Meeting of Minds – March 2018

Published on: March 27th, 2018

This month Raoul returns to the bigger-picture shift in global power from an introspective US-led West as China seizes the One Belt One Road initiative. He follows this with an update to his ‘tailwind’ theme of Indian opportunity following a recent business trip to the subcontinent. Julian meanwhile, provides a framework encompassing oil, inflation, USD, yields, and stocks in his piece called Sequencing.

Comments

  • DW
    Daniel W.
    31 March 2018 @ 18:35
    Julien, from your point of view, what will be the best trading opportunities in case of tighter financial conditions? Short EM equities? Short Gold? Long Dollar Index? Others?
    • JB
      Julian B. | Contributor
      2 April 2018 @ 18:20
      Hi Daniel. EEM has a very high correlation to financial conditions and in addition it should respond very poorly once the $ starts its risk off rally. Technically, there's a pretty decent channel if you use the closes coming off the Dec 2016 lows and we are bang on it today.
  • lD
    lance D.
    27 March 2018 @ 12:53
    O.K This is a nice read and informative thank you for the service guys. Now a question i need answering because i have found trading/investing confusing. I knew it was not going to be a walk in the park by any means i started this journey approximately 6yrs ago and it has been an expensive journey so far. I can see some light at the end of the tunnel. Anyways historically i have followed educators that have basically put out video tutorials on what is called 'top down bottom systematic process' where they provide a whole heap off excel spreadsheets and encourage me to download the data of numerous leading lagging and coincident indicators. however since being a macro insiders member I'm starting to feel that the indicators that i try to keep on top of maybe starting to become more and more useless to get a view on rates currencies commodities etc (but i could be totally wrong) so the question is in the future are the main leading lagging coincident indicators still likely to be used by the professionals to get perspective ? i suppose i am trying to ask what should i be watching as the main drivers of stock market returns? should i assume Indias GDP/stock market going to be more important to global growth in the future say over the european economic sentiment report . I do hope you can make sense of what I'm trying to get across its important to me, i am not sure if I'm paranoid i just get the feeling that all the indicators and data i have been inputting into excel spreadsheets over the years that are designed for me to predict global/regional GDP is all about to flip and swap to something totally different, just as I'm just starting to get to grips with the analysis (which would be just my luck.) Any info would be great i currently try to watch chinese Pmi's USA & europe is this going to change as we move from old world order to a new ? what will be the new drivers that can be used to get a perspective in this ever changing world? Thanks
    • RP
      Raoul P. | Founder
      28 March 2018 @ 12:58
      I think you are really perceptive and asking the right questions but first you need to understand that there is no one magic model and its a whole lot of evidence taken together to make reasonably informed probability judgements. Not mathematically perfect ones, but your own personal working framework. The broader question about are the things we all follow now becoming less relevent is interesting. I still thing the global cycle is the US cycle but China's monetary cycle has huge impacts on the global cycle too. Overtime, the rise of China and India as consumers and exporters will lessen the US influence on the global business cycle. Its hard therefore to filter out signal from noise during that transition, but I would suggest that the larger shift will come after the next recession when the Baby boomers play a lesser role in the investment cycle and consumption cycle, leaving external influence of other countries on the rise as the global balance shifts.
    • JB
      Julian B. | Contributor
      28 March 2018 @ 22:19
      I'd echo Raoul's comments but would add the following. While indicators/data still play an important role in determining market prices. Since the GFC, they have been trumped (no pun intended) by liquidity. So what you need to ask is how changes in the indicators/data influence central banks' behaviour and how that in turn impacts prices. For example, in the old days weak data traditionally would have resulted in weak equities. But since the GFC, weak data = more QE = higher stocks. Hope that helps?
    • lD
      lance D.
      1 April 2018 @ 15:01
      Thanks guys. I read somewhere that April 3rd there is a new rate 'secured over night funding rate' that is an alternative to Libor benchmark should i be scrapping my libor spreadsheet and track this new SOFR benchmark Instead ? I m actually thinking the best thing to do would be track both equally ? what do yous reckon ? Cheers
  • CO
    Connor O.
    29 March 2018 @ 09:42
    Raoul, would be interested in getting your thoughts on Fairfax India Holdings Corp. as a play on your India Thesis? This is a unique opportunity in that you can co-invest with a successful manager in an investment vehicle focused on India that combines listed stocks and private investments such as 48% interest in Bangalore International Airport.
    • RP
      Raoul P. | Founder
      30 March 2018 @ 13:02
      I dont know enough about it but the little I do know looks very interesting.
  • CH
    Chris H.
    27 March 2018 @ 13:51
    Raoul - how does Saudi fit into this new political order given the proxy wars with Iran? Also, do you have a view on their potential given the positive tailwinds behind the 3Ds - demographics, development and debt. -CH
    • RP
      Raoul P. | Founder
      28 March 2018 @ 12:54
      I am positive on the Saudi economy over time, once they transition further away from oil. The Iran thing is a concern but no side can afford a war with each other so I think of it as essentially neutralised. The issue is more about how John Bolton tries to accentuate the divide between the two for US interests. China and Russia, however, are big supporters of Iran.
  • CS
    C S.
    27 March 2018 @ 23:40
    All is not lost - the West can always 'identify' as Chindia. :D Raoul, just curious, do you hold an physical stock certificates, particularly for your longer (5yr+) stock holdings? (any concerns about broker stability).
    • RP
      Raoul P. | Founder
      28 March 2018 @ 12:52
      Having lived through Man Financial I am always worried about brokers. It is almost impossible to have physical certs these days sadly.