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Archive for the ‘Ken Fisher’ Category

Is Janet Yellen really a closet hawk?

My longstanding correspondent Ken Fisher, the West Coast money manager, has a typically contrarian take on how the new head of the Federal Reserve, Janet Yellen, should be regarded by the markets. In a column for the Financial Times, he says that, although an adherent of Ben Bernanke’s approach to monetary policy, she is in reality more of “a closet” hawk than a dove. This is essentially because while she supports QE, in practice that kind of monetary stimulus only forces down long term interest rates, inhibiting rather than encouraging banks from lending. She is also in favour of requiring banks to shore up their capital bases, which also inevitably tightens the flow of credit to the real economy and leads to slower than expected economic growth. Read the rest of this entry »

Written by Jonathan Davis

November 4, 2013 at 4:11 PM

Views on Europe

Back from a two-day trip to Paris, it is no surprise to find that the markets are still obsessing about Europe. In the absence of elections political change is rarely a straightforward business, as this week’s tortuous attempts to form new governments in Italy and Greece are demonstrating. The markets remain volatile, but as yet nothing has happened to change my view that we are moving towards an endgame that will ultimately prove beneficial, howver messy it becomes in the short term.

What is noticeable is how opinion is at last slowly shifting away from arguing over how the eurozone in its present form can be saved towards the (more sensible) view that the eurozone cannot continue exactly as it is, whether or not it survives the immediate crisis.. See for example an excellent piece by Lord Owen, the former Foreign Secretary, writing in The Guardian on Monday which begins:

A eurozone may survive, but it will not be the present 17 member state eurozone. What will emerge, if it is to survive, will be smaller and more focused around German financial and monetary disciplines

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Written by Jonathan Davis

November 10, 2011 at 3:02 PM

More On The Great Optimists

Having mentioned grounds for optimism in the equity market in my last post, it is striking that the markets have perked up suddenly in the last 48 hours – no more than a happy coincidence, I fear, as for now the markets remain in their trading range and are merely reacting to individual items of  economic or political news that by their nature have little in the way of reliable or enduring meaning. The tug of war between inflationists and deflationists, and between double dippers and equity bulls, goes on, and most likely will do for some time.

The FTSE All Share chart, for instance, continues to trade in a band around its 200 day moving average, which itself is struggling to find a new direction. It is difficult to read anything into this lack of direction other for the moment  than that it is still consistent with either school of thought being ultimately proved right. At some point we will witness a breakout that gives a more positive clue as to where the markets are heading.

It was interesting to see the Financial Times reproducing Bill Miller‘s positive take on large cap US stocks in the paper yesterday. These comments in fact originally date back to his quarterly market commentary written more than a month ago, something I logged at the time. Bill is one of the professional investors I was referring to in the last post, and someone whose views I have followed for a long time, but I could name several others. Having performed very badly through the credit crisis, and misread  the last bear market completely, such is the way of the markets that few probably take much notice of his comments any more – which doesn’t mean he is wrong, merely out of favour.

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Written by Jonathan Davis

September 2, 2010 at 2:57 PM

Ken Fisher: Liking What He Sees

Ken Fisher, the West Coast money manager, has been one of my professional correspondents on the markets for over a decade. His directness and knowledge of US market history are always stimulating. He is not always right, but he is never shy of nailing his colours to the mast. Of his many books, the one I find most useful is The Only Three Questions That Matter, which is a treasure trove of useful ideas on market behaviour. These are his latest views, courtesy of his regular column in Forbes magazine.


“I like what I see: improving fundamentals plus skepticism: the classic ingredients of the second phase of bull markets. It’s a year since the bull market began, and I remain firmly bullish. I’m often wrongly called a permabull. I’m not one. In 25 years of Forbes columns I turned bearish for three extended periods: in 1987, in 1990 and between 2000 and 2002. Yes, I completely missed foreseeing the 2008 bear market. But that doesn’t make me a permabull”.

“When in doubt I am biased toward owning stocks. Stocks rise more often than not. Since bear markets are always followed by bull markets–which is a basic rule some investors seem unable to accept–it seemed to me basic to be bullish once the 2008 bear market was well under way. One year into the current bull market I like what I see: globally improving fundamentals plus strong societal skepticism. Snarky, cranky sentiment and better fundamentals are the classic ingredients of the second phase of bull markets”.

“Economic numbers globally and almost consistently keep coming in up and better than expected, while being largely dismissed in terms of significance. In part this is because the fastest recoveries from the recession are happening in the 25% of global GDP found in emerging markets countries. Maybe it’s unnerving that China and Brazil are leading us. Americans are way too U.S.-focused”.

“My Feb. 8 column cited the “pessimism of disbelief,” the tendency to see all news as bad, or, if good, as something likely to morph into something bad. (Typical formulation: Stimulus efforts either won’t work or will cause inflation.) You can see this pessimism in mutual fund flows: For three years there has been a migration into bond funds–mostly into government bonds for safety–just in time for long-term U.S. government bond funds to return a –17.5% in 2009. That’s fear”.

“For more on market sentiment, visit market blogs anywhere. The scepticism is wise-guy thick. Anyone posts something positive and they get pounded by the wiseacres. I love it. This is the wall of worry bull markets classically climb. So be bullish while the sentiment’s sour–and keep buying good companies at reasonable prices”.

My Comment: This effectively has been my stance for most of the last 12 months. We have had a market mired in pessimism as a result of the credit crisis in which the majority of investors have been unable or unwilling to credit the strength of the potential global economic recovery.

On fundamental grounds, the case for buying equities at today’s levels has now become fairly weak. The prospective 10-year returns for any investor returning to the market for the first time today are mediocre at best. However it is quite likely that momentum will now carry this bull market phase higher, as more investors come to regret having missed the boat, and for those with the appetite for that kind of risk it is worth staying for the ride.

However, while remaining fully invested,  I am now more cautious and on the lookout for early warning signs of a cyclical downturn.

Written by Jonathan Davis

April 7, 2010 at 6:08 AM