The second from friend of M.E. Jay Pelosky, who advises big pension funds on what to buy.
POLITICO MORNING EXCHANGE: Banks vs Basel — Fed on hold — No Greece Worries
Jay Pelosky, an investment strategist emailed me. A weak economy without recession is the best US equity investors can hope for.
POLITICO: Hedge fund titans lament - Central banks stole our mojo!
Jay Pelosky, which advises big institutions on where to put their money, believes that central banks both in the U.S. and Europe have been gamechangers in both what they did after the crisis and how they did it.
ITAÚ: Waiting for Fiscal
In Samuel Beckett’s famous play “Waiting for Godot,” the actors wait endlessly and in vain for someone who never materializes. That feeling of endless waiting is on full display in economic and financial circles; hopefully the wait for fiscal policy to join the fight against global economic weakness will not be in vain. The perverse coupling of ever more fearful IMF global growth warnings and new year-to-date highs in global equities suggest an unstable state of affairs. Self-levitating financial markets on one side, and on the other, fretting policymakers worried that it’s all about to implode and wanting to be sure history shows they gave the warning.
FOX BUSINESS: Fed drops reference to risks in global financial markets
Source: FOX BUSINESS
PENSIONS & INVESTMENTS: Market environment driving asset owners to revolution
Revolution and pension funds typically don't go together. But today's investment landscape calls for a revolution in asset owner long–term fund management process and structure. An environment characterized by low returns, rising longevity risk and deteriorating demographics requires nothing less.
ITAÚ: Where to Next?
If one had departed the market scene at year-end and returned at March month end one could be forgiven for thinking that not much had transpired. A point-to-point look would suggest flat global equities, slight USD weakness and rallies in sovereign credit and broad commodities ( chk). Having not departed the scene, we know all to well that such a comparison fails to recognize the violent sell off across assets in the first 6 weeks of the year followed by an equally violent cross asset rally over the last six weeks. Where do we go from here is the question of the day; an answer will require a look at where we have been and some thoughts on various paths forward.
Read moreITAÚ: Why the World Needs a Weak Dollar (The Case for a 21st Century Plaza Accord)
There has been much discussion over the past few years about a currency war but one party has been missing in the discussion and that’s the US dollar (USD). Euro weakness, yen collapse, EM FX crash, a Yuan mini devaluation and its all good. The USD approaches new highs as money flows back into the US and its (relatively) high yielding US Treasury market and until quite recently its strong equity market. The world ex US gets to live in a fantasyland of endless US consumption that they can sell into with cheap currency. One doesn’t have to be Donald Trump to see that is not sustainable.
Read moreITAÚ: What's the Bull Case?
It has certainly been a challenging start to the year – even for someone like myself who has been quite cautious (see “2016 Outlook: And the Chickens Come Home to Roost,” published on December 21, 2015). Bearish predictions abound, and market participants have been shaken by the violent sell-off across risk assets and around the globe.
Market psychology appears damaged, and the muscle memory from the Great Financial Crisis has kicked in like a bad cramp in the middle of the night. Negative feedback loops seems to be trending, and while the bears are loud and proud, the bulls seem to have been taken to slaughter. The good news is that we are set up for a nice bounce in asset prices; the bad news is that such a bounce is likely to be just that – a bounce.
FOX BUSINESS: Why wage growth is lagging in the U.S.
University of Maryland Economist Peter Morici, Pelosky Global Strategies Principal Jay Pelosky and Kevin Kelly of Recon Capital discuss the December jobs report and the U.S. economy.
ITAÚ: 2016 Outlook: And the Chickens Come Home to Roost
The tough choices that were not taken in 2015 come home to roost in 2016. These include: the implications of the Fed’s decision to tighten; China’s decision to fully take on SOE reform; and sovereign/corporate decision making in the commodity complex. Perhaps most important is SOE reform in China - the context for the latest decision to increase stimulus. The key takeaway for the global economy: all three of these decisions are negative for growth and inflation and moreover all three reinforce each other. The big surprise for 2016: a period of USD weakness which will lead to a sharp counter trend rally in all the assets punished in the past few months: commodities, EM equity, US high yield. What the world needs now is a weak dollar and it will get it - at least for a little while. Cross asset allocations discussed inside include the sighting of a rare twofer.
ITAÚ: Talkin’ Bout a Revolution (With a Nod to the Beatles)
I recently had the pleasure of addressing a large group of pension fund managers. That talk & this piece fleshes out two themes of mine - one old and one new. The old is the Tri Polar World View (TPW) - an environmentally sound, socially aware and pro governance global growth model. The new is the coming revolution in the long term investment management (LTIM) space which I expect to have an effect akin to the Yale Model. The trifecta of low returns, rising longevity risk and deteriorating demographics requires it… the question is how to survive it. See inside for a 7 step program to do just that.
HEDGEYE: Our Worrisome ‘Tri Polar World’ and Its Global Implications
In this second installment of our recent interview with Jay Pelosky, Pelosky lays out the implications of his Tri Polar World (TPW) theme. According to Pelosky, TPW simply means we are now in a world of 1) Insufficient demand; 2) Excess supply; 3) No inflation; and 4) Excess debt. It comes from his view that, “2008 was not only a financial crisis and crash, but it also meant the crash of all major global growth models at the same time.” He speaks with Hedgeye Director of Research Daryl Jone.
Source: HEDGEYE
ITAÚ: Seeking Inspiration
Its true: I was seeking inspiration when I spent some time in the fabled Writers Room at Washington, D.C.‟s Cosmos Club. I doubt, however, that I was alone in seeking inspiration – policy makers and investors alike seem to be falling back onto the same monetary policy playbook, and that‟s a problem. The ECB talks and the PBOC walks, risk assets bounce while the data disappoint. Yet monetary policy alone is unlikely to be sufficient to offset the looming threat of global deflation.