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Gary Shilling Reveals His Top Trades For 2014 (A. Gary Shilling Insight)
Global deleveraging continues to be a major force shaping the 2014 investment outlook, according to Gary Shilling. This implies, "Continuing slow U.S. economic growth at about 2% annually; further reduction in the Fed's security purchases; slow inflation worldwide with deflation a strong possibility; uncertainty over gridlock in Washington including troubled Obamacare; rising protectionism; further regulation of financial institutions here and abroad; and slow growth in developing economies that depend on exports to developed lands that will also continue to grow slowly at best."
For now Shilling is "taking a defensive position in our themes that utilize equities." Here are 10 things he thinks are attractive: 1. Treasury Bonds 2. Selected income-producing securities 3. Small luxuries 3. Consumer staples and foods 5. The dollar against the yen, Canadian and Australian dollars 6. Japanese stocks 7. Selected healthcare providers and medical office buildings 8. Low price-to-earnings stocks 9. Productivity enhancers 10. North American energy producers ex-renewables. Meanwhile he thinks certain commodities and developing country's stocks and bonds are unattractive.
Three Takeaways From 2013 ETF Fund Flows (Morningstar)
Exchange traded funds (ETFs) witnessed $188.4 billion in inflows last year. Michael Rawson at Morningstar writes that there are three things we can learn from these flows. 1. ETF investors and mutual fund investors are different. "ETF investors sold roughly $6.6 billion out of funds in the diversified emerging-markets category while mutual fund investors bought $39.0 billion." ETFs were largely held by institutional investors while mutual funds are largely owned by individual investors. 2. "ETFs hold up remarkably well in the face of massive redemptions." 3. Bonds tend to be "relatively illiquid," so bond investors turn to bond ETFs for liquidity.
A new report by Cerulli identifies 771,120 high-net-worth-households with $5 million - $20 million in investible assets. And 62,410 ultrahigh-net-worth households with over $20 million in investible assets. The report found that both groups used a range of personalized services but ultrahigh net worth investors are "progressively pursuing the high-touch and extremely private nature of multifamily offices and private trust companies," according to Michael Fischer at ThinkAdvisor. While single family offices were usually for those with $100 million net worth or more. Registered investment advisors (RIAs), multifamily offices, and bank trust companies have been gaining favor.
A Deconstruction Of Global Stock Market Returns In 2013 (Morgan Stanley)
A look at global stock market returns in 2013 shows that U.S. stock market returns were largely driven by multiple expansion, though this wasn't necessarily the case elsewhere.
The World Will Go Through 5 Big Transitions This Year (Morgan Stanley)
Morgan Stanley's Joachim Fels thinks the global economy will face five "tricky transitions" in 2014. 1. The Fed under Janet Yellen will have to manage tapering and "create credible forward guidance on interest rates to avoid a replay of the unpleasant experience last summer." 2. This will be a "crunch year" for Japan as the planned corporate tax cuts are unlikely to offset the drag from consumption tax increases, and there could be additional easing measures. 3. Europe will try and "cleanse" its banking system. 4. China will move from credit-driven growth to reform-driven growth. 5. Emerging markets need structural reforms but policymakers "are on the wrong track or have near-term headwinds."
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