A Steady Hand in a Changing World

Published on
June 10th, 2019
Duration
42 minutes

A Steady Hand in a Changing World

The Larry McDonald Series ·
Featuring Alan Higgins

Published on: June 10th, 2019 • Duration: 42 minutes

Alan Higgins is the CIO of Coutts & Co., the eighth oldest bank in the world. In that role, he is uniquely positioned to see the trend in wealth management away from liquid asset markets to private equity. In this interview with New York Times best-selling author Larry McDonald, Higgins explains the wealth management trends he sees, and breaks down the nuances of today’s asset management world. He also shares his outlook on global markets, interest rates, and Brexit. Filmed on May 3, 2019 in London.

Comments

Transcript

  • AA
    Aymman A.
    23 August 2019 @ 18:45
    Good interview. I did not think much of this guy earlier but have changed my mind.
  • NR
    Nelson R.
    15 June 2019 @ 18:56
    Alan’s comments on DB Equity vs COCO’s was very insightful color. Nice job gents.
  • DS
    David S.
    11 June 2019 @ 20:30
    What a great guest. Extraordinarily quick mind. I need to watch again as I am not that fast. I was encouraged by comments about the UK, American banks' preferred bonds, and Italy. It is rare to see positive comments on the Italian situation. Since Mr. McDonald likes to give his position during the question, I wish the interview was a full hour. DLS
  • BA
    Bruce A.
    10 June 2019 @ 23:06
    Treasury rates may or may not mean revert, but that is only part of the valuation picture for equities (whether via PE multiple or discounted cash flows or Fed model). The expected earnings growth rates into the future is another key input. Current equity valuations imply a 'high growth rate' for SP 500 earnings but this is at a time when corporate profit margins are already elevated on a historic basis and the economy wide growth situation is challenged by demographic changes (affecting workforce growth) and limited productivity growth per employee. Suppose the low treasury rates don't mean revert............... that only happens in a low growth future. A low growth future means low growth for SP500 earnings given already elevated corporate profit margins. This conundrum suggests that there's a mismatch between current valuations and future corporate earnings..
  • SS
    Sam S.
    10 June 2019 @ 14:08
    Totally appreciate this interview. Larry held the "history" of Mr. Higgins to a minimum. So many interviews are over-filled with the past and the background. of the guest. They got right into the action of bonds and equities, making the discussion a lot of fun to listen and learn from. Mr. Higgins answered questions in a clear concise well spoken manner with a humble approach. It's like these guys could be our neighbors next door. Truly real vision! I learned a great deal on the perspective of how interest rates, spreads and yields matter to valuations today verses the world of yesteryear. Mr. Higgins reminded me of Robin Williams with a such a wonderful since of joy and positive nature discussing the sometimes very boring world of fixed income finance. First Class. Thank you!
    • DS
      David S.
      11 June 2019 @ 20:33
      Very well said especially the reference to Robin Williams. DLS
  • JA
    James A.
    10 June 2019 @ 13:49
    Larry. You're one connected guy!
  • JL
    J L.
    10 June 2019 @ 11:30
    Glad to hear the Crown's assets are nicely tucked away in DB cocos... jokes aside brilliant points on bond mean reversion, could have pushed a bit more on how that would in turn affect equities, i.e. if he sees a positive correlation of stocks and bonds during the next decade.
    • JL
      J L.
      10 June 2019 @ 11:38
      in particular the fact that real rates mean revert to 0ish does not mean that nominal rates need to go down with them, and that could prove to be bad at least for sectors of the equity market. this is a point Julian Brigden has made for a while who sees the high-growth giants / FANG being affected adversely if I understand correctly
    • CM
      C M.
      10 June 2019 @ 18:44
      So what I heard is that long term there will be a positive correlation between stocks and bonds when rates are dropping and a negative correlation if rates are rising (his scenario being that rates only increase if economy is roaring and stocks will be up 20%). On the rate side, his stance appears to be that real and nominal rates will head to zero and thus benefiting stocks as they will be the asset class to invest. Essentially a replay of 2015 - 2017. And while I have been negative on stocks, I agree with the thesis that rates are heading to zero. The question is will this be due to a softening economy or will it be due to a crashing economy. If it is just softening, Higgins is correct to be in stocks. If it is crashing (which he alluded that his view was long term and stocks could go down 15% in short term), then do we get a scenario where all the program trading and ETF investing, along side heavliy indebted corporations, create a black swan event.
    • JL
      J L.
      11 June 2019 @ 16:29
      thanks CM, if you truly believe nominal is going to zero God knows how high equity indices should trade
    • DS
      David S.
      11 June 2019 @ 20:58
      I am in a camp of one, but I think rising Fed funds rates can slow the economy, Lowering rates from 2.5% by even one percent will not rejuvenate a slowing economy. The corporate hurdle rate is not stopping real investments. If Fed funds were markedly higher, then it would help. The curve is not linear at the lower bound. DLS