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Friday 08 April 2016

Specialist, independent investment continuing education & certification for portfolio construction practitioners

Diversification, stats and unconventional monetary policy
With diversification the holy grail for portfolios, Michael Kitces' paper this week is a useful insight on what real diversification is (it starts simply but stick with it!). Michael Mauboussin then reminds us of what to look for in a good statistic, and Oliver Hartwich offers up two stats on the euro crisis becoming permanent. Nouriel Roubini argues unconventional monetary policy is now conventional, and ever more unconventional policies are needed. And if you're wondering what that means for portfolios, check out Dr Bob Gay's presentation from Markets Summit.
All the best for a great weekend's continuing education - Graham
P.S. Applications close next Friday for two Certified Investment Management Analyst (CIMA®) scholarships. CIMA offers an unrivalled opportunity to formally equip yourself with the knowledge and skills to build better quality investment portfolios – and be recognised for it.
BlackRock/PortfolioConstruction Forum CIMA Scholarship

- Macquarie/PortfolioConstruction Forum CIMA Scholarship


Is that portfolio really diversified?
Being properly diversified means always having to say you're sorry as some investment's not moving in the same direction as the rest.
Michael Kitces, Pinnacle Advisory Group |

What makes a useful statistic?
The worlds of business, investing, and sports are awash in numbers, yet we rarely pause to consider what makes a statistic suitable.
Michael Mauboussin, Credit Suisse |

An ECB dead end
You may have concluded by now that the euro crisis is over. Two figures show we're still right in the middle of the euro crisis. And it has become permanent.
Oliver Hartwich, The New Zealand Initiative |

Unconventional unconventional monetary policy
Unconventional monetary policies have themselves become conventional. Monetary policymakers will have to continue their fight with a new set of "unconventional unconventional" policies.
Nouriel Roubini, Roubini Global Economics |

Debt cycles don't repeat themselves - but this one rhymes
A 50-year era of inflation is ending and we are left no inflation, little growth and too much debt. China's slowdown and the current oil glut are early signs that this debt bubble may end badly.
Dr Robert Gay, Fenwick Advisers 0.50 CE  |
1 comment | Resources
* Rated in the top 10 presentations by Markets Summit 2016 delegates

Member comments
Prolonged low returns
I didn't mean to imply that the solution was to be 100% invested in volatile assets. The solution lies in reducing the chance that the first ten years will be poor rather than by reducing volatility...
Tim Farrelly
, farrelly's Investment Strategy Comment

Response to Stuart
Good question. If you look at western debt levels, across most sectors of most economies, debt has been flat...
Chris Watling
, Longview Economics Comment

Realistic long-term returns
Mark, with all due respect, I'm not certain how you can characterise returns of 0.4%pa and 15.6%pa "unrealistic" over 10-year time periods, when in fact those returns are almost directly in line with recent real-world experience...
Michael Kitces, Pinnacle Advisory Group

The resources cycle is getting closer to the bottom
In the long term, oil markets are no different from any other commodity market.
Amy Teh
, Colonial First State Comment

Demographic shifts are polarising investment opportunities
Demographic trends are a "known" that will play out over the very long term. Nigeria will become 3rd most populous country by 2045...
Aneta Wynimko, Fidelity International


A global (quant) perspective on the Australian equities
One might expect that Australia's high dividend yield, currently lower PE Ratio and generally smaller companies means the Australian equity market behaves like a global small cap with a value style tilt. Is that true?
Michael Furey, Delta Research & Advisory 0.25 CE  | 1 comment | Research

The Fed’s New Neutral rate
No one expected the FOMC to change its policy rate from 0.25% to 0.50% this month - but this month's meeting still provided plenty of unusual twists that warrant serious thought.
Dr Robert Gay, Fenwick Advisers

When things fall apart
The economic theories of the pre-crisis period – rational expectations, efficient markets, the neutrality of money – must be revised.
Anatole Kaletsky, GaveKal

It’s the end of EU-rope as we know it
The EU has been in crisis for many years. But you ain't seen nothing yet. 2016 will change the nature of the EU and it might well signify deja-vu, the end of Europe's process of political and economic integration.
Oliver Hartwich, The New Zealand Initiative 0.50 CE  |
1 comment | Resources
* Rated in the top 5 presentations by Markets Summit 2016 delegates

Capturing the governance premium in less developed markets
In the last 10 years, many companies from emerging economies have closed the corporate governance gap relative to their developed market counterparts. Such companies find themselves in a sweet spot.
Mugunthan Siva, India Avenue Investment Management Opinion

Member comments
Prolonged low returns
Tim, your point about the prolonged period of low returns is bang on the money but your implicit solution to stay 100% invested in a volatile market does not stand the test...
Aaron Minney
, Challenger Comment

You are correct but...
Unfortunately, the historic examples of sequencing risk at its worst has always been during the most volatile of equity markets...
Michael Furey
, Delta Research & Advisory Comment

S&P/ASX 200
I'd like to see this scenario run with the 40% one year dip replaced with the actual S&P/ASX 200 returns starting just prior to the GFC...
Brendan Swift, Collaborative Media & Publishing

The question is how...?
... how much pain will be endured to bring global debt back down to normal levels?  Are talking a Great Depression type proportion or a more gradual reduction over, say, 10 or 20 years?
Stuart Bailey
, KAS Financial Advisers Comment

Long-term returns
I strongly disagree Michael. I enjoy and appreciate your work on long-term investment matters but I believe you have inputted unrealistic expectations and then come to a poor conclusion.
Mark Hayden, Hayden Financial Services

Fasten your seatbelt for a volatile 2016
Thanks, some great questions here – I appreciate the opportunity to respond. 1. If the best case is that the global economy "muddles through", why would anyone own equities?
Brett Lewthwaite, Macquarie Investment Management

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