Investment letters

SlowStrangle

09/2017

Boiling the frog

by Pascal Blackburne & Luc Synaeghel

The month of August was certainly noisy, with Hurricane Harvey and escalating North Korean military provocations dominating the headlines. Such commotion should, however, not detract investors from what we consider to be the crucial longer-term development: the normalisation of monetary policy – assuming of course that a dire scenario will be avoided in North Korea.

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SlowStrangle

08/2017

Euro breakout

by Pascal Blackburne & Luc Synaeghel

Numerous are the concerns that we have written about in recent letters – all the while striving to make the most of the ongoing sweet spot for the global economy and financial markets. Rich equity valuations, eventual wage-driven inflationary pressures, high correlations due to ETF and quantitative hedge fund proliferation, (geo)political uncertainties, build-up of Chinese non-performing debt: these matters (and more) have long featured on our worry list.

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SlowStrangle

07/2017

Slow strangle

by Pascal Blackburne & Luc Synaeghel

However enjoyable the ongoing upward ride in risky asset markets, we confess to becoming increasingly worried about the longer-term outlook. By this we do not mean that we fear a market crash. That, to put it bluntly, would be the better scenario – rapidly aligning valuations with intrinsic company worth and opening a new investment window. No, what we dread is a slow grinding process, whereby risky assets produce poor returns for many years. Alongside slowly rising bond yields, aka negative bond returns, this would be nightmarish for investors.

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Economics_Vs_Politics

06/2017

1999 all over again?

by Pascal Blackburne & Luc Synaeghel

The money currently flowing into the private equity space is quite astounding – and a testimony to how desperate investors have become for returns in a world of zero rates. Not only are they willing to entrust massive amounts to newly established private equity funds, but they are also requesting that their money be put to work fast. The ensuing competition between private equity firms to find investments means not only that target company prices are bid up well above the level suggested by standard valuation tools, but also that proper due diligence is not always performed.

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Economics_Vs_Politics

05/2017

Economics vs. Politics

by Pascal Blackburne & Luc Synaeghel

At the risk of repeating ourselves, let us begin this letter by pointing out the striking dichotomy between solid – indeed improving – European economic fundamentals and a political agenda that is rife with potential pitfalls.

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Climbing a wall of worry ?

04/2017

No storm on the horizon... Anchors aweigh!

by Pascal Blackburne & Luc Synaeghel

Economic indicators are virtually unanimous in pointing to (very) strong global growth in the second quarter. Confidence is high at both the consumer and business levels, with Purchasing Managers Indices particularly buoyant – typically reliable leading indicators.

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Climbing a wall of worry ?

03/2017

Climbing a wall of worry

by Pascal Blackburne & Luc Synaeghel

Politics rule our investment letter again this month, albeit shifting focus from the US to Europe. With the first episode of a heavy 2017 electoral agenda just around the corner, investors are understandably concerned that a populist backlash could undermine the European construction. Our position, taking a hard look at each of the countries involved, is that the European Union (EU) will likely not only survive the political challenges of 2017, but perhaps even emerge more united – thus in a better position to rethink its future.

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When will trump hit the wall ?

02/2017

When will Trump hit the wall?

by Pascal Blackburne & Luc Synaeghel

The first weeks of the Trump term have been animated, to say the least.
Far from “rising to the function” as many were hoping, the new US President has kept to his Twitter style and set about running the country as if it were a company. We are convinced that institutions will eventually constrain him, be they the Congress (manifestly in no hurry to confirm the nomination of several Trump candidates), courts of law (as is occurring on the issue of immigration), the Federal Reserve or state governors. Pressure from the US corporate sector is also already evident. In domestic affairs, Donald Trump will thus have to start to compromise.

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01/2017

There is no comfort in the truth

by Pascal Blackburne & Luc Synaeghel

The economic picture is looking good as we enter 2017 – and stands to get even better in 2018. Growth is accelerating globally thanks to less austere fiscal policies and large infrastructure investments. After decades of trial and error, central banks have found the holy recipe to avoid recessions and keep inflation at a moderate level: durably low interest rates and episodic money printing.

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12/2016

Stubbornly optimistic equity markets

by Luc Synaeghel, CIO

Having begun 2016 in an extremely pessimistic mood, equity markets are ending the year on a high note. Brexit vote, Trump election, OPEC agreement to cut production (pushing the oil price upward), political disruption in Italy: no event has been “bad” enough to derail the upward march of most equity indexes for more than a few hours or days.

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11/2016

President Trump

by Luc Synaeghel, CIO
Let us begin by apologising to our readers for the late publication of this Investment Letter.
Somewhat distrustful of polls (a lesson from the Brexit referendum), we chose not to put our monthly thoughts to paper until the result of the US vote was known. In hindsight of course, this proved a wise option. The election of Donald Trump as the next President is a true game changer for both the US economy and financial markets.
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10/2016

Do not underestimate China

by Luc Synaeghel, CIO
It has been only six months since Chinese policymakers announced their plan to develop the North Western part of their country and already more than 300 projects, totalling some USD 150 billion, are ready for roll-out. There should be no doubt that China is serious about its infrastructure spending, with major consequences for commodity prices and the industrial sector at large. Yet financial markets have been paying little attention.
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