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ARP Observations

In this section, we provide some thoughts on events and developments that are shaping the world and informing our investment advice and strategies.

Featured
Chart of the Moment –
Why the Baby Boomers could make it difficult for equity investors
Experience from the U.S. has taught us that, as people age, they gradually switch from equities to income-generating investment vehicles (in the past, mostly bonds). Eventually, as they age further, they become net sellers of both equities and bonds. Given the substantial amount of capital controlled by baby boomers (see below) that could put further pressure on equities (and, eventually, also on bonds) in the years to come.
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Brexit - What Now?
Having just been defeated in Parliament, Theresa May has only a few days now to sketch out plan B, which she must present to Parliament by Monday the 21st January. The big question is therefore: What will happen next?
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Debt "Hotspots"
The world is now $62 trillion more indebted than at the time of the Lehman collapse, and many of the new debt “hotspots” are in Europe.
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Brexit at 23:58
With the vote in Parliament coming up and the exit date now less than four months away, the stakes are getting higher and higher. See here why a hard Brexit - i.e. no agreement - is the worst of all possible outcomes.
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UK Longevity in Decline
With UK longevity in decline since 2011, one can no longer argue it is just a blip on the curve, but what is really going on? Is it a function of lifestyle, or is it a function of the UK government having cut back on NHS – at least in real terms? We are looking into this, as the ramifications are widespread.
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Media Coverage of The End of Indexing
Niels Jensen’s book on the six structural mega-trends that will dramatically change the world we live in has been out since late March 2018, and has been very well received by various media.
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Our CIO in South Africa
Our CIO, Niels Jensen, was recently invited to share his views with clients of GraySwan – a leading provider of investment solutions to pension funds as well as private investors in South Africa.
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The End of Indexing
A new book authored by Niels Jensen, CIO of Absolute Return Partners
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BofAML’s Bull & Bear Indicator
Following the sudden spike in volatility in late January and early February, many investors expected the change in fortunes to be longer lasting, but markets have been remarkably calm since. In fact, so calm that investor sentiment is now extremely bullish – a classic warning signal that investors should be wary.
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The Mother of All Bubbles?
Over the centuries, many bubbles have played havoc with people’s lives, but rarely – if ever – have we seen a bubble as big as Bitcoin. Having dropped almost 50% from its peak, one wonders whether the meltdown has already commenced? Alternatively, could it possibly be a blip on the curve, only for Bitcoin to go much higher? For what it is the worth, I think Bitcoin will ultimately go to zero, but that doesn’t mean it couldn’t appreciate further in the short term.
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Brexit, our latest view
The latest language in the current round of Brexit negotiations is becoming increasingly emotional, fuelled by nationalist press on both sides. This has made deciphering fact from fiction for the general populous almost impossible. The import/export debate is a case in point. In this latest Observation we highlight some facts worth remembering!
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Bond yields vs. the global economic cycle
Bond yields diverging from the economic cycle is a post-crisis phenomenon, and now it is happening again. Will bond yields pick up or is the economy finally slowing?
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Protectionism on the Rise
The EU and US combined have hugely increased the number of protectionist policies in place in recent years. This is not conducive to global growth; in fact it is outright obstructive to it . . .
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Labour’s demographic problem
Demographics will make it increasingly difficult for Labour to gain power in the UK.
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GDP needs (reasonably) cheap energy
Economically, nothing is more important than energy. Industry would die virtually overnight.
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US debt levels are in (relatively) good shape
Despite all the negativism towards the US economy and its supposedly vast amounts of debt, the reality is very different. The absolute numbers look big, but that is because the economy is so big. On a relative basis (as % of GDP) the debt problem in the US is small compared to many other economies.
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Market apathy?
Are equity markets reflecting today’s systemic risks? Proceed with caution . . .
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Confidence Trick
US consumers are feeling rosy right now. Could this be the peak though?
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The Untied Kingdom
Should Scotland's First Minister seek a second referendum, as she now has authority to do, can Scotland afford it?
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Mind the Gap
US Economic Growth - the gap between hope and reality widens
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Year of the Alpha
At Absolute Return Partners we distinguish between four types of risk – beta, alpha, gamma and credit risk. Alpha risk is the contentious one. There is more than one way to think of alpha risk.
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Trump Pie
Trump’s promise to the American populace that he can deliver 3.5-4.5% annual GDP growth consistently is a pie in the sky.
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All change at the next nation
With 2017 well underway, one concerning factor stands out above everything else, and that is what is usually classified as growing nationalism. I am not convinced that the true driver is just growing nationalism.
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Change is coming
Fund managers are going to struggle to perform sudden miracles and deliver outsized returns in the prevailing low return environment. So, it is fees that make a significant difference to the bottom line.
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The Empire Strikes Back(wards) – Now what?
Democracy has been served. Brussels and London (or at least the elite in those cities) have received a slap in the face.