Investment letters

Economics_Vs_Politics

06/2017

1999 all over again?

by Pascal Blackburne & Luc Synaeghel

The money currently flowing into the private equity space is quite astounding – and a testimony to how desperate investors have become for returns in a world of zero rates. Not only are they willing to entrust massive amounts to newly established private equity funds, but they are also requesting that their money be put to work fast. The ensuing competition between private equity firms to find investments means not only that target company prices are bid up well above the level suggested by standard valuation tools, but also that proper due diligence is not always performed.

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Economics_Vs_Politics

05/2017

Economics vs. Politics

by Pascal Blackburne & Luc Synaeghel

At the risk of repeating ourselves, let us begin this letter by pointing out the striking dichotomy between solid – indeed improving – European economic fundamentals and a political agenda that is rife with potential pitfalls.

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Climbing a wall of worry ?

04/2017

No storm on the horizon... Anchors aweigh!

by Pascal Blackburne & Luc Synaeghel

Economic indicators are virtually unanimous in pointing to (very) strong global growth in the second quarter. Confidence is high at both the consumer and business levels, with Purchasing Managers Indices particularly buoyant – typically reliable leading indicators.

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Climbing a wall of worry ?

03/2017

Climbing a wall of worry

by Pascal Blackburne & Luc Synaeghel

Politics rule our investment letter again this month, albeit shifting focus from the US to Europe. With the first episode of a heavy 2017 electoral agenda just around the corner, investors are understandably concerned that a populist backlash could undermine the European construction. Our position, taking a hard look at each of the countries involved, is that the European Union (EU) will likely not only survive the political challenges of 2017, but perhaps even emerge more united – thus in a better position to rethink its future.

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When will trump hit the wall ?

02/2017

When will Trump hit the wall?

by Pascal Blackburne & Luc Synaeghel

The first weeks of the Trump term have been animated, to say the least.
Far from “rising to the function” as many were hoping, the new US President has kept to his Twitter style and set about running the country as if it were a company. We are convinced that institutions will eventually constrain him, be they the Congress (manifestly in no hurry to confirm the nomination of several Trump candidates), courts of law (as is occurring on the issue of immigration), the Federal Reserve or state governors. Pressure from the US corporate sector is also already evident. In domestic affairs, Donald Trump will thus have to start to compromise.

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01/2017

There is no comfort in the truth

by Pascal Blackburne & Luc Synaeghel

The economic picture is looking good as we enter 2017 – and stands to get even better in 2018. Growth is accelerating globally thanks to less austere fiscal policies and large infrastructure investments. After decades of trial and error, central banks have found the holy recipe to avoid recessions and keep inflation at a moderate level: durably low interest rates and episodic money printing.

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12/2016

Stubbornly optimistic equity markets

by Luc Synaeghel, CIO

Having begun 2016 in an extremely pessimistic mood, equity markets are ending the year on a high note. Brexit vote, Trump election, OPEC agreement to cut production (pushing the oil price upward), political disruption in Italy: no event has been “bad” enough to derail the upward march of most equity indexes for more than a few hours or days.

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11/2016

President Trump

by Luc Synaeghel, CIO
Let us begin by apologising to our readers for the late publication of this Investment Letter.
Somewhat distrustful of polls (a lesson from the Brexit referendum), we chose not to put our monthly thoughts to paper until the result of the US vote was known. In hindsight of course, this proved a wise option. The election of Donald Trump as the next President is a true game changer for both the US economy and financial markets.
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10/2016

Do not underestimate China

by Luc Synaeghel, CIO
It has been only six months since Chinese policymakers announced their plan to develop the North Western part of their country and already more than 300 projects, totalling some USD 150 billion, are ready for roll-out. There should be no doubt that China is serious about its infrastructure spending, with major consequences for commodity prices and the industrial sector at large. Yet financial markets have been paying little attention.
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09/2016

Dont' be fooled by Jackson Hole

by Luc Synaeghel, CIO
Jackson Hole, a remote mountain valley of West Wyoming, used to be roamed by fur trappers in the 19th century. Over the past decades, it has come to be known as the annual central banking late summer retreat. Every August, central bankers, policy experts and academics gather there to discuss « a topic that is not necessarily of immediate concern, but instead looks into the future at emerging issues and trends »1.
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08/2016

The biggest bond bubble ever

by Luc Synaeghel, CIO
There are no two ways about it: since the great financial crisis of 2008 developed economies have produced consistently disappointing growth despite unprecedented monetary stimulus, falling unemployment and – since mid-2014 – the low oil price bonanza. Recent months have been no exception. Just released US figures put second quarter real GDP annual growth at a meagre 1.2%, (following downward-revised 0.8% growth in the first quarter) while the European Union (EU) posted only marginally better real growth.
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07/2016

The dearth of yield

by Luc Synaeghel, CIO
Much has already been said and written about UK voters’ June 23 “surprising” decision to leave the European Union (EU) – surprising in the eyes of financial markets and politicians that is. More than the outcome of the vote, what we really find astounding is the lack of a plan B, on both sides of the Channel. We are also surprised to see EU leaders play hardball with post-referendum UK.
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