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HomeWhat Are Credit Suisse Clients Doing and Saying?
Posted by Larry Doyle on October 9th, 2009 11:30 AM |
High five to a good friend for sharing with us tremendous insights just released by Credit Suisse. While individuals can and should develop opinions on the economy and markets, the global flow of capital from investors (obviously central banks now count as investors given massive quantitative easing programs) will determine overall market levels. Let’s navigate and assess how Credit Suisse’s client base has positioned themselves and decipher what it all means.
Credit Suisse research analysts report the following:
We are close to finishing our marketing trip in the US and Continental Europe—and take a look at the main issues our clients are focused on at the moment.
1. Caveated bullishness: Hedge funds appear optimistic (focusing on Q3 earnings as the next catalyst). Long-only funds seem cautious, while retail investors are buying bonds rather than equity. We feel there is enough scepticism to leave us bullish.
LD’s comment: CS means bullish on equities.
2. Many asset allocators still prefer credit (bonds) to equity, so there is switching potential.
LD’s comment: Asset allocators are money managers, investment advisors, et al. This comment translates into the fact that money which has been allocated to the bond market could move into equities causing a move higher in equities and a move down in bonds.
3. Investors’ main dilemma: Why have margins stabilised at such high levels? Most feel the reason is cyclical (leaving limited upside in earnings), but we suspect it could be more structural.
LD’s comment: Margins refer to corporate profit margins. The fact that CS believes that profit margins are being supported by structural developments in companies and the economy is a VERY positive assessment as it indicates a change in the foundation of the global economy which would drive equities higher.
4. Economy: Very few clients are positioning themselves aggressively on a macro view. There is little confidence on final demand given the level of excess household leverage. A third of investors are bearish on US housing (too many, in our view). Clients still see inflation, not deflation, as the main risk.
LD’s comment: investors would appear to be more cautious than optimistic with concerns that there is excess liquidity from central banks which will ultimately lead to inflation.
5. Consensus catalyst for next leg down is severe dollar weakness (LD’s highlight), leading to a US bond funding crisis or government tightening fiscal policy too early. Two areas of worrying consensus: 99% of investors appear to be dollar bears and nearly everyone believes the Fed will be very slow to raise rates.
LD’s comment: if 99% of investors are dollar bears and are positioning themselves that way in one way, shape or form, then the dollar will find support. Why? When too many people are on one side of a boat, that boat tips. If the dollar does rally, then many ‘dollar carry trades’ may enter the ‘pain chamber’ and risk-based assets would likely sell off.
6. Regions: Strong consensus to be long of emerging markets (NJA is felt to have large upside potential if US retail sales recover and the dollar remains weak). Clients are more positive on Europe than they have been for the past two years. Investors have quickly capitulated on a tactically positive call on Japan. Renewed focus on domestic plays in dollar-linked countries (especially the Middle East).
LD’s comment: NJA is non-Japan Asia
7. Sectors: We believe most clients have a bar-bell type strategy. Consensus longs are tech and commodities/gold. We found far too many oil bulls for our liking. There is a huge variance of views on banks. Sectors where there is still doubt: life companies (too opaque), media, telecoms, steel and pharma. There were very few questions on defensives.
8. Style: Clients are looking for quality growth, shifting away from the credit-related plays.
Overall, I view this report as decidedly constructive on the economy and markets, albeit with plenty of reasons for caution.
Thoughts, comments, questions always appreciated.
LD
Financial Literacy Is the First Step to Financial Independence
Posted by Larry Doyle on July 22nd, 2009 3:12 PM |
Financial literacy does not guarantee financial independence but it is a necessary first step.
In a society which has undervalued thrift and prudent financial management, is it any wonder our country is woefully unprepared to help future generations become financially literate?
The goal of Sense on Cents is to help people navigate the economic landscape, from whatever point of departure on that landscape they may currently occupy.
The Medill Washington Program recently reported on challenges to improve financial literacy. From the article Financial Literacy Programs Face Uphill Climb:
“The economic crisis was caused by the fact that a lot of Americans lack basic financial literacy skills, which makes it difficult to make wise credit decisions, as was evidenced by the mortgage crisis and other areas of the overall economic crisis,” said Levine. “However, with the advent of the new presidency, also comes a new approach when it comes to undertaking the goal of increasing national financial literacy in schools. And the transition to this new approach takes time.”
Everett Hoffman, 22, of Staten Island, N.Y., wishes he had taken the elective of a personal financial education course in high school. He thinks it would have helped him make wiser spending choices.
“I think it might have been good because I’m learning a lot of things the hard way now being a young adult,” said Hoffman. “But I really do think taking that class might have helped me avoid some minor debit card issues I’ve been having lately, you know basics, like balancing a checkbook.”
Allison Joseph, 21, of Chesapeake, Va., also interviewed on the National Mall, said that her parents still shelter her from having to take care of her finances. She took a macroeconomics course in high school that did not cover personal finance.
“When I went to college, I started getting my own credit card statements, but my parents have always helped me out, so I’m not totally independent in that sense.”
Up to now, only three states require at least a one-semester course devoted to personal finance – Utah, Missouri and Tennessee. Eighteen other states require personal finance instruction to be incorporated into other subject matter. The rest have no requirements, but leave individual schools the choice to implement personal finance education programs in their curricula.
According to JumpStart, a personal financial education course would give students a head start at being less debt-prone by teaching them how to manage checkbooks, how mortgages work, and other basic financial life skills.
I will readily admit that the tone and tenor of my writing at Sense on Cents is not geared toward high school students, but certainly the Financial Primers in the right sidebar (Debt Management, Financial Aid, Insurance, Investing, Mortgage Finance) provide a wealth of information for anybody embarking down a financial path.
By the same token, I am heartened by the number of college students and recent college grads who have informed me how much they have learned and are learning from Sense on Cents.
Please spread the word and do not be bashful about asking me anything.
Financial literacy is the first step in becoming financially educated which is the path to becoming financially independent.
I am happy to help you navigate along the way.
LD
Financial Advisers: “A Crisis of Confidence”
Posted by Larry Doyle on May 23rd, 2009 7:38 PM |
Are you confident in the financial advice you are receiving?
A recent report in InvestmentNews, Financial Advisers Face a Crisis of Confidence, indicates that an overwhelming number of investors are not happy with their financial advisers. In fact:
About 80% of affluent investors — that is, those with more than $500,000 in investible assets — are “disgusted with their adviser because their adviser is spooked,” he said.
Wow!! How is it that such an overwhelming percentage of investors can develop disgust with their adviser? Very simply, as with any service, if you are not getting professional coverage for the fees charged, a level of disgust can easily develop.
Based on my experience, I have dealt with a wide range of professionals in this field. A small percentage are outstanding, a few more are more than satisfactory, a large percentage are decidedly mediocre, and plenty are borderline, if not totally incompetent. I would venture to say the same assessment could be made of many professions. How does this happen?
Financial advisers are primarily trained to do two thngs: sell products to generate commissions and gather assets to generate fees. I have been involved in training programs as participant and adviser. Additionally, I have been solicited more than I care to remember. All too often, I have experienced people and programs geared toward products and services.
Very infrequently have I experienced programs and people that fully understand the dynamics at work in the economy and markets. Additionally, I have very infrequently experienced people who truly care to learn and understand the customer’s needs and how they can help solve the customer’s issues. Why?
The salesperson or adviser is too focused on writing immediate business and moving on to the next sale. What is the result? (more…)
Tune in Sunday Evening to NoQuarter Radio’s Sense on Cents with Larry Doyle
Posted by Larry Doyle on April 19th, 2009 7:34 AM |
Please join me Sunday evening from 8-9 p.m. ET for NoQuarter Radio’s Sense on Cents with Larry Doyle. 
The developments in the markets, economy, global finance, Wall Street, and Washington are occurring at breakneck speed. I will try to slow things down a bit and provide a sense of perspective. What did we learn in the markets over the last week and what does that mean for the weeks and months ahead? We will address a wide range of issues, including: transparency and quality of earnings, Goldman’s and JP Morgan’s initiative to pay back TARP, and upcoming bank stress test results.
In addition, my guest Sunday night will be Chris Lowney. Lowney, formerly a Jesuit, was named a Managing Director of J.P. Morgan while still in his thirties and held senior positions in New York, Tokyo, Singapore and London until leaving the firm in 2001. He served successively on Morgan’s Asia-Pacific, Europe, and Investment Banking Management Committees. Lowney’s first book, Heroic Leadership: Best Practices from a 450-Year-Old Company that Changed the World, was the #1 ranked bestseller of the CBPA (Catholic Book Publishers Association) and was named a finalist for a 2003 Book of the Year Award from ForeWord magazine. It has been translated into ten languages. (more…)
Join us NOW for Sense on Cents Central Station
Posted by Larry Doyle on April 16th, 2009 8:20 PM |
***UPDATE: The Live Chat event has ended, but you can scroll through the topics we discussed by clicking on the “Replay” icon on the chat window at the end of this post.***
Join us right now for a few hours of written Q/A and live chat with your resident host, Larry Doyle. We can address a wide range of issues, including: transparency and quality of earnings, Goldman’s initiative to pay back TARP, the April 15th Tea Parties, market performance this week, month, and year to date, developments overseas, the outlook for our financial regulatory structure, issues of personal finance, career planning, or anything else on your mind.
Sense on Cents Central Station
Posted by Larry Doyle on April 16th, 2009 3:15 PM |
Join me this evening beginning at 8:30 p.m. ET for Sense on Cents Central Station. This endeavor is a few hours of written Q/A and live chat with your resident host, Larry Doyle. I like to utilize the theme of a ride on the rails, so please allow me to elaborate.
With so many cross currents at play in the markets, economy, and world of global finance, where can one go to develop a framework of understanding, enjoy the company of friends, and make sense of the madness? Welcome to Sense on Cents Central Station. Our ride departs at 8:30 p.m. with an expected return at 10:30 p.m. (I’m hoping this time frame allows our West Coast friends to join in). While we traverse the curves along our track, we can address a wide range of issues, including: transparency and quality of earnings, Goldman’s initiative to pay back TARP, the April 15th Tea Parties, market performance this week, month, and year to date, developments overseas, the outlook for our financial regulatory structure, issues of personal finance, career planning, or anything else on your mind.
Our ride is most productive with as many people participating as possible. Please bring not only your questions, but also your views. Invite friends, neighbors, and colleagues along for the ride as well. Together we can collectively navigate the economic landscape.
I look forward to chatting with you beginning at 8:30 p.m. All Aboard!!
LD
Audio Recording: NoQuarter Radio’s “Sense on Cents with Larry Doyle” April 12, 2009
Posted by Larry Doyle on April 12th, 2009 9:06 PM |
In case you missed LD’s Sunday night radio show, just click on the Play button below for the audio recording. Once the playback has started, you can fast forward or rewind to any portion of the show by clicking at any point along the play bar.
It was a wonderful show with special guest George Rieger, Chief Investment Strategist of Greenwich Investment Management.
In 30 Minutes, Join NoQuarter Radio’s “Sense on Cents with Larry Doyle”
Posted by Larry Doyle on April 12th, 2009 7:30 PM |
Join me from 8:00 to 9:00 p.m. ET on NoQuarter Radio for Sense on Cents with Larry Doyle. These are truly historic times in the global economy. Let’s “navigate the economic landscape” without the pandering or nonsense found elsewhere! What is truly going on in the economy? Where are markets headed? What is happening in Washington and how is that impacting Wall Street? So much to cover.
The developments in the markets, economy, global finance, Wall Street, and Washington are occurring at breakneck speed. I will try to slow things down a bit and provide a sense of perspective. What did we learn in the markets over the last week and month and what do they mean for the weeks and months ahead? What is happening overseas and how does that impact us here at home? What is happening in the municipal sector and how will that impact the markets and our personal finances?
Tonight my guest will be Louis George Rieger, Chief Investment Strategist at Greenwich Investment Management. Following graduation from Yale Law School, George accepted a position at T. Rowe Price Associates LLC, where he became an officer and stockholder. In 1984, George founded RRH Capital Management, Inc. At RRH, George established the firm’s record in the management of not-rated, tax exempt bonds and high yield equities. George founded Greenwich Investment Management in 2006. George’s legal education has proven valuable in structuring municipal bond issues. He brings over 35 years of experience in the securities industry.
(more…)
Tune in Sunday Evening to NoQuarter Radio’s “Sense on Cents with Larry Doyle”
Posted by Larry Doyle on April 11th, 2009 6:45 PM |
Please join me Sunday evening from 8-9 p.m. ET for NoQuarter Radio’s Sense on Cents with Larry Doyle. What is truly going on in the economy? Where are markets headed? The developments in the markets, economy, global finance, Wall Street, and Washington are occurring at breakneck speed. I will try to slow things down a bit and provide a sense of perspective. What did we learn in the markets over the last week and month and what do they mean for the weeks and months ahead? What is happening overseas and how does that impact us here at home? What is happening in the municipal sector and how will that impact the markets and our personal finances? So much to cover.
My guest will be Louis George Rieger, Chief Investment Strategist at Greenwich Investment Management. Following graduation from Yale Law School, George accepted a position at T. Rowe Price Associates LLC, where he became an officer and stockholder. In 1984, George founded RRH Capital Management, Inc. At RRH, George established the firm’s record in the management of not-rated, tax exempt bonds and high yield equities. George founded Greenwich Investment Management in 2006. George’s legal education has proven valuable in structuring municipal bond issues. He brings over 35 years of experience in the securities industry. (more…)
Games of Chance: TALF, PPIP, TARP, FDIC, FASB
Posted by Larry Doyle on April 7th, 2009 2:40 PM |
In thinking about the economy, markets, and our banking system, my memory brings me back to my early days in New York. While working my way along 8th Avenue back to my apartment in Hell’s Kitchen, I would happen upon numerous versions of the classic NYC “hustle.” The shell game (also 3 card monte) was rampant in NYC in the ’80s. Mayor Giuliani cleared out this game, along with a host of other street scenes. For those not familiar with this game, there was a constant need for new players with new money to keep the game alive.
Why do these games remind me of our current banking system? The similarities are scary. Let’s access the most recent piece from John Mauldin’s site to “view the games.”
Mauldin’s guest, John Hussman, comments on these various “games” (TALF, PPIP, TARP, FDIC, FASB), in which taxpayers bear the brunt of the risk in the government’s engagement with financial institutions. Hussman writes of the PPIP:
this is a recipe for the insolvency of the FDIC and an attempt to bail out bank bondholders using funds that have not even been allocated by Congress. The whole plan is a bureaucratic abuse of the FDIC’s balance sheet, which exists to protect ordinary depositors, not bank bondholders.
