Jonathan Davis | Government Bonds

Emerging markets: an accident that’s been waiting to happen

Stern words today about the roots of the current emerging markets crisis from Stephen Roach, the former chief economist at Morgan Stanley now less stressfully ensconced at Yale University, where he is a senior Fellow. You can read the full broadside here, but this is a short extract, highlighting how the huge destabilising capital flows into – and

Chart Of The Week – 22nd July 2013

U.K. equities have underperformed their U.S. counterparts since late-2007. Even though the U.S. was the epicenter of the financial crisis, the U.K. economy suffered a deeper recession and has witnessed a far more anemic expansion since 2009. The U.K. is currently flirting with near-recessionary conditions and prospects appear poor given the economic problems in the euro area, domestic fiscal drag and a relatively passive BoE.

Debt: still very much in favour

Reports by the Wall Street Journal that officials at the Federal Reserve are drawing up plans for starting to rein in the current programme of QE are worth noting. Jon Hilsenrath, the Journal reporter who wrote the story, is widely held to be the Fed’s favourite unofficial channel for making known its future intentions. Could

Bond Fugitives and Valuation Extremes

There is no bigger issue in the fund management circles that I frequent than the question of whether it still makes sense to hold the big global franchise stocks that have served investors so well over the past few years. In a world of artificially low interest rates, driven by the hair-raisingly experimental unconventional monetary policies now being pursued by the world's main central banks, global businesses with strong free cash flow, balance sheets, an established competitive advantage and a consistent dividend track record have become the darlings of all fugitives from the return-free QE-squashed world of government bonds.

“Don’t mistake predictability for safety”: Part 2

Sandy Nairn, the CEO of Edinburgh Partners, has been a regular contributor to Independent Investor over the years, making several highly prescient calls along the way. He was extremely cautious in November 2007, just as the markets were starting to anticipate the full extent of the banking crisis, and bullish once more in March 2009, when the equity markets finally bottomed out after the severe 2007-09 bear market. Two years ago he made the case for investing in Japan. In the second part of our latest interview he argues that investors are overpaying for perceived safety: government bonds and companies with stable earnings are much more vulnerable to disappointment and capital loss than investors appear to appreciate.

“Don’t mistake predictability for safety”: Part 1

Sandy Nairn, the CEO of Edinburgh Partners, has been a regular contributor to Independent Investor over the years, making several highly prescient calls along the way. He was extremely cautious in November 2007, just as the markets were starting to anticipate the full extent of the banking crisis, and bullish once more in March 2009, when the equity markets finally bottomed out after the severe 2007-09 bear market. Two years ago he made the case for investing in Japan. In the first part of our latest interview he argues that investors are overpaying for perceived safety: government bonds and companies with stable earnings are much more vulnerable to disappointment and capital loss than investors appear to appreciate.

Politicians Bow to Pressures to Bend Data

The British government recently assumed the £37bn liabilities of the Royal Mail pension fund. As a result, government borrowing was reduced by £28bn. Yes, you read it correctly. The explanation is that, by convention, unfunded pension liabilities do not represent government borrowing while, by a different convention, public assets intended for sale – such as securities formerly held by the Royal Mail fund – may be offset against borrowing.

Labour’s New Tax Policy Is an Old Mistake

I first wrote this article 33 years ago as a young researcher at the Institute for Fiscal Studies think-tank, and have repeated it at regular intervals since. When Ed Miliband announced last week a new flagship policy for his opposition Labour party – a reduced starting rate of income tax to help the low paid – he provided me with an opportunity to pull out the file again.

Reality and euphoria in the equity market

In the modern era strong equity market performance in January is not, as used to be believed in days gone by, a reliable forerunner of a good year ahead for the stock market, which is a pity as 2013 has certainly got off to a roaring start, with both the S&P 500 and the world index

Fools rush in while wise men take their time?

The New Year has started well, with plenty of evidence that professional investors are continuing to rediscover their appetite for risk assets, with the price of equities, corporate bonds and high yield debt all heading higher. The charts for leading equity indices, including the S&P 500 and the FTSE All-Share, have been trending higher ever since Mario Draghi,