Author Topic: RETURN OF CAPITAL/RETURN ON CAPITAL  (Read 13167 times)

Online king

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« on: July 07, 2016, 05:54:23 AM »

Bill Gross: Don't expect return on your money
Tae Kim   | @firstadopter  1 Hour Ago
Bill Gross, the billionaire bond investor, discussed his views on the Fed's monetary policy, quantitative easing and risk assets on CNBC Wednesday.
The Fed, the Bank of Japan and the European Central Bank have created "a combined $12 trillion [of quantitative easing] between those three central banks. Theoretically that should be enough money to provide prosperity across the globe," Gross said. "It has not been effective in generating credit growth."

He added, "It is time to worry about the return of your money as opposed to the return on your money."

Gross is a lead portfolio manager at Janus Capital. Previously, he co-founded and was chief investment officer of Pimco

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« Reply #1 on: July 07, 2016, 07:08:30 AM »

Michael Lombardi: Here’s Why the S&P 500 Could Collapse 20% to 30% Near-Term
By Moe Zulfiqar, BAS Published : July 6, 2016
 Michael Lombardi:A little more than a week ago, after the Brexit news, we saw key stock indices like the S&P 500 plummet very quickly. It looked as if the decline would continue; however, now, it looks like nothing happened.
Looking at this, investors are asking, what’s next?

If you ask the opinion of Michael Lombardi, founder of investment research firm Lombardi Publishing and the popular financial web site Profit Confidential, the S&P 500 could see severe losses in 2016 and early 2017. And according to Michael, the Brexit is just one of the many factors that suggests the S&P 500 could crash like it did in 2008 and 2009.
I had a chance to chat with Michael Lombardi about where the S&P 500 is headed next. The following is a transcript of our conversation. It has been lightly edited for clarity.
Moe Zulfiqar: On Profit Confidential, you have been telling your readers that the S&P 500 could see massive declines. Tell me three big reasons you believe this could happen.
Michael Lombardi: For starters, earnings are outright collapsing. Corporate earnings of S&P 500 companies have declined between from the second quarter of 2015 to the first quarter of 2016. In the second quarter of 2016, they are expected to decline as well! Understand this: if earnings fall, stock prices will tumble. Look back at any previous stock market crash and you will see this phenomenon prevail.
Next, you have to pay close attention to the global economy. Right now, we’re seeing major economic hubs slowing down. Pick a map, point to a major country, and it’s very likely that country is struggling to grow.
And if you think the U.S. economy and U.S. companies don’t have any exposure to the global economy, you may be truly misled. As the global economy slows, American companies’ earnings will tumble and the stock market will decline.

Last but not the least, the Brexit is something people are not taking very seriously. It is going to have many implications and there will be a lot of uncertainty. Remember: when there’s uncertainty, investors sell stocks.
I want to be very clear here—there are many more reasons why key stock indices like the S&P 500 could fall significantly. These are just three major reasons.
Moe Zulfiqar: How much do you think the S&P 500 could drop?
Michael Lombardi: As my readers know very well, I hate giving exact targets. To give a slight idea, I will not be shocked if the S&P 500 sees a 20%–30% move to the downside in the near term.
And if the losses persist, it could really spook investors, sending them running for the exits. Investors are too complacent right now. This will make the sell-off much bigger.
Mind you, I will not be shocked if these losses happen very quickly.
Moe Zulfiqar: What could investors do in case there’s a sell-off?
Michael Lombardi: Currently, the risks of downside are far greater than the chances of the stock market moving higher. In times like these, investors should be focusing on preserving capital more than anything else—take some profits off the table and cut losses. The last thing you want to do is give away your gains by keeping a losing position

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« Reply #2 on: July 07, 2016, 09:12:27 AM »

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UPDATED Gross says this key factor is caging in investors’ ‘animal spirits’   
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Gross says this key factor is caging in investors’ ‘animal spirits’

By Mark DeCambre
Published: July 6, 2016 5:41 p.m. ET

Bill Gross of Janus Global is drawing parallels to the board game Monopoly as he explains central-bank moves
AFP/Getty Images
Animal spirits are caged.
Bill Gross has a fairly simple explanation for benchmark government-bond yields falling to record lows: weak bank lending.

The fixed-income expert, who manages an unconstrained bond fund for Janus Global Capital, made the case on Wednesday in a monthly market report that a lack of lending by the world’s big banks is hemming in credit and hobbling economic growth here and abroad.

Gross says highly levered economies are dependent on credit for its “stability and longevity.” He said banks and, specifically the credit they provide, are the financial lubricant that keeps the system chugging.

Read: MarketWatch’s daily stocks column

But negative and record-low interest rates are gumming up the economic works. Although lower interest rates have encouraged spending, that trend is sputtering as central banks run out of tools after printing money and helping to drive trillions of dollars worth of sovereign bonds—some $11.7 trillion by Fitch Ratings’ count—into negative territory. Impeded by tough regulations designed to curb the same risk-taking habits that helped to lead to the 2008 financial crisis, banks have become increasingly hesitant to lend, especially as worries about anemic growth persist.

Also read: European bank shares slapped to all-time lows by Brexit, interest-rate anxieties

The upshot?

Genuine appetite for risk has waned, which has resulted in record low yields for government debt, including the benchmark 10-year U.S. Treasury note TMUBMUSD10Y, -0.55% The T-note touched a record intraday low of 1.321% Wednesday and other government paper hit new nadirs.

Gross’s comments, which resemble his earlier warnings about negative rates, follow a wave of worry in global markets sparked by the Britain’s decision to exit the European Union.

Concerns about the aftermath of Brexit and its affect on the rest of Europe’s trade bloc has fueled some of the more recent gyrations in government bonds and whipsawed stocks, namely the Dow Jones Industrial Average DJIA, +0.44%  and the S&P 500 index SPX, +0.54% which were turning higher Wednesday afternoon in New York.

Drawing parallels to the board game Monopoly, in his letter, Gross says investors should be more wary of the return “’of’ their money rather than the return ‘on’ their money” as they navigate the negative-yielding landscape.

Check out: Brexit puts squeeze on central banks to fix financial jitters

Until governments can spend money and replace the animal spirits lacking in the private sector, then the Monopoly board and meager credit growth shrinks as a future deflationary weapon. But investors should not hope unrealistically for deficit spending any time soon. To me, that means at best, a ceiling on risk asset prices (stocks, high yield bonds, private equity, real estate) and at worst, minus signs at year’s end that force investors to abandon hope for future returns compared to historic examples. Worry for now about the return “of” your money, not the return “on” it. Our Monopoly-based economy requires credit creation and if it stays low, the future losers will grow in number.
“Borrowers don’t want to borrow and bank’s don’t want to lend,” Gross told CNBC during an interview Wednesday afternoon after minutes from the Federal Reserve’s June meeting were released. The minutes indicated that the Fed wanted to keep its options open as it waited for more data to assess the health of the U.S. economy.

However, by Gross’s assessment, the situation is looking pretty grim.

Read: Blackstone’s Wien warns the Fed is out of firepower

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Mark DeCambre is MarketWatch's markets editor. He is based in New York. Follow him on Twitter @mdecambre.
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Tony Tarantino 2 hours ago
Are father who QE in heaven, QE be thy name, Thy Kingdom QE etc....yes it's a coming, they'll use Trump as the excuse.
Tell It Right 2 hours ago
I’m out of the market right now anyway.  But if I wasn’t I wouldn’t put much stock (pardon the pun) into bearish words from someone who makes a living on market fear like, say, a bond fund manager.
George Courtney 3 hours ago
Gross, to me, appears to be describing symptoms rather than causes.  Big banks loan to big business.  If big business thinks the economy is going to tank, reducing restrictions on big banks won't help at all.  It's not the FED, imho.  The FED follows the market.  Big businesses don't see growth, they don't hire and don't borrow and this is certainly one reason for low interest rates.  Of course it's not sexy to say the economic outlook isn't good.  We public insist, no demand a villian as the cause and never root economic problems but the villian causes it.
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Offline EyalNachum

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« Reply #3 on: August 01, 2019, 06:44:38 PM »
Yes, emerging markets provide investors some of the high growth opportunities, but the risk and instability can be high too. However, the risks can be reduced with the right analysis and planning. Eyal Nachum (an expert in the European banking sector) helps you to analyze and invest in emerging markets. Hope it will be helpful.

Offline Bossstilx

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« Reply #4 on: September 18, 2019, 06:28:19 PM »
I haven't seen such a good story for a long time. Hopefully next time we'll talk about it again