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G'day
It's not often that you hear someone downplaying the importance of
Yellen, Dragi, Kuroda, et al - but that's what Harvard's Ken Rogoff does
in this week's Fodder, suggesting that
the media attention given to central bankers' pronouncements exaggerates
their economic significance. Dr Robert Gay then analyses
why bonds yields are so low (no, it's not as simple as ZIRP and QE),
concluding that interest rates and inflation will remain low for a long
time yet, and that fears of equity bubbles are at least premature. Back
on the issue of media obsessions, BCA Research's Marko Papic explains
why headline-grabbing
extremist group, Islamic State, is irrelevant from an investment
perspective. Far more relevant, he argues, is the sudden surge in
oil production by Libya - oil prices may be reaching a bottom. (BCA
Research is offering a complimentary two-month trial of its macro
research, including Marko's geopolitical strategy service, to
PortfolioConstruction Forum members - see the end of his article for
details). There's not much any of us can do about markets, but we can
limit the impact of market volatility on portfolios and manage "sequence
of returns risk". We've featured quite a few papers on how to do that in
Fodder over the past few years - but this week, Michael Kitces shows
that simple
regular portfolio rebalancing can do as good a job or better of managing
sequencing risk than other more complex approaches - and it's a lot
simpler for clients to understand.
Lastly, following on from Michael Furey's low beta piece
last week, we feature Cliff Asness's Conference 2014 presentation |
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on the
theoretical justification for the low beta premium. I'm well aware
that sounds like a big yawn.
It's
anything but because Cliff is such a fantastic presenter - in fact, this
was the second highest rated session of Conference!
All the best for some more great weekend learning - Graham
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LATEST...
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Celebrity central bankers
There are good reasons why central bankers receive so much media.
But the bubble around their pronouncements grossly
exaggerates their economic significance.
Kenneth Rogoff, Harvard University
| Opinion
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Why are bond yields so low?
The answer seems obvious. But more complicated forces are
at work that have reduced real interest rates far below historic norms
and may keep them low for many years yet.
Dr Robert Gay, Fenwick Advisers
| Opinion
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IS is irrelevant - Libya is relevant
The media continues to obsess about IS - but the far more
investment-relevant development in the Middle East is the return
of Libyan crude into a well-supplied market.
Marko Papic, BCA Research
| Opinion
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Managing sequencing risk - buckets v rebalancing
In managing sequencing risk, we may not be giving simple rebalancing
nearly the credit it deserves to accomplish similar or better results
than more complex approaches.
Michael Kitces, Pinnacle Advisory Group
| Research
paper
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Risk parity portfolios and the low beta premium
In recent years, the risk parity approach to asset allocation has been
gaining popularity. Evidence supports the approach but confidence in it also
needs a theoretical justification.
Cliff Asness, AQR Capital
| Resources
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RECENTLY...
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The single-engine global economy
The global economy is like a jetliner that needs all of its engines
operational to take off. Unfortunately, only one of its four engines is
functioning properly.
Nouriel Roubini, Roubini Global Economics
| Opinion
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Taking a gamble with negative interest rates
The taboo that savers must be compensated for handing money to a
financial institution has been broken, with the ECB's negative rates
finally being passed on to retail clients.
Oliver Hartwich, The New Zealand Initiative
| Opinion
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Deflation: Boom or bust?
It has been my contention for a while that capitalism is returning to
its 19th century deflationary roots. Indeed, the evidence has become
overwhelming.
Charles Gave, GaveKal
| Opinion
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Low beta anomaly - mispricing or risk?
I don't dispute that low volatility stocks outperform highly volatile
stocks (and this is common across many markets). But volatility does not
explain all of an asset's risk.
Michael Furey, Delta Research & Advisory
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comment
| Opinion
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Risk parity portfolios - fad or the future of portfolio construction?
Is risk parity's outperformance in the past decade sustainable or just a
quirk of the unusual markets?
Michael Kitces, Pinnacle Advisory Group
| Resources
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PLUS...
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