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Long/Short ideas from Otter Creek OTCRX YTD +2,51 1 Yr +12.26 From Jan 20th 2016 THE MACRO and MARKET ENVIRONMENT: CONCLUSION Framing the macro environment • US is a bifurcated economy (+) Favorable consumer trends (labor, low gas prices), we believe the age of government austerity is over (-) Downside risk from prolonged slump in industrial and commodity activity, weaker survey data • Global growth will likely remain challenged, more downside risk to growth than upside in the near term • The decline in global trade volumes is concerning • We believe high levels of US denominated debt in emerging markets will continue to weigh on growth • Uncertainty around the Fed’s rate cycle (the “dots”) will lead to ongoing volatility • Yield curve has not inverted (inverted yield curve has predicted every recession since 1962) • The “goldilocks” credit environment is a thing of the past • We expect large scale bankruptcies if commodities remain weak, this could force a repricing in risk assets • Many developing markets go through a cycle of increasing non-performing loans which could weigh on credit growth Framing the markets • Market valuations appear full, especially relative to sales and earnings growth recently • The low market breadth is concerning, leading indicators of the economies health (transports) making new lows • Ex. energy, there is moderate earnings growth, margins have likely peaked, but forex headwinds should abate WEBCASTS January 20th presentations http://www.ottercreekfunds.com/index_webcasts012016.html Audio - January 20, 2016 http://www.ottercreekfunds.com/media/pdfs/Q42015_CC.mp3
Comments
http://www.morningstar.com/cefs/XASE/UTG/quote.html
Long/Short ideas from Otter Creek OTCRX YTD +2,51 1 Yr +12.26
From Jan 20th 2016
THE MACRO and MARKET ENVIRONMENT: CONCLUSION
Framing the macro environment
•
US is a bifurcated economy
(+) Favorable consumer trends (labor, low gas prices), we believe the age of government austerity is over
(-) Downside risk from prolonged slump in industrial and commodity activity, weaker survey data
•
Global growth will likely remain challenged, more downside risk to growth than upside in the near term
•
The decline in global trade volumes is concerning
•
We believe high levels of US denominated debt in emerging markets will continue to weigh on growth
•
Uncertainty around the Fed’s rate cycle (the “dots”) will lead to ongoing volatility
•
Yield curve has not inverted (inverted yield curve has predicted every recession since 1962)
•
The “goldilocks” credit environment is a thing of the past
•
We expect large scale bankruptcies if commodities remain weak, this could force a repricing in risk assets
•
Many developing markets go through a cycle of increasing non-performing loans which could weigh on credit growth
Framing the markets
•
Market valuations appear full, especially relative to sales and earnings growth recently
•
The low market breadth is concerning, leading indicators of the economies health (transports) making new lows
•
Ex. energy, there is moderate earnings growth, margins have likely peaked, but forex headwinds should abate
WEBCASTS
January 20th presentations
http://www.ottercreekfunds.com/index_webcasts012016.html
Audio - January 20, 2016
http://www.ottercreekfunds.com/media/pdfs/Q42015_CC.mp3