "yours." If so, I wonder, if values are relative, then what are mortals to make of them, and what would a judging God make of
Stay the Course in Small Caps
Small-cap stocks sold off in the third quarter, but now is not the time to abandon the market cap segment. In this article, Jonathan Coleman, Co-Portfolio Manager of the Janus Venture Fund, gives his perspective on current small-cap valuations, and why an allocation to small caps is beneficial in an environment where the U.S. economy is on stronger footing than the rest of the world.
Global Evolution a Game Changer for Real Estate
As investors consider rising rates and the impact on yield-based assets, it is time to address a couple of common misperceptions about real estate. Patrick Brophy, Portfolio Manager of the Janus Global Real Estate Fund, explains why rising rates are not directionally bad for real estate equities. He also explains why real estate can be more than just a source of income for portfolios.
You Only Dance Twice
Dancing, or better yet as the beginning of my Investment Outlook suggests, being asked to dance, seems to have become an important part of my life over the past month or so. Having first been asked by my wonderful wife, Sue, and now by Dick Weil and Janus from a business standpoint, I write to you today from my desk in a new Janus office in Newport Beach, California.
Staying Ahead of the Curve
Investors could soon face an environment of rising U.S. interest rates and heightened rate volatility. Already, the Federal Reserve has begun setting the stage by tapering its quantitative easing program. Once rates start to rise, its difficult for a fixed income portfolio to make up lost ground if its not already positioned for higher rates. We think its crucial for investors to diversify their yield curve exposure by investing abroad.
Beware of the Theme and a Dream
Mid-cap equities generally remain attractive, but momentum has driven up stocks tied to several hyper-growth industries. The bubble around these stocks began to pop in March, and we believe limiting exposure to those areas of the market will be critical to maximizing returns going forward.
The Race for Speed
Much attention has been given recently to the complexities of U.S. equity market structure, and the potential for predatory high-frequency traders to work within that complex structure in a way that negatively impacts other market participants. There is no question the market structure faces challenges, but there are a number of tools and best practices that asset managers can utilize to mitigate the negative impact of high-frequency trading.
Sell-Off in Health Care Sector Overlooks Strong Fundamentals
After a strong run over the last two years, stocks for biotechnology, pharmaceutical and specialty pharmaceutical companies have fallen significantly in recent weeks. While a couple of near-term headwinds surfaced recently, in our opinion much of the sell-off was driven by momentum investors who had indiscriminately bid up stocks for biotechnology and pharmaceutical companies.
Breakthrough
The funny thing about crises is that we tend to feel as if they occur suddenly, on one day. For me, that day was when Lehman Brothers filed for bankruptcy protection on September 15, 2008. I remember looking at my Bloomberg screen and thinking I was witnessing the end of the financial markets.
China's Great Leap
Chinas government just announced it would take a big step back...and let its economy take a giant leap forward. We believe Chinas proposed economic reforms will transform the economy and should allay investors main concerns about Chinese markets. In Janus latest Equity Monthly, our equity team offers its perspective on Chinas Great Leap.
What Price for Growth?
Cloud computing and social media are bringing a level of disruption and innovation not seen in the technology sector since the dot-com era. The troubling aspect is that valuations for many of these companies seem just as stretched as Internet stocks were back then. We think investors may be paying too much for the growth inherent in these companies.
Nowhere to Hide: Navigating Rising Rate Risk in High-Yield Markets
Over the past few years, investors have flocked to high-yield credit, many believing it a good way to mitigate their interest rate risk as well as capture additional yield. However, they may not realize the level of rate risk that has followed them. High-yield indices, negatively correlated to five-year Treasury bond yields over the past 15 years, have been positively correlated for the past year.
Momentum in Europe
We think now is a good time to be investing in Europe. European equity valuations are at the lowest level in more than 40 years, by some measures, and we are seeing green shoots in the regions downtrodden economy. Meanwhile, European companies in several industries have right-sized their cost structures or refocused their businesses, setting them up to be more competitive on a global scale.
Rising Rate: Challenge and Opportunity
While the prospect of rising interest rates generally strikes fear into the hearts of fixed income investors, its important to remember that periods of rising rates are normal and can create opportunities for active bond managers. Since 1970 there have been 21 periods in which interest rates rose significantly. While each has had its own unique characteristics, over the past 20 years equities have rallied during these periods, which has tended to support corporate credit markets.
Currency Wars: A Case for the U.S. Dollar
In recent years, the U.S. dollar has tended to lose value when the global economy improves, as investors are more willing to take risks. We believe that pattern has changed and that the U.S. dollar will outperform the Japanese yen, the euro and the British pound over the medium term, even if the global economy continues to improve. In our view, current conditions justify a material deviation in currency exposure compared with certain global fixed income benchmarks, such as the Barclays Global Aggregate Bond Index.
Emerging Markets: Reasons for Optimism
by Team of Janus Henderson Investors,
Emerging market equities are lagging developed markets this year. However, the underperformance creates an opportunity in our view, and does little to change our long-term outlook for emerging markets, where we believe some of the strongest growth opportunities lie.
Straight Talk: Janus Balanced Fund
In today's ever-shifting economic landscape, many investors are looking for a cautious approach. Marc Pinto answers five questions on Janus Balanced Fund, including how he navigates uncertain markets, where he's seeing compelling investment opportunities, and why the partnership between Janus' equity and fixed income teams may benefit investors.
Living in Lake Wobegon
Are we normal? For many quarters, I have counseled investors that we are going through extreme market conditions and that patience was the best strategy. As the panic fades in the rear-view mirror and the road ahead looks less bumpy, I stand by the advice. But I dont need to repeat it.
New Highs
by Team of Janus Henderson Investors,
The Dow Jones Industrial Average closed at a new record high the first week of March, breaking its previous closing high reached in October of 2007. The new record is symbolic more than anything else, but it still has some positive implications for equity markets.
Results 51–100
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