This week’s NetWorth Radio Program guides investors through the strategies that are actually working so far in 2016. Important shifts in global capital flows have occurred since February based upon the material that this week’s program presents in an understandable common sense tour of asset classes, warnings for investors designed to reduce risks, and key updates on apparent structural defects in the way that indexes and index funds are allocated.
Solutions for allocation strategy are presented based upon MGAM research and leading analysts. The evolution of global capital markets presents investors with opportunities for superior profits while calling upon investors to systematically reduce risks at key inflection points. Range bound equity markets can actually drive a scenario like 2012 that we call a “yield panic” where assets that pay real cash flow can experience capital gain potential on top of attractive current yields.
Featured Research Solutions:
Investors are invited to improve decision making with a comprehensive tour of global economics, indicators, and actual results.
Headline Round Up!
- Jamba! California based Jamba Juice Gone to Frisco Texas!
- Dallas Big Boom! Surprising Real Estate Trends for North Texas and the Nation.
- Lone Star Success Story: North Texas based gas utility Atmos Energy supercharged! Who is buying?
- Fossilized! This week’s share price implosion of Richardson, Texas based Fossil, FOSL, underscores important lessons for investors.
- Turmoil in Brazil signals an important global shift away from the Left. What does it mean for investors?
- Updates on Argentina and Venezuela.
- Dallas Federal Reserve former President Richard Fisher Addresses Compression! New updates on global yields and resulting money flow. What it means for opportunities in 2016.
- Hedge Fund Updates: This week’s brief rally to near 18,000 for the Dow in part appears to be fueled by hedge fund activity.
- Oil Pops to $47! At what point does a supply driven collapse end with modestly rising demand?
- ”Down Down Down in a Burnin’ Ring O Fire!” Krispy Kreme Buyout Ends The Rise and Fall of an Initial Public Offering that Provides a Warning and Underscores Business Strategy Evolution.
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Q2 2016 MGAM Client Updates
The first 3 months of 2016 appeared to reflect significant changes in the perspective of investors, apparently moving to extreme pessimism and back to realistic optimism. The corrections of 2015 and early 2016 culminated with what could be diagnosed as a temporary freeze in global credit markets, based upon the pricing of US high yield corporate bonds at the February 11th discount of 75% of par value as measured by HYG, the Dow Jones Industrial Average twice approaching 15,500, and the concurrent implosion of domestic oil prices to $27 per barrel.
Springtime appeared to change perspectives: anxiety melted, trees bloomed, and investors bought investments that pay reliable cash flow as evidenced by increases in the Utility Index and US Corporate High Yield Index:
What is a yield panic?
One relevant scenario is 2012. The premise that interest rates could stay lower for longer was put forward, prior to 2012, by Scott Minerd of Guggenheim. During 2012, the values of high cash flow assets paying substantially more that U.S. Treasuries generally rallied in price. It appeared that investors, realizing rates did not have to rise, began to purchase allocations that could provide yield advantages.
Conclusions for 2016-2017
March appears to indicate that the 2012 yield panic scenario could continue to push prices up for high cash flow assets. While discounts to maturity value under control are available, investors should continue to consider that capital flows at the end of the first quarter of 2016 could signal opportunities for the remainder of this year as well as 2017.