Nelson Louie, Global Head of Commodities in Credit Suisse’s Asset Management business, said, “Over the second half of the month financial markets became increasingly nervous over the possibility that the Federal Reserve will begin to taper its program of asset purchases in coming months. This sent the ten-year yield sharply higher and started to increase risk aversion. The heightened concerns were due to numerous mentions of scaling back the pace of quantitative easing by various members of the Federal Reserve Board. Also, US economic data began to come in better than expected. Markets are currently caught between good economic news being positive as it can indicate the recovery is gaining traction, or good economic news being negative in the short term as it may mean monetary policy will tighten. However, the bias of most major central banks, especially in the US and Japan, seems to be toward being overly easy, rather than risk tightening too early.”
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, “As a result of these mixed signals, uncertainty surrounding the future of the global economic recovery remains high. With global growth remaining below average in the first quarter, and recent data suggesting continued weakness this quarter, commodities continue to face headwinds. However, some key indicators suggest stronger growth further out, which would ultimately support economically sensitive commodities. With the market currently not expecting higher inflation and central banks not overly concerned by it either, commodities may benefit should growth materialize at higher levels than expected.”
The Dow Jones-UBS Commodity Index Total Return decreased 2.24% in May. Overall, 15 out of 22 index constituents posted negative returns. Precious Metals was the worst performing sector, down 6.09%, as the dollar strengthened and interest rates rose sharply. Holdings in gold exchange-traded funds continued to fall, reaching their lowest levels in four years. Energy declined 4.71%, led by Natural Gas. Crude oil and petroleum products also decreased as a weak economic outlook continued to weigh on demand expectations, while the current supply and demand balance is not overly tight. The US Department of Energy conditionally approved a permit allowing a US company to export liquefied natural gas to countries without existing free trade agreements with the US, providing a potential boost for longer term demand. Livestock was relatively unchanged, down 0.33%, as Lean Hogs increased while Live Cattle decreased. Exports were reported weaker for the first quarter of 2013, partially due to import restrictions in China and Russia. China’s largest publicly-traded meat processor announced its bid for the largest pork producer in the US, Smithfield Foods. This may boost US pork exports to China. Agriculture was also relatively unchanged, up 0.04%. Corn was supported by Chinese buying and strong demand from US ethanol manufacturers. Coffee declined on the back of expectations of a record “off year” crop out of Brazil, which accounts for about one-third of the world’s coffee supply and existing comfortable inventory levels. Industrial Metals gained 1.61% as declining zinc and aluminum stocks in London Metals Exchange warehouses supported the sector, in addition to gains in copper. The better than expected US employment report at the beginning of the month along with strong consumer confidence readings provided a boost to the economically sensitive sector at the beginning of the month.
As of May 31st, 2013 the team managed approximately USD 10.8 billion in assets globally.
Credit Suisse today announced the launch of two new commodity index ETNs which are listed under the ticker symbols “CSCB” and “CSCR” and began trading on the NYSE ARCA this morning. CSCB is the first exchange traded product in the US market to offer investors access to the Credit Suisse Commodity Benchmark Total Return Index. CSCR is the first exchange traded product in the US market to offer investors exposure to the Credit Suisse Backwardation Total Return Index.
The Credit Suisse Commodity Benchmark Total Return Index underlying the CSCB ETN is a long-only diversified commodity benchmark index composed of notional futures contracts on 34 physical commodities (as of the 2013 annual rebalance). The index seeks to provide wider diversification and closer reflection of the overall global commodity complex than existing commodity indices. The index features an extended roll period of 15 days per month. The index also invests in contracts that expire between one to three months (where available), spreading exposure across multiple delivery periods, versus the more traditional front-month contract only investment.
The Credit Suisse Commodity Backwardation Index, underlying the CSCR ETN, is a long-only diversified commodity index composed of single-commodity indices that follows a rules-based strategy to select eight commodities based on the price of the commodity futures contracts of various terms. The index measures the level of backwardation (where the prices of futures contracts nearer to expiration are higher than prices of futures contracts with longer to expiration) or contango (where the prices of futures contracts nearer to expiration are lower than prices of futures contracts with longer to expiration) between two observation points on the curve (month 1 and, generally, month 6). Each month, the Index takes a notional weighted long position in eight single-commodity sub-indices from a universe of 24 eligible sub-indices.
Mark Harvey, global head of commodities structuring for Credit Suisse commented, “The Credit Suisse Commodity Benchmark Total Return Index updates a physical commodity futures index originally formulated in 1975 by commodities expert Bob Greer and first published in 1978. We have retained the key aspects of that index – including rebalancing, multi-period exposure and weighting methodology – to create an updated robust benchmark for the performance of the current global commodities markets.”
Wikimedia CommonsBy Jessica from Hove, United Kingdom. Switzerland has the Most Expensive Club Sandwich in the World & Colombia One of the Cheapest
Geneva has taken over from Paris as the most expensive city in the world in which to order a Club Sandwich, at an average of $30.45, according to research released today by Hotels.com. Using the classic hotel staple of a chicken, bacon, egg, lettuce and mayonnaise sandwich as a barometer of affordability, the Hotels.com Club Sandwich Index (CSI) offers travelers an indication of the cost of living associated with their destination of choice.
Now in its second year, the Index reflects not only changes in the actual price of a Club Sandwich across the globe but also the effect of currency fluctuations. Travelers will be pleased to note that, on the whole, prices are falling: the Genevan average of $30.45, although higher than any other destination, is also lower than last year’s most expensive, which was $33.10 in Paris.
Gastronomic hub and last year’s chart topper, Paris, this year slipped to number two with a new average of $27.45, closely followed by Oslo, which held on to the number three spot with $26.72. India’s New Delhi remained the cheapest destination to buy a Club Sandwich, with an average price of just $9.11.
New York City, the only U.S. destination to make the global list*, anchored the middle with an average of $17.51, up $1.57 from its 2012 average of $16.93. Prices in NYC ranged from a hefty $27 at the 5-star renowned St. Regis New York to a more modest $7.95 at a 3-star property elsewhere in Midtown. Another U.S. region that saw significant increases in Club Sandwich pricing includes the West Coast, with Los Angeles and San Francisco increasing by approximately $4 to $15.21 and $3, to $15.52 respectively. On the East Coast, Orlando saw a $4 decrease to $11.17, while in the country’s center cities like Houston and Las Vegas remained the same year over year.
Alison Couper from Hotels.com said: “The Club Sandwich, available on hotel menus across the globe, is the perfect spending barometer, helping tourists factor into their travel plans the everyday cost of simple items such as food and drink. The price changes when comparing 2013 to 2012 hide a complex story of factors from changes in the local price of basic food items through to currency fluctuations. The beauty of the CSI is that we are able to offer travelers a simple price comparison to show how far their money may stretch in each country.”
Foto cedidaFoto: Richard Speetjens. Darwin in the Digital Age: Robeco Consumer Trends
Back from a long weekend and about to board the plane, my husband commented … “Apple and Samsung have their days numbered”, “Say what?” I said, a little annoyed because I just got hold of the last iPhone model. “They don’t offer any added value, all smartphones are equal.”
I did not give that comment any further thought until a few days later, when Richard Speetjens, co-manager of Robeco Global Consumer Trends Equities Fund, explained a very similar concept. “In 2013, within our Digital World trend, we have greatly reduced our exposure to semiconductor manufacturers and other manufacturers of hardware for mobile devices.” While consumer secular change into the digital age is still one of the strongest thematic pillars of this fund, Speetjens notes that “60% of users already have a smartphone, and Apple and Samsung have taken the bulk of these purchases, but now low cost Chinese competitors with lower margins are entering the market.” Darwin has entered fully into the digital age.
In fact, the fund sold its entire position in Apple and AMR Holdings and has reduced its exposure to Samsung.“We’ve reassigned these positions to internet companies with a good strategy for mobile devices like Google, LinkedIn, eBay, TripAdvisor, Amazon, Yelp or MercadoLibre, one of our two only positions in Latin American companies,” the manager added.
The Robeco Consumer Trends fund, with about $850 million in assets under management, explores the trends which will shape consumption over the next five to ten years, investing in global companies exposed to these themes. “They must be global trends with consistent growth prospects over 5-10 years,” says Speetjens adding that “it is just as important to select good consumer trends as it is to select the individual companies which will represent these trends in the portfolio.”
The fund’s second major trend is consumption in emerging markets, both on the theme of consumption of luxury goods, “where we have remained stable in recent months,” as in the basic needs “where we had a strong bias towards Chinese consumers which we have recently diversified by investing in consumer companies exposed to Brazil, Indonesia and Russia. “One example is the Brazilian department store Lojas Renner, “very competitive, benefitting from the increased middle class in Brazil,” said Speetjens.
The fund’s third consumption trend focuses on the big brands; Speetjens explains that “generally these allow us to balance the risk that comes from the digital and the emerging consumer themes.” This year the strategy has added positions in Estée Lauder and Coca Cola, “two major brands with very reasonable rates and unappreciated right now.” The fund will typically hold between 35% and 40% in these “big names” of the consumer sector.
Foto cedidaGeorge Crosby, nuevo presidente de FIBA. FIBA elige nueva Junta Directiva, encabezada por George Crosby de HSBC
FIBA, a global trade association whose membership includes most of the largest financial institutions in the world who are active in correspondent banking, trade finance and international wealth management/private banking services, has elected its new Board of Directors to be headed by President-elect George de F. Crosby. Mr. Crosby will serve during the 2013-2014 fiscal year and has served as First Vice President of FIBA for the past year as well as chaired the Wealth Management Committee for the past 8 years. He will take office on July 1st for a one-year-term, succeeding Grisel Vega of Bci Miami Branch.
Mr. Crosby is a Managing Director and Group Head for Brazil at HSBC Private Bank International overseeing a team of bankers in Miami and New York. He is responsible for developing the Brazilian market strategy for the U.S. and is part of the Brazil Global Market Management team. Mr. Crosby is on the Board of HSBC Private Bank International in Miami.
Several areas contribute to the success of this forum, foremost of which are the constituency of it membership comprised due to the bankers, brokers, financial industry attorneys, accountants and consultants in the hemisphere. During his term, he will aim to achieve important goals focusing on four key areas:
FIBA Wealth Management Forum in September 16-17. A recent study showed that Miami is one of the top ten cities for global wealth management in the world. And with this in mind, FIBA is the right organization to showcase the future of our wealth management industry by hosting the first annual FIBA Wealth Management Forum in September.
The new FIBA Private Banking and Wealth Management Series. This initiative is lead by FIBA and the Private Banking Committee and the intention is to bring together not only bankers but also brokers and other practitioners. We focus on education, best practices and networking as these are all keys to sustaining our business.
Advocacy. FIBA has successfully taken important steps forward to have our voice heard in Washington and Tallahassee and we are recognized as the voice of the industry on international banking issues. The importance of working closely with the regulators for the benefit of our industry continues to be a key priority for us. With this, FIBA will maintain open lines of communication between the private and public sectors.
Preparing the next generation of banking leaders. FIBA’s role in providing relevant training programs and networking to ensure that we strengthen our next generation’s skills and vision is a key. This initiative is being well executed by the FIBA Young Professionals Committee through programs and after work happy hour activities. Few organizations offer their members so much in terms of information and knowledge sharing opportunities.
Photo: Chris Bullock. Taper relief: what are the real implications of the FED’s announcements?
The market has been alive with speculation regarding when and how the US Federal Reserve (the Fed) will exit its ultra-loose monetary policy, currently being carried out through near zero interest rates together with direct asset purchases, a form of quantitative easing (QE). The debate was sparked by Ben Bernanke’s response to a question at his testimony to Congress in late May. In his reply Bernanke stated: “If we see continued improvement and we have confidence that that is going to be sustained then we could in the next few meetings take a step down in our pace of purchases.”
This was immediately interpreted as signalling an imminent “tapering” of the $85 billion a month asset purchases and contributed to a sell-off in both bond and equity markets. Since then, there has been a more measured response to the comments and the level of qualification in Bernanke’s remarks underlines the fact that stronger economic data will be necessary to herald a change of stance by the Fed.
In our view, there is a lot of noise as market commentators and Fed members offer their individual views rather than firm guidance. What we do know is that it is logical that one day the Fed will have to stop buying assets. The problem is that the markets have grown addicted to the additional liquidity this has provided and it would be remiss of the Fed to not acknowledge this fact
This probably explains the more gradual approach being put forward. With QE1, the Fed abruptly stopped. With QE2 they slowed asset purchases to zero. With QE3 we are being guided towards a “tapering” approach. What is interesting this time is that the tapering approach could work both ways and Bernanke reiterated this when he said the Fed “could either raise or lower our pace of purchases going forward.”
Despite all the coverage since the testimony, the Fed has done nothing yet, and is unlikely to do so if it looks like markets would crash. Unemployment remains above their 6.5% target, and that is without adjusting for people leaving the potential workforce. Janet Yellen of the Fed set out five measures that form a Fed dashboard for the strength of the labour market, stressing that although the unemployment rate and growth in employment remain key, other factors such as the hiring and quitting rates should also be considered. The 175,000 net new non-farm payrolls figure for May was solid but still shy of the 200,000 that would noticeably accelerate a reduction in the unemployment rate. Further readings in the 175,000 region make a start to tapering in September 2013 possible but far from a given.
What is important is that markets do not lose sight of the fact that tapering is merely a slowdown of the increase in the Fed’s balance sheet. It will still be QE. It will still be accommodative. Moreover, the Fed has committed to keeping the Fed funds rate near zero at least as long as the unemployment rate remains above 6.5% and as long as inflation is no more than 2.5%. Neither of these conditions looks likely to be breached this year.
Europe is not immune to the decisions taken across the Atlantic but it is worth noting that different dynamics are at play and that Europe is at a different stage of monetary policy – it is behind the US. What is more, European bond markets are the lowest duration in the developed world and so are less sensitive to interest rate risk, as reflected in their more defensive movements during May’s volatility.
Overall, we recognise that it will not be easy to withdraw stimulus but markets need not be alarmist. We believe that some of the softness in bond markets in late May and early June reflects a pull back after a particularly strong performance in previous months. If anything, the volatility in the markets could present some buying opportunities, particularly if you believe, as we do, that the underlying economy is still weak, employment remains fragile, and inflation is not an immediate threat.
By Chris Bullock, co-manager of the Henderson Horizon Euro Corporate Bond Fund
AGV locomotive, manufactured by Alstom. Be contrarian. Be European.
In the late 90s the European stock market accounted for 36% of the market capitalisation worldwide.It thus vied for protagonism with the US stock market, which had a 41% share.They left a decade behind them in which European stocks had traded at a premium to their US counterparts.Fifteen years later and the scenario is rather different: while the US stock market now accounts for over half of stock market value worldwide, the European exchanges all taken together do not even amount to one quarter of this figure, their value languishing even below that of the Asian markets.
The beginnings of the uncoupling of the US from the European stock markets can be traced back to the opening weeks of 2010, when the level of Greek debt started to become a cause for concern. Over the following three years the steady stream of financial disasters in Europe has opened up the spread between both markets. From 2010 Long USA – Short Europe has translated into a substantial 50%.
During these three and a half years equity has mostly been funnelled into the US stock market (ETF flows illustrate this well – see chart), driving up stock prices and making it one of the most expensive stock markets in the world. The S&P 500 stands at a current P/E ratio of 18.9 and a Shiller P/E ratio of 22.7, both comfortably above their historical average. If we go by the replacement value (Q ratio), the US stock market is also at historically high levels. And according to Mr. Buffett’s favourite ratio for valuing the market (Market Cap to GDP), it has surpassed the third highest level in history after 2000 and 1929.
Even though this may not mean that the US stock market is set to fall in the coming years, it is reasonable to assume that its future performance will be fairly modest. Assuming long term growth on fundamentals of 6%, with a current Shiller P/E ratio of 22.7 and a dividend yield of 2.2%, the S&P performance over the next 10 years should be a moderate 3.9% a year.
On the other side of the seesaw, we have the European indices at under their historic highs, condemned to be listed against the backdrop of a possible disappearance of the Euro, with the sole and timid exception of the DAX. If we apply the Market Cap to GDP ratio to Europe we see that it stands at way below the high of the year 2000. Its major markets (Germany, the UK and France) stand at Shiller P/E ratio levels of close to 11 and show dividend yields that double the rates offered by the US market. Such flat prices were last seen in the early 80s at just the time when European shares embarked on a ten-year period in which they showed a premium in the market compared to US stocks (see chart).
The S&P 500 currently stands at 1.4 sales compared to 0.7 for the Eurostoxx 50. Working off the assumption that we live in a world that is increasingly globalised and where multinationals rely on world growth (not local growth), the gap in valuations between both markets is surprising. This point takes on particular relevance if we bear in mind that 44% of the revenues of European companies are produced outside the continent (in the case of the UK this figure rises to 52%). In addition to this, one quarter of the profits of European companies derive from emerging markets, a figure which doubles that obtained by US companies from these markets.
These average figures match our fund EDM Strategy’s exposure to exports (45%) and to emerging markets (25%), based on the sales of the companies we have in our portfolio. Therefore, European companies are priced at a discount simply due to where they are domiciled, often without paying heed to the geographical origin of their business.
But perhaps one of the best signs to measure valuations properly is corporate transactions. In comparison to the frenetic corporate activity we have witnessed in the USA for some time now, this has fallen off sharply in Europe (by -14% in 2012) down to levels unseen since 2003. This shows that sellers are not willing to dispose of their businesses and assets at these prices and are probably holding out for more realistic valuations. It should therefore come as no surprise that the book value of the S&P 500 is 2.2, compared to 1.6 for the FTSE-Eurofirst 300.
There is therefore no doubt that the market values on the “Old Europe” are highly attractive compared to those in the USA, and these actually stand at a low not seen for 40 years now:
Source: BCA Research
In this pricing environment, stock-pickers like us have more options for finding attractive investments. In fact since 2006 some 50% of European equity managers have outperformed their indices, which compares to 16% for US managers.
The “Old Europe” will present us with a key opportunity in the next few years, which no investor should pass up. It might even rejuvenate.
Ignacio Pedrosa is Head of Marketing & Institutional Investors at EDM Asset Management.
by Asy arch at en.wikipedia. A tool that extracts the market "signal" from the social media "noise" for investors
Market Prophit has announced the official launch of its website with the goal of providing retail and institutional investors with a real-time, sentiment analysis tool for financial market conversations in social media.
Market Prophit extracts the market “signal” from the social media “noise” using sophisticated natural language processing techniques and predictive analytics. The algorithms automatically interpret and quantify large quantities of unstructured conversations to deliver sentiment signals to investors.
“As the volume of on-line conversation about financial markets continues to grow at a massive pace, it is getting much harder for investors to keep up with and interpret all of this information;especially in real-time. We believe that sentiment and market mood can have an effect on financial markets so we provide an easy-to-use tool that quickly delivers the “pulse” on the market to you”, highlights the firm in its press release. The tool is designed for self-directed retail investors, day-traders, hedge fund portfolio managers, research analysts, or anyone interested in getting the current crowd-sourced buzz on the market.
Market Prophit is a financial big data company focused on analyzing market-related conversations in social media and providing real-time sentiment signals to both retail and institutional clients.
Wikimedia CommonsBy Michal Osmenda. Esteban Zorrilla, New Head of Investment Strategy at HSBC in Miami
HSBC has appointed Esteban Zorrilla as new head of the Investment Strategy team for their Miami office, reporting to Ajay Loganadan, the American region’s director, based in New York.
According to information received by Funds Society from sources close to the bank, Zorrilla will take over the team following the departure of Carolina Montiel, who joined EFG to manage the Swiss bank’s new Investment Strategy department.
Zorrilla has over 15 years experience in international private banking and financial investments in Spain, Switzerland, the Dominican Republic, USA and Latin America. Prior to joining HSBC in 2010, he worked in other international institutions such as Banco Santander and Morgan Stanley.
Zorrilla, Bachelor of Business Administration from the University of Deusto (Bilbao), holds an MBA in Banking Management from the Instituto Universitario de Posgrado(Postgraduate University Institute).
Wikimedia CommonsHead of BBVA Compass in Birmingham, AL. By Ralph Daily
. BBVA Compass creates a division for UHNW clients in Latin America headed by Manuel Sánchez Castillo
BBVA Compass has just created a new department within its international private banking division. The new division, aimed at UHNW clients in Latin America will be dependent on the Wealth Management unit. This new group will be headed by Manuel Sánchez Castillo, who will manage the team from Miami as regional manager for Latin America, as told to Funds Society by sources of the organization.
“The new project is committed to the group’s presence in Latin America and is aimed at enhancing the service in this sector,” those sources explained.
With over 20 years of industry experience, Sánchez Castillo has spent most of his career at Banco Santander, first in Spain and over the last 12 years in Miami as head of Management and Investment and later as manager of Investment and Advisory services. While in Madrid he worked at Santander Asset Management and Banesto Funds as head of International Equities.
In 2009, the executive became responsible for Santander’s Private Wealth division. In 2011 he moved to BNP Paribas Wealth Management in Miami as director of Latam Key Clients, until joining BBVA Compass in late April. Sánchez Castillo is a graduate in Economics from the UCM (Complutense University in Madrid).
