Thursday, 14 May 2015

Great selection of conference charts and tweets

One of the many, many positives from 'Twitter Finance' is that it allows you to keep in touch with so many fascinating investment themes and trends from multiple sources. Earlier this week I hugely enjoyed a series of tweets over a couple of days from @JasminandRoses who was in attendance at a Morningstar thematic investment conference I could not attend in London which had a multitude of interesting speakers.
Here are a few macro thematic charts that particularly spoke to me captured in her tweetstorm from (undoubtedly) the front row of the conference sourced from a variety of the speakers.  For even more take a look a look at the @JasminandRoses twitter feed. I highly recommend it. 

First this (agricultural) 'yields must improve' slide which particularly spoke to me given the current big speculation swirling around one of my largest holdings Syngenta (as discussed here). All portfolios need to access the agricultural theme in some shape or form and my portfolios certainly have good sized exposure.  Nevertheless - partially inspired by the chart - I am going to take another look in the potash space which I have passed on for well over a year.  


Next up, emerging market debt which apparently the speaker from Investec noted that 'even under the most severe rate rise scenario, our forecast returns are positive over 5 years'.  Fixed principal investments of course have a different return profile than equities but what I would be worried about are not rate rises (note the chart at this link showing the sheer magnitude of countries cutting rates) but defaults. Events in Ukraine and Greece are signals...


Next up demographics and the superlative Credit Suisse work I have quoted on my twitter feed before.  Here's a strong comment though: 'demographic changes are rendering macro-policy ineffective'. You have got to think about the demographic angle on every investment decision of a reasonable intended time duration you make.  It is one of the cornerstones of thematic decision making.  Just look at the statistic on diverging US and Eurozone population growth contained here.


So how do we get out of this demographic malaise?  It has to be the supply side of the labour market as nicely summarised below.  I have been reviewing the immigration literature recently and would heartily recommend reading this link (which itself contains multiple other links).


The next chart-based observation shows the discount cyclicals are to defensives in Europe.  This is an opportunity if Europe ever gets its act together. I posted yesterday - in a rather wry fashion - about European growth apparently being above the equivalent in the US ('Shock, horror: Europe grows more than the US' - link here). For a European cyclical to get my support it has to be more than cheap, it has to be doing something of interest (pricing power, shareholder distribution, underappreciated internal initiatives etc.). 


Additionally, of course, valuations remain full but in that wonderful irony that is the financial world this is statistically justifiable via the self-reinforcing linkage between ultra-low bond yields and high P/E markets.  Interesting today that the weekly AAII sentiment statistics (link here) were just so neutral...and don't even get me started on something fundamental like earnings (see point 3 on the S&P 500 earnings here).


That is not to say there is nothing to do.  Far from it.  In my take 2015 is a proper 'stock picking market' and this graphic nicely underlined this albeit on country-by-country research aggregations. The key is knowing something better than 90% of the market - and that occurs more often in the obscure, illiquid and under appreciated.  The first step is to do your own research irrespective of where you sit in the investment spectrum...


...and to stay sufficiently flexible of mind...


...and then you can aspire to being 'above average'! 
 

Thanks very much for a very thoughtful set of conference tweets @JasminandRoses - they certainly got me thinking.  

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