Wednesday, June 26, 2013

Bond Market Impact:The Implications of Rising Rates

The recent bond sell-off and concomittant rise in interest rates present both challenges and opportunities.
I think we're gonna see a slowing in housing,said Bliss Morris,CEO of First Financial Network.Rising rates could certainly affect newer borrowers.Those still involved in renting could have some trouble buying a home.
California is doing better,the sand states of Arizona,Florida and Nevada,but secondary and tertiary markets could be in trouble.Our community banks are suffering from regulations and have not totally sold off their non-performing assests.
The next opportunities could be in the Euro-zone,with its many foreclosed properties.I don't think they've totally stabilised.They face some challenges with cultural and linguistic differences.
We do think the Treasury market offers value here,said Mark Kiesel,managing director and portfolio manager at PIMCO.We see a much weaker economy,and so we see value.We just don't see the economy generating jobs growth.There's a lot of consumer debt and unemployment is structurally high.
We're going through an unwinding of risk,creating volatility,but over time,the Fed will take another point of view and rates will go back down,Mr.Kiesel projected.
Mark Kiesel was Morningstar Associate's 2012 Fixed Income Manager of the Year.

Wednesday, June 19, 2013

Private Equity:Strategy and Focus

Our strategy is to find sort of the treasures below the surface,said J.Michael Chu,co-founder and Managing Director at private equity firm Catterton Partners.You're able to get higher growth through the recession.
All of our businesses are up very strongly.Our strategy is to identify those businesses that are well below the surface.We like businesses that are driven by value and luxury.
Outback Steakhouse started with great leadership.It's the leader in its casual steak category.The vast majority of our investments tend to be new,emerging businesses.
We don't really use a lot of leverage.We tend to over-equitise them.We never want the balance sheet to impede the business strategy.
Catterton Partners is a Connecticut-based private equity firm with an exclusive focus on providing equity capital to small and mid-market consumer companies in North America.With its combination of investment capital,strategic and operational skills,and industry network,it has become the most sought after company in its specialty.
Among Catterton's investments are Outback Steakhouse;Restoration Hardware;Baja Fresh;Cheddar's;Kettle Brand Potato Chips;and Sweet Leaf Iced Tea.

Wednesday, June 12, 2013

Cramer,China and the End of the World

I think it's gotten ahead of the Fed,said CNBC's Jim Cramer.The ten year Treasury continues to go up in rates.There are people who are making a very big end of the world case.The world is fretting about this.We just have to let it happen and let the end of the worlders play out.
The wheels are coming off China.Wages are going up.You're gonna hear the Communists talking about workers' rights.Workers' rights in Communist China?
People are saying this is the big unraveling.I respect the macro,but in the end,I am stuck with the micro,what with GM doing better than expected,as well as General Mills and PepsiCo.
They were looking at the big things at the US-China talks in California over the weekend,according to Pauline Loong,Managing Director at Asia Analytica.The good news is,there was no news.It was not an official summit.It was about what was on the chairs,not what was on the table.It was off the record.President Xi Jinping speaks English.
Right now,it seems the two big economies have decided it's in their interests to get along.Asian countries aren't in the untenable position of having to choose between them.
The eight hours of talks between President Barack Obama and Mr.Xi were described as having been historic and constructive.They took place at the Sunnylands Estate in Rancho Mirage,California.
The success of the talks was in spite of the fact that US defence contractor Northrop Grumman said hacking attempts are increasing at an alarming rate.Chinese hackers have breached defence contractors' systems or observed their activities with orbiting telescopes.
China has reportedly hacked into major projects such as the Advanced Patriot Missile;Aegis;V-22 Osprey;and Global Hawk.More than two dozen weapon systems have been compromised,but China has consistently denied it is responsible for such hacking.
Northrop Grumman(NOC),General Motors(GM),General Mills(GIS),PepsiCo(PEP)                                                            

Wednesday, June 5, 2013

Issues in Money Management

BlackRock is the world's largest money manager,owning the iShares exchange traded funds.Consumer confidence is up,but manufacturing is down,BlackRock CEO Larry Fink noted.Private sector deleveraging is still going on.
I actually believe we can't find enough good investments.Bonds are no longer providing sufficient return.
Emerging markets are probably today relatively cheap compared to where they were a few years ago.
We need a mandatory savings policy in the US.Retirement is an even bigger issue than tax policy.We need to educate Americans about the longevity of life.
I'm not worried about retirees.I'm worried about the young people who are not putting money away for retirement.We have men and women who should have more choice-maybe with the mandatory savings plan as a backup.
Everything that we face today is more short-termism.Most market partcipants make money on the velocity of money,on quick trades.It's the 24/7 news cycle,the annual election of board members.Some form of elongation is needed.
One of the big issues is confidence.We're sitting with a trillion dollars in money market funds by corporations.
Five years is the average term of CEOs.You see more short term changes in their behaviour.
BlackRock is the largest shareholder of JP Morgan Chase,and is among the top three shareholders of many other firms.Less pressure on board members means better outcomes,Mr.Fink suggested.