How Government Corruption Crackdown, Student Protests Shape Our View of China

How Government Corruption Crackdown, Student Protests Shape Our View of China

We believe the Chinese government’s crackdown on corruption has had the unintended consequence of lower economic growth, as evidenced by a reduction in discretionary spending, including at luxury retailers and Macau gaming operators.

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Worried About the Unknown? Focus on the Business Cycle Instead

Worried About the Unknown? Focus on the Business Cycle Instead

Lately, I’ve been fielding questions about the possible “unknowns” that could bring about the end of the current economic expansion. While I understand investors’ trepidation about the unknown, I believe this concern is misplaced. Business cycles do not generally end because of unforeseen accidents. They normally end because central banks, in an effort to bring down inflation, raise interest rates, which creates an inverted yield curve and slows money and credit growth. We are clearly a long way from this scenario at present. That is why I have argued over the past two to three years that this business cycle expansion will be one of the longest on record.

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Is Russia’s Credit Rating Heading for Junk Status?

Is Russia’s Credit Rating Heading for Junk Status?

On Oct. 17, Moody’s Investors Service cut Russia’s ratings to Baa2 from Baa1, leaving a negative outlook. While this action brings Russia’s ratings more in line with other rating agencies (Standard & Poor’s and Fitch Ratings currently rate the country at BBB- and BBB, respectively), there is a chance that there might be more catching up to do soon on the country’s credit ratings.

That’s because S&P is scheduled to release a rating decision on Russia as soon as Friday, Oct. 24. Since S&P already rates Russia’s credit as BBB-, with a negative outlook, a potential downgrade would bring Russia’s ratings to junk status.

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As Europe’s Economy Dims, Where Are the Bright Spots?

As Europe’s Economy Dims, Where Are the Bright Spots?

It has been difficult for us to find new names in Europe to invest in this year that meet our criteria for earnings, quality and valuation (EQV).  However, we hope the recent sell-off will give us a chance to put some of our cash to work. While we have several concerns about Europe, there are bright spots as well, and we are watching several companies across sectors that we would like to own once they become more attractively valued.

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Not All Market Hedges Are Created Equal: Part 1

Not All Market Hedges Are Created Equal: Part 1

While the multi-year bull market may feel like it has created some distance from the market turmoil, investors won’t soon forget the global financial crisis of 2008-2009 and the eurozone debt crisis events of 2010-2011. These experiences made investors painfully aware of the impact large market drops can have on a portfolio and the importance of preparing for such drops with investments that may serve as market hedges. Recovering from large losses can take years if not decades to achieve, which may put long-term financial goals at risk.

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The Positive Impact of Falling Oil Prices

The Positive Impact of Falling Oil Prices

Crude oil prices have dropped sharply over the last few months thanks to abundant global production and signs of slowing global economic growth. Lower oil prices could inject spending power into the economy as consumers eventually pay less for gasoline and open their wallets in other areas. This would provide a positive shock and potentially bolster the performance of consumer discretionary shares.

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