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Bill Gross's Investment Outlook For February: Increasingly Addled
From the subject I thought that "increasingly addled" referred to Bill Gross' outlook commentaries.
The increasing action of the Central Banks can also be seen as the failure of Governments to set the right economic policies or in a gridlock and doing nothing. Not that there is a single/simple solution for all countries.
It is also a consequence, I think, of increasing dominance of the finance sector in most economies.
Synopsis /Outline THE OTTER CREEK INVESTMENT PROCESS
US MACRO: THE AGE OF GOVERNMENT AUSTERITY IS OVER Government spending is estimated to add around 40 70bps to GDP growth in 2016 according to various Street economists
US MACRO: OVERALL THE US ECONOMY HAS SLOWED
US MACRO: MIXED SIGNALS Global trade volume growth has turned negative One potential upside factor to growth is lower oil prices eventually boosting GDP
CENTRAL BANKS: THE POLICY CONUNDRUM
TAILRISK: EXPECT THE UNEXPECTED IN 2016 Large increases in global debt, zero bound rates, slowing growth ...we are expecting heightened levels of volatility to continue (and they're busy boys on those days)
MARKET FUNDAMENTALS: EARNINGS GROWTH and PROFIT MARGINS S&P 500 earnings growth excluding energy has moderated, but it is still growing Margins gains have slowed
CHEAP DEBT & LOW RATES: REAP WHAT YOU SOW Zero bound rates have created meaningful distortions in how capital is allocated...it started with energy production Auto subprime financing at all time highs
THE MACRO and MARKET ENVIRONMENT: CONCLUSIONS
PORTFOLIO POSITIONING IN TODAY’S ENVIRONMENT Long Portfolio Short Portfolio
INVESTMENT THEMES
DRAWDOWN ANALYSIS
CONCLUSION Seek to achieve: •Absolute risk-adjusted returns • Capital preservation in periods of dislocation • Low correlation relative to the market indices • Below average volatility relative to the S&P 500 Index
I think Gross writes quite well. That's a valuable skill to possess, but bears little relation to the accuracy of his analysis or his predictions. In fact there may be more than a little truth in the old adage: Those who know aren't talking.
Gross details the deflationary environment afflicting many economies and than tells us that's proof stimulative central bank policies haven't worked - or even worse, have exacerbated those problems. I don't think anyone really knows the answer to that one. It's equally plausible the problems Gross highlights would have been even worse had the central banks not intervened. To me his backward-looking analysis is a bit like looking at a 100-car pile-up and than attempting to single out the lone culprit. Was it the little old lady who was driving too slowly? Or the failure of DOT to maintain proper lane markings? Or the failure of the weather bureau to forcast frozen precipitation? To a degree he's pandering to our suspicions of government in general and the U.S. central bank in particular which has suffered more than it's share of criticism from the right.
And if the outlook for the world economy is dire enough, perhaps you'll send Bill some $$ to invest in his bond fund?
Comments
The increasing action of the Central Banks can also be seen as the failure of Governments to set the right economic policies or in a gridlock and doing nothing. Not that there is a single/simple solution for all countries.
It is also a consequence, I think, of increasing dominance of the finance sector in most economies.
Update From the Jan 31 OTCRX Fact Sheet
..We continue to be focused on credit domestically and globally as the change in credit conditions is being underappreciated by investors from our perspective.
Credit market stress continues to percolate in various sectors with stress now going beyond commodities..
the decline in equity markets has made valuations slightly
more attractive; however, overall valuations in both the equity and bond markets are not compelling on an absolute basis considering the growth outlook. We
estimate the S&P 500 is trading around 15x-16x consensus 2016 earnings, this is near its historical average. Based on our conversations, it appears that in the
near term there will continue to be selling pressure in the market driven by asset liquidations among Sovereign Wealth ( funds )..
As we enter February, we have approximately 20% of the Fund in cash. We anticipate equity and bond markets will remain volatile as the market goes through a
painful digestion period driven by a less accommodative Federal Reserve, slowing global growth, tighter financial conditions, and the risk of a currency war.
Ultimately, asset prices will have to adjust to reflect a higher risk premium
Copyright © 2015 :::: Otter Creek Adviosors, LLC
http://www.ottercreekfunds.com/media/pdfs/OCL_Factsheet.pdf
OTCRX Y T D +4.09 1 YR +13.89 A U M $225 mil
JANUARY 20,2016 Webcast Combine the two links for the full presentation.About 45 minutes.
http://www.ottercreekfunds.com/media/pdfs/OCL_Call_Presentation_4Q2015.pdf
http://www.ottercreekfunds.com/media/pdfs/Q42015_CC.mp3
Or
http://www.ottercreekfunds.com/index_webcasts012016.html
Also
http://performance.morningstar.com/fund/performance-return.action?t=OTCRX®ion=usa&culture=en_US
Synopsis /Outline
THE OTTER CREEK INVESTMENT PROCESS
US MACRO: THE AGE OF GOVERNMENT AUSTERITY IS OVER
Government spending is estimated to add around 40 70bps to GDP growth in 2016 according to various Street economists
US MACRO: OVERALL THE US ECONOMY HAS SLOWED
US MACRO: MIXED SIGNALS
Global trade volume growth has turned negative
One potential upside factor to growth is lower oil prices eventually boosting GDP
CENTRAL BANKS: THE POLICY CONUNDRUM
TAILRISK: EXPECT THE UNEXPECTED IN 2016
Large increases in global debt, zero bound rates, slowing growth
...we are expecting heightened levels of volatility to continue
(and they're busy boys on those days)
MARKET FUNDAMENTALS: EARNINGS GROWTH and PROFIT MARGINS
S&P 500 earnings growth excluding energy has moderated, but it is still growing
Margins gains have slowed
CHEAP DEBT & LOW RATES: REAP WHAT YOU SOW
Zero bound rates have created meaningful distortions in how capital is allocated...it started with energy production
Auto subprime financing at all time highs
THE MACRO and MARKET ENVIRONMENT: CONCLUSIONS
PORTFOLIO POSITIONING IN TODAY’S ENVIRONMENT
Long Portfolio
Short Portfolio
INVESTMENT THEMES
DRAWDOWN ANALYSIS
CONCLUSION
Seek to achieve:
•Absolute risk-adjusted returns
•
Capital preservation
in periods of dislocation
•
Low
correlation
relative to the market indices
•
Below average volatility
relative to the S&P 500 Index
Gross details the deflationary environment afflicting many economies and than tells us that's proof stimulative central bank policies haven't worked - or even worse, have exacerbated those problems. I don't think anyone really knows the answer to that one. It's equally plausible the problems Gross highlights would have been even worse had the central banks not intervened. To me his backward-looking analysis is a bit like looking at a 100-car pile-up and than attempting to single out the lone culprit. Was it the little old lady who was driving too slowly? Or the failure of DOT to maintain proper lane markings? Or the failure of the weather bureau to forcast frozen precipitation? To a degree he's pandering to our suspicions of government in general and the U.S. central bank in particular which has suffered more than it's share of criticism from the right.
And if the outlook for the world economy is dire enough, perhaps you'll send Bill some $$ to invest in his bond fund?