Trust Company Distrusts the Market

This is a financially engineered market,said Michael Crofton,President and CEO of The Philadelphia Trust Company,engineered by central banks.Bonds and commodities are telling us that stocks are too high,and there could be a crash.
The pullback will come from a macro-event that will surprise everyone.The Federal Reserve won't be able to do much more to help.Those high points of similar markets in the past coincided with the peak of financial engineering.
We rotated out of consumer staples in March and into underperforming energy and technology.The rise of staples had been unsustainable.You just keep rotating,and when the music stops,you'd better hope you're sitting down.
The Philadelphia Trust is an independent private bank serving affluent investors and institutions.The company says it brings old-fashioned values such as attention and discretion into the post-modern world.It offers a full range of services,from custody and trading to income distribution,CDs and scheduled client reviews.
In equity investing,the Trust strictly adheres to the growth at a reasonable price discipline.
On Wednesday,the Federal Reserve said it would continue its quantitative easing policy of bond-buying to keep interest rates low,in effect driving investors more into equities.

Betting On Banking:Should You Invest in Chase and Citigroup

JP Morgan Chase reported earnings of 1.48 versus a consensus estimate of 1.16,and revenue of 24.37 billion dollars versus an estimate of 24.41 billion.We think that the numbers were good,in line,said Jason Goldberg,CFA,an analyst at Barclays.Mortgage results continue to be the story.Asset management and commercial banking also had a good quarter.
We have an overweight on the stock.We think you'll see several metrics in the right direction.They're growing the top and bottom lines.Not too bad.It is trading well below tangible book value.
The stock has outperformed the market and the sector since Jamie Dimon joined as CEO.It's certainly one of our favourites in 2013.We also like Citigroup and US Bank.
Gerard Cassidy of RBC Capital Markets thinks Citigroup is in a good position to obtain some capital return for shareholders.Their Q4 report as well as their reducing exposure to risky assets over the past 2-3 years will support their case with regulators.
JP Morgan Chase was at 46.14 in afterhours Wednesday trading,down 0.09;while Citigroup was at 41.85,down 0.17;and US Bank was at 32.70,down 0.39.
JP Morgan Chase(JPM),Citigroup(C),US Bank(USB)

Euro Debt Crisis Means Cheap Assets

Spain is gonna be one of the two or three biggest markets for distressed assets,said Russell Platt of Forum Partners Investment Management.It could take 7-10 years in the courts to take control of the assets.There are about 140 billion euros of distressed assets available in Spain.
Germany is the biggest market for distressed assets-about 200 billion euros' worth.It's a chance to buy real estate cheaper.We see commercial properties at 50-60 cents on the dollar in the UK.
In the US,we're buying REITs mostly and mortgage-backed securities.We also like homebuilders.
PIMCO is one of the biggest buyers of distressed European assets.DIC Asset AG is a fund that buys distressed office properties in Germany.
Forum Partners is a global real estate investment management firm.It has 6 billion dollars of assets under management for institutions and family offices.With offices from London to Beijing and Santa Fe,it has invested in 17 countries in Europe and Asia.
DIC Asset AG(DAZ:Xetra),iShares Barclays CMBS Bond Fund(CMBS)

Newsletter Founder:Slowly Working It Out-the global economic slowdown

Spain will take a bailout by year end,predicts Paul Krake,founder of the "View from the Peak" newsletter.The world is so dominated by QE and expansion of the balance sheet,that's all that matters.
This is about kicking the can down the road.It's about working through the process.This could take 5+ years.
I've been advising clients a Spanish bailout and a Greek bailout will occur around the same time.Portugal will need more money,but it's incremental compared to Greece.
Asia will continue to be affected by falling exports.Global growth ex-US will be very sluggish next year,Mr.Krake advised.
QE,or quantitative easing,is the buying of assets by central banks to support markets and the economy.
"View from the Peak" is a weekly macro piece on the economic,valuation and policy factors that drive asset classes and regions.They work with asset management firms, sovereign governments and high net worth families.
Paul Krake has a Bachelor's degree in economics from Monash University in South Africa.

Investment Problems and Prospects:Thoughts From Alliance Bernstein

Our point of view on the Volcker Rule is that it reduces liquidity all over the world,says Peter Kraus,Alliance Bernstein CEO.Investors want to trade securities at a price that's fair;at the end of the day,the Rule reduces liquidity.Our view reflects our clients' views.
The Volcker Rule,part of the Dodd-Frank financial reform legislation,takes effect in July.It bans proprietary trading by financial institutions.Big banks will be required by the Rule to maintain a staff of 50-60 people to comply with it.
That the Rule applies to foreign institutions as well has increased the criticism of it.Complaints have been rolling in from around the world.
The changes on Alliance Bernstein's business will not be particularly large,Mr.Kraus added,but it will crimp our clients' returns.It will hinder the sale of mutual funds.If you buy securities from a seller,you must sell at the end of each day,making it difficult to price the sale.The Rule is very complex from both the compliance and the structural point of view.
As for the overall investing environment,we certainly understand the flow of funds is still into fixed income.That makes it an interesting time to consider tilting back into equities,Mr.Kraus explained.
Mr.Kraus' colleague at AB,Vadim Zlotnikov,observes that some of the positives from the U.S. and China should be able to overcome the problems in Europe.To the extent Greece defaults,and there is no contagion,I don't think it would be a big enough event.
Mergers and acquisitions economically would make a lot of sense.The financial availability is improving;the deals are looking attractive.It could be April or mid-year before conditions deteriorate,in Mr.Zlotnikov's estimation.
Alliance Bernstein is a client-centered and research-driven asset management firm.Their global client base includes a broad range of individuals and institutions who are assisted by the firm's array of products and service organisations,which are tailored to their distinctive needs,from offices worldwide.
Alliancebernstein Holding,LP(AB)

BlackRock's Downgrade Reaction

The timing of the downgrade of U.S. credit did take us by surprise,said Peter Fisher,head of fixed income trading at BlackRock,but we did a great deal of planning to protect our clients.It's a wake-up call about the level of risk in the world.A number of investors will take it as one more risk.They're selling risk assets,not Treasuries.
We're not mechanistic sellers or buyers.We are managing risk and looking for opportunities that this downgrade may create.The risk that the U.S. will not pay is pretty marginally increased.Clearly,coming in the fragile markets,it's one more straw breaking the camel's back of investors.
U.S. Treasuries were 60% of all AAA assets.It's a liquidity pool with great transparency.There's a little too much overreaction.Do not change behaviour abruptly.We've been up in quality and liquidity to try and brace ourselves,Mr.Fisher indicated.
BlackRock is the largest money manager in the world,with 3.66 trillion dollars of assets under management.It provides investment,advisory and risk management solutions from offices in 26 countries.
BlackRock(BLK)