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Hedge Clippings | Friday, 26 February 2021
Last week - and since the start of the year - Hedge Clippings has been referring to the spike in Bond yields, and the potential for inflation to break out. Overnight on Monday we noted US 10 Year yields touched 1.38%, and by last night they'd spiked higher to touch 1.6414%.
It's not so much that interest rates are higher, more that markets anticipate future events (excepting of course if they're a Black Swan). And 1.64% isn't high by historical standards. It's what it indicates: Inflation, seemingly dead in the water for so long and, in spite of Jerome Powell's testimony during the week, the potential for a change in policy from the Fed. And that causes fear of firstly a "taper tantrum" as the fed reduces QE and the era of free money, and in the bigger picture a sector shift (already occurring out of high growth, back to value) and an asset shift away from equities.
It is worth remembering that the estimated dividend yield of S&P500 companies is only 1.48%, so as Risk-On starts to be replaced with Risk-Off, and the tech stocks lose their attraction, that differential, although small, becomes critical to investors.
Last week we interviewed Michael Frazis from Frazis Capital Partners, who on the back of a return of over 100% in 2020, was not only rewarded for his commitment to growth, but remains committed to it.
This week we looked at the other side of the growth vs. value "argument" when talking to Rob Swift from Delft Partners, who looked both forward and back at markets over the past 50 years to put the opposing view. The interview can be viewed here. Meanwhile Hedge Clippings is happy to sit on the sidelines, partly as we still remember 50 years ago and beyond (even if we sometimes struggle to remember last week!), and partly as our businesses, both Australian Fund Monitors and OLIVIA123, are completely committed to technology and the new economy.
Last week we also took a swipe at Zuckerberg's bully boy tactics, before Facebook did an Aboutface and changed their minds and agreed to share content and revenue with Australian publishers. Somehow he tried to Saveface by claiming the Government had made concessions, but we're pretty sure he didn't help his image along the way. Fake News maybe?
Meanwhile if anyone is still confused by the way markets have operated since the GFC, and the resulting introduction of QE and loose policy, we dug up this clip from the archives of "And Now for Something Completely Different", which, for the majority of mere investors, as opposed to market economists, pretty much sums it all up. It's vintage Clarke and Dawe, and a sad reminder we're no longer able to enjoy John Clarke's unique take on administrivia.
News & Insights
New Funds on Fundmonitors.com
Video interview with Dr Andrew West from Longlead Capital Partners
Video interview with Robert Swift from Delft Partners
The Most Volatile 12 Months in the Last 10 Years - How Did Active ManagersFare? by Australian Fund Monitors
Bubble, bubble, toil, and no trouble! by Montgomery Investment Management
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