Damien Klassen

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Buy or sell the Syrian missile strikes?

The US missile strikes in Syria today create a considerable investment issue. On the bullish side, US intervention in Syria to help stop the descent into a failed state could stem the flow of refugee from Syria and potentially save hundreds of thousands of lives. Stemming the flow of refugees (the UN estimates there are

8

Are machines taking over the stock market?

There have been a bunch of articles out in the last week about the rise of the machines driving fund managers out of business. The headline is way more exciting that the details though. The detail is that computers are making fund managers more efficient. From the NYT Score one for the machines. The largest

7

Buy or sell the US dip?

No market goes up in a straight line, and so the US stock market was due a pull back at some stage. The question that you have to ask at this point is whether this is a typical market retreat following a 4 month almost straight line rise or is it something more sinister? The

16

When will electric cars disrupt oil?

Yesterday we had a long look at solar and battery power and how they affect the electricity sector. Today we extend the battery analysis to the oil sector and look at electric cars. “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Mark

35

Special report: Where to invest to win the energy race

Fossil fuels have a limited time as viable sources of energy. And I’m not talking about saving the planet or carbon taxes, simply economics. Coal, gas, oil, all have economics based on a “scarcity curve” – the more we use them, the deeper we need to dig to find more and more expensive they become

37

Want to buy the bigotry ETF?

A new ETF from Inspire in the US is trying to show that bigotry knows no bounds (hat tip to the FT): The methodology removes from the investment universe the securities of any company that has any degree of participation in activities that do not align with biblical values, which are: abortion; gambling; alcohol; pornography;

21

Are central banks really independent?

After yesterday’s suggestion that a brick would do as good a job as Phil Lowe at the RBA owing political sensitivities, Goldman Sachs offers this chart on central bank independence: The Goldman piece was about highlighting how the US Fed doesn’t actually have that many legal protections if Trump decides to test his powers. I

22

Fundies have a shocker

Fund results out today from S&P are not good for active fund managers: The majority of Australian actively managed funds in all categories (equity and bonds) underperformed their respective benchmarks. This is the first time this has occurred across all categories in a calendar year since the first SPIVA Australia report was published in 2009.

6

Will the Snapchat unicorn bring you riches?

Snapchat is listing shortly, probably early March. It’s a unicorn, a start-up with a valuation over $1b. It’s going to be valued at lots (USD25b?), and it loses money, which makes it hard to value. In the end, it’s a lottery ticket. Late last year there was a research paper out suggesting that the investment

28

Chanticleer channels the MB fund

Shout out to Chanticleer this morning in the AFR (channeling the reasoning behind the MB fund) and talking about the problems with financial advice: … it provided a stark reminder of why the integrated advice model of the major banks cannot survive. Argo and WAM Leaders stand for the sorts of things banks struggle to

37

When should you panic about Donald Trump?

Mainstream media is in a panic about Donald Trump. Financial markets are pretty calm. So, what would it take to spook financial markets? US consumers / US small business owners are the key My take is that the small business sector is the key driver of US employment, the US consumer is the key driver

79

Breathless Trump reporting

I admit that I fall for it. Time and again, a juicy piece of click-bait that invites me to be outraged at the latest Trump tweet, campaign speech and now (sadly) executive order. From an investor’s perspective you need to be wary though. News media knows that we will click and so will play to

5

US and China playing chicken

Timely reminder from Brad Setser about the unintended consequences of trade spats, using the US tyre tariff/Chinese chicken feet retaliation from 2009. Brad’s posts are often quite technical and dense, so I have taken the liberty of annotating his charts below to tell the story:   The lessons being: there are lots of unintended consequences

10

Trump vs Yellen

From the WSJ: Trump would like to talk the USD lower. Just about every policy he has proposed will push the USD higher. Yellen is worried about “nasty surprises” if the Fed doesn’t raise rates. My money is on Trump’s actions having a greater effect than his words… Damien Klassen is Chief Investment Officer at

30

The great Chinese power exchange

The Economist had a chart of the day earlier this week highlighting the new ultra-high-voltage projects in China: The largest connector under construction, the Changji-Guquan link, will carry 12,000MW (half the average power use of Spain) over 3,400km, from Xinjiang, in the far north-west, to Anhui province in the east. This is a good illustration

24

Baby boomers begin to drain cash in the US

The WSJ has a piece out on the demographic effects of the baby boomers retiring: The largest generation in U.S. history has to start pulling its retirement money this year, kicking off a mandatory movement of cash that could total hundreds of billions in the coming decades. U.S. law requires anyone age 70 ½ or

0

Oil rebalancing dreams

Job Done! The oil market is rebalanced according to the Saudis (from Bloomberg): OPEC and Russia won’t need to prolong output cuts beyond June because the agreed reductions will have already ended the oversupply in world crude markets, Saudi Minister of Energy and Industry Khalid Al-Falih said in Abu Dhabi on Monday. Unfortunately for oil

6

The wonderful world of broker conflicts

A reminder today from Reuters on the perils of being a research analyst at a brokerage firm. The guts of the story: JP Morgan equity strategists downgrade Indonesian stocks to underweight The Indonesian finance ministry takes offence and stops using JP Morgan as a primary dealer for its government bonds JP Morgan upgrades Indonesian stocks

4

Iranian oil: back to pre-sanction levels

Another oil report from Oxford Energy, this time looking at Iranian oil and noting: Iran is broadly back to pre-sanction oil production levels. There is the potential for expansion, but that is years away as none of the agreements with European oil companies have progressed very far. There is LNG potential, but that is also

1

Asset Allocation and the Trump border tax

Here’s some more on border taxes from the FT, following up on my rundown yesterday on Trump’s effect on taxes. The FT are invoking JP Morgan (JPM) to show which countries and stock markets are most exposed: JPM then go on to draw some conclusions based on ETF flows: It is of course almost certain that

12

Evaluating Trump’s corporate tax scattershot

There are a number of elements to Trump’s tax plan. Most of it involves cutting taxes on the richest and hoping that “trickle down” will sort everything out. I don’t think there will be a happy ending to that story. However, the tax plan is more complicated than that, especially at the corporate level –

12

Lazy thinking at the Economist

The Economist mounts a defense of Chinese capex today. They start with a study from last year: Western leaders often shake their heads in disbelief at the sums China spends on its huge projects. And some analysts question how much of it has been wisely spent. In a widely circulated study published last autumn, Atif