Thursday, December 27, 2012

李克强习近平这回遇到了真老虎(组图)

http://www.creaders.net  2012-12-26 22:53:22  万维读者网  [1条评论,查看/发表评论]
万维读者网记者上官天乙综合报道:加快城镇化,是李克强主政河南时期经济发展战略的一个重要组成部分。现在,无论十八大报告还是中央经济工作会议,都把城镇化列为中国扩大内需,实现向内需主导型经济转型的着力点所在。
日经中文网12月27日文章指出,由于雷曼危机后推出的4万亿元经济刺激政策,中国出现了产能过剩和房地产泡沫等后遗症,而依赖基础设施投资的增长模式的弊端也显露无疑。另一方面,由于受人工费和人民币升值的影响,出口主导型增长也开始难以为继。在这样的背景下,中国剩下的选择就是通过推进城市化来扩大内需。

“未来几十年最大的发展潜力在城镇化”,11月28日中国现任副总理李克强在会见世界银行行长金墉时如此断言。由此可见,中国新领导层对以城市化为动力的增长模式寄予了厚望。
但是,把“推进城市化”定位为增长的主要驱动力,这执行起来并不容易。它面临着改革自毛泽东时代起推行的户籍制度等问题。
文章把中国现有的户籍制度视为“推进城市化”的最大障碍。这种以出生地确定户籍的制度大体分为农村户籍和城市户籍。农村出身者即使迁到城市,也仍然是农村户籍。而在医疗、教育和养老金等等公共服务方面,城市户籍拥有者被优待,因此,仅仅因为出生地在农村,就会在社会福利方面遭受不公平。
中国自建国以来一直没有调整过户籍制度。在防止人口迅速流入城市的名义下,改革一直被推迟。有分析认为改革需要交通和住房等规模庞大的基础设施投资,不但财政负担将加重,还会影响到城市居民的一部分既得利益,因此在北京市和上海市等大城市废除户籍制度并非易事。
文章最后说向内需主导型经济转型是自胡锦涛时代以来的重要课题,但结果却未能取得进展。习近平能否排除既得利益集团的阻碍、大力推进户籍改革,引导经济走上稳定增长轨道,新领导层的执行能力将接受考验。
(日经中文网:户籍制度考验中国新领导层) “将加快户籍制度改革”,主管经济政策发改委主任张平于18日如此强调。这意味着中央经济工作会议提出的新领导层的意志已经开始在政策制定层面得到落实。
此外,中国地方也已出现了改革的迹象。广西壮族自治区南宁市于同一天宣布,将把以往划分为农村和城市的户籍制度合二为一。而获得新户籍的条件是在城市购买住房、在市内工作4年以上、同时缴纳社会保险费3年以上。
据新华网北京12月20日电,李克强19日在北京主持召开经济社会发展和改革调研工作座谈会时明确指出,推动城镇化,把农民工逐步转为城市市民,需要推进户籍制度改革。
路透社据上海证券报报道,中国城镇化规划草案已经基本成型,决策部门目前考虑从户籍制度改革、土地制度改革、住房政策完善、财税体制改革、地方投融资体制改革以及行政区划调整六大方面着手,为今后的城镇化快速健康发展,提供强有力的体制和政策支持.
(古人云:苛政猛于虎。户籍制度堪称是毛泽东时代以来祸害中国人无数的一只其猛无比的大老虎)
知情人士透露,新型城镇化的六大指导原则包括体现以人为本的理念,着力提高人口城镇化水平,降低城镇准入门槛;坚持城乡统筹,把推进城镇化和工业化、农业现代化紧密结合,以工促农、以城带乡,实现城乡经济一体化发展.
在六大原则指导下,今后中国将采取措施增强城镇综合承载能力,全面提升交通、通信、水电气暖、污水垃圾处理、医疗教育、文体等基础设施和公共服务水平.
符合条件的农村转移人口将逐步转为城镇居民,在北京、上海、广州等特大城市控制人口规模的同时,大城市将继续发挥吸纳外来人口的作用,中小城市和小城镇则将放宽落户条件.
经济参考报报道说,国家行政学院经济学教研部副主任张占斌也认为,城镇化需要一系列公共政策的推动。今后一段时期必须把深化体制改革放在十分突出的位置。其中之一就是统筹推进户籍制度改革。深化户籍制度改革,必须以去利益化、城乡一体化、迁徙自由化为目标和方向,在中央的统一规划下,逐步剥离户口所附着的福利功能,恢复户籍制度的本真功能,同时改革嵌入户籍制度之中的其他二元制度,整体推进。

而城镇化对经济增长的作用主要有以下方面:
第一,城镇化是扩大内需的最大潜力所在。因为城镇化带动大量农村人口进入城镇,带来消费需求的大幅增加,同时还产生庞大基础设施、公共服务设施以及住房建设等投资需求。

第二,城镇化是统筹城乡发展的基本前提。通过推进城镇化,大量的农村富余劳动力向非农产业和城镇转移,农村居民人均资源占有量会大幅度增加,这将有利于提升农业生产规模化、市场化水平,加快农业现代化进程。
(虽然韩国自上个世纪60年代就有人提出废除户籍法,但始终未能形成大的气候。究其原因,主要是因为主张废除户籍法的势力敌不过反对势力,所以在电视剧《黄手帕》中,英俊说,现有的不合理的户籍制度即将要修改,但也许那只是编剧美好的愿望。在一个男性为主观念根深蒂固的国家里,要想彻底废除以男性为中心的户主制还有一段路要走。)
第三,城镇化是产业结构调整升级的重要依托。城市的根本特点是集中,是市场中心、金融中心、信息中心、服务中心、文化教育中心等,具有多种功能。城镇化产生集聚效益、规模效益和分工协作效益,极大地推动工业化进程。同时,城镇化不仅能够推动公共服务发展,也能够推动消费型服务业和生产型服务业的发展。

第四,城镇化是转变经济发展方式的重要条件。城镇化带来人们生活方式改变,推动消费结构和消费方式升级。城镇化带来巨大的城镇投资,促进产业聚集,带动基础设施和第三产业发展,推动产业结构升级。城镇化带来人力资本和信息知识聚集,促进市场竞争、技术创新和改善管理,有利于提高资源集约利用,降低工业化排放,实现低碳、低能耗发展。

第五,城镇化是提高中等收入者比重的重要途径。城镇化形成更多的就业机会,提高劳动生产率,有利于提高劳动力的工资和劳动报酬在初次分配中的比重;同时,城市服务产业也是培育中产阶级或者中等收入人群最重要的产业载体。

新华网消息,今年1月17日中国国家统计局发布的数据显示,2011年末,中国有城镇人口69079万人,城镇人口首超农村。中国改革发展研究院院长迟福林认为,中国正进入城镇化从局部突破到全面推进的重要时期,处在由投资主导向消费主导转型的关键性阶段,以服务业为主体的消费型城市的兴起将成为中国城市化的一个基本趋势,而城乡一体化是加快城市化发展的决定性因素。
中国城镇化率已从1978年的17.9%上升至51.27%。
但城镇化绝非单纯的城市空间扩张,其实质是通过相关制度改革和建设,使农民转化为市民,真正融入城市。全国政协经济委员会曾就此调研指出,要加快促进“空间城镇化”到“人口城镇化”的转变,其中各项制度建设,如户籍管理制度、城乡统一就业制度、土地使用和住房制度、农民工子女教育制度、收入分配制度、社会保障制度等是最为根本的。“只有农民变市民,才能真正实现城镇化。”

Wednesday, December 26, 2012

Vietnam Grows at Slowest Pace Since ’99 on Credit Slump: Economy

Vietnam Grows at Slowest Pace Since ’99 on Credit Slump: Economy
 
By Bloomberg News
December 25, 2012 12:44 AM EST

              Motorists drive down a road in Hanoi, Vietnam. Photographer: Justin Mott/Bloomberg
Vietnam’s economy expanded at the slowest pace in 13 years in 2012 as a slump in bank lending damped domestic demand, adding pressure on the government to revamp the financial system and attract more foreign investment.
Gross domestic product rose 5.03 percent this year, down from 5.89 percent in 2011 and the least since 4.77 percent in 1999, the General Statistics Office said in Hanoi yesterday. GDP increased 5.44 percent in the fourth quarter from a year earlier, up from a revised 5.05 percent in July-to-September.
Foreign investment pledges fell 14 percent this year and Vietnam’s credit rating was cut by Moody’s Investors Service as mounting bad debt and weakened state-owned enterprises limited room for policy makers to boost growth. The government has said it may form an asset manager to clean up lenders, and the World Bank and International Monetary Fund are preparing their first review of the banking system as a blueprint for the sector.
“It was only explosive credit growth that allowed for the level of economic growth that Vietnam had previously been achieving,” said Edwin Gutierrez, a portfolio manager at Aberdeen Asset Management in London, which manages about $11 billion in emerging-market debt, including Vietnamese bonds.
Prime Minister Nguyen Tan Dung said on Dec. 10 growth may reach 5.2 percent this year, down from earlier targets of as much as 6.5 percent. The country averaged expansion of 6.5 percent in the five years to 2011 and 7.8 percent in the five years before that. The pace has slowed due to falling productivity linked to inefficiencies in state-owned companies, banks and public investments, the World Bank said last week.
Moody’s cut Vietnam’s credit rating in September, citing “more pronounced weaknesses in the banking system” and costs related to recapitalizing banks. Concerns about the sector are increasing, the World Bank said this month, even as the government said it averted risks to the safety of the lenders.
Banks have reported bad debt to be about 4.5 percent of outstanding loans, while the central bank’s estimate is about 8.75 percent, the IMF has said. Credit growth this year was 6.45 percent, the planning ministry said today. That compares with 14 percent last year and 32 percent in 2010, according to the IMF.
The real-estate market “stays stagnant” and shows no sign of recovery, while the number of insolvent businesses continues to rise, the government said on Dec. 10. About 58,000 companies, or about 71 percent, in Hanoi posted losses in 2012, Cong An Nhan Dan newspaper said, citing the Hanoi People’s committee.
Vietnam’s monetary authority this month cut benchmark interest rates for a sixth time even as the World Bank warned against easing too soon, to help companies “cope with difficulties in production and business.”
“We are not going to go back to 6 percent, 7 percent growth, until we fix some of the structural issues, banking being perhaps the most important of them,” Deepak Mishra, the Hanoi-based lead economist for the World Bank, said on Dec. 10. “The point is whether the banks are ready to cut, even if policy rates are coming down.”
Industry and construction, which made up 40.7 percent of the economy, grew 4.52 percent in 2012, while the sub-category consisting of construction alone expanded 2.09 percent, the statistics office said. Services, which accounted for 37.7 percent of GDP, grew 6.42 percent this year, while agriculture, forestry and fisheries, which made up 21.7 percent of the economy, expanded 2.72 percent, the data showed.
Pledged foreign direct investment fell to $12.7 billion this year from $14.7 billion in 2011, while disbursed FDI slipped 4.9 percent, according to the ministry of planning and investment. Still, stronger exports helped prevent an even sharper slowdown, as the country posted its first annual trade surplus in two decades. Overseas shipments of goods including electronics increased from companies such as Intel Corp., Samsung Electronics Co. and Jabil Circuit Inc.
The trade surplus for the year was $284 million, based on preliminary figures from the statistics office. The last time Vietnam recorded a positive balance was 1992, data on its website show. Exports gained 18.3 percent to $114.6 billion in 2012, while imports advanced 7.1 percent to $114.3 billion.
“Exports made up for what was probably sluggish domestic demand,” said Jonathan Pincus, a Ho Chi Minh City-based economist with the Harvard Kennedy School’s Vietnam program. “It’s not a bad outcome considering all the deleveraging that’s going on, though in the long run this is not the type of growth that Vietnam would hope to attain.”
The surplus helped the dong advance almost 1 percent versus the dollar this year. The benchmark VN Index of stocks has risen nearly 14 percent, poised for its first annual gain since 2009.
Asian stocks advanced, with the MSCI Asia Pacific Index (MXAP) gaining 0.3 percent as of 1:42 p.m. in Tokyo, snapping three days of losses. Most bourses in the region are closed today for Christmas, with Japan and China the only major markets open.
China will keep home-purchase restrictions and “strictly” curb speculative housing demand in 2013, the official Xinhua News Agency reported, citing the Ministry of Housing and Urban- Rural Development. The economy will continue to recover in December, and may grow 7.7 percent this year and 7.8 percent in 2013, Shenyin & Wanguo Securities said in a report today.
Vietnam’s growth this year “is good enough given that we made curbing inflation our top priority for the year,” said Do Thuc, general director of the General Statistics Office.
Inflation slowed for the first time in four months in December, with consumer prices rising 6.81 percent from a year earlier after climbing 7.08 percent in November, a report showed.
“The government is hoping that if inflation remains under control, they’ll be able to ease monetary policy and growth will accelerate back to the 6 percent range,” said Pincus. “But it’s entirely possible that if the banks don’t get fixed, that when they loosen monetary policy we’ll come right back to a period of inflation and then they’ll have to tighten up again.”
Vietnam may expand about 5.5 percent next year, the government said on Dec. 10. The IMF and World Bank expect to conclude next year their first analysis of Vietnam’s financial system, which may bolster government efforts to strengthen the banking sector and boost investor confidence.
“Next year will still be a very difficult year for the economy,” Le Xuan Nghia, a member of Vietnam’s National Financial and Monetary Policy Advisory Council, said today in Hanoi. “Economic growth will probably be at the same level as this year, or slightly higher.”
--Jason Folkmanis in Ho Chi Minh City. With assistance from Nguyen Dieu Tu Uyen in Hanoi, Minh Bui in Sydney and Sunil Jagtiani in New Delhi. Editors: Rina Chandran, Oanh Ha
To contact Bloomberg News staff for this story: Jason Folkmanis in Ho Chi Minh City at folkmanis@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

Stock Market Gurus' Top Country ETF Bets for 2013

 

Where should ETF investors travel in 2013 for the biggest returns? Several investment strategists share their top country ETF investing ideas.
Mark DiOrio, portfolio manager at Parasol Investment Management in Westmont, Ill., with $125 million in assets under management: iShares Poland ETF (EPOL).
Poland is poised to be a standout equity market for 2013. A combination of an accommodative business environment, easing monetary policy and attractive valuation levels sets the stage for an emerging opportunity.
For 2013 (from the left), Parasol's Mark DiOrio prefers Poland, Zacks' Neena Mishra favors Mexico, Camarda's Don Vandenbord likes Japan and Beckerman...
For 2013 (from the left), Parasol's Mark DiOrio prefers Poland, Zacks' Neena Mishra favors Mexico, Camarda's Don Vandenbord likes Japan and Beckerman... View Enlarged Image
Supported by the Ministry of the Treasury, a plan for 2012-13 has been implemented to privatize 300 Polish companies.
One of the objectives is to execute the plan through stock exchange transactions in order to strengthen the domestic capital market. The other objective is to strengthen economic competitiveness.
To further strengthen the private sector, Poland has embarked on a three-step deregulation agenda. The first two steps significantly reduced administrative burdens. The third step, to be implemented in 2013, focuses on VAT (value-added tax) relief for companies.
The National Bank of Poland (NBP) maintains Poland's own currency, the zloty. That means Poland sets its own monetary policy, giving it flexibility to manage many challenges.
Currency fluctuations can be a risk to U.S. investors. The z loty is about 21% cheaper vs. the dollar than it was on Jan. 1, 2008.
The slowdown and recession in most of Europe is an ongoing risk. Those factors reduced Polish third-quarter gross domestic product growth to 1.4% from 2.3% in Q2. However, the NBP is responding to this slowdown in GDP growth. It has begun to lower interest rates to 4.25% from 4.5%. The NBP said it would lower rates more if the slowdown persists. Low rates are historically bullish for equities.
The Polish stocks in EPOL trade near 1.7 times book value compared to 3.0 P-B ratio for the broad MSCI Emerging Markets Index. Poland is not only trading at a discount to the rest of its peers, it is trading at a discount to itself.
The Polish equity market's cyclically adjusted price-to-years, using 10-year earnings, is 11.2. Its current one-year P-E is near 7.8. The P adjusts much quicker than the E, and in this case the P has plenty of room and reason to expand.
Neena Mishra, ETF research director at Zacks Investment Research in Chicago, Ill.: iShares MSCI Mexico Investable Market Index Fund (EWW).
Many U.S. manufacturers are shifting production to Mexico from China as China's average manufacturing wages, adjusted for productivity, now top Mexico's.
Further, Mexico's proximity to the U.S. means that companies can ship goods to U.S. customers much faster, at a much lower cost and duty-free because of the North American Free Trade Agreement.
The new administration (of Enrique Pena Nieto) has pledged more reforms in the energy sector, allowing more private investments and encouraging development of shale gas reserves, and tax reforms that could accelerate the GDP growth to 6%.
Apart from being positive on the Mexican economy, I also like the ETF due to its heavy exposure to consumer staples and telecom sectors. Growing consumer demand in the country will be beneficial for these sectors.
In recent years, Mexico adopted open market policies, fiscal discipline, labor reforms and prudent macroeconomic measures. As a result, the economy is currently growing at about 3.2%.
Its budget deficit is just 2.5% of GDP compared with 8.6% of GDP for the U.S. for 2011. Gross debt stands at about 43% of GDP, compared with more than 107% for the U.S., according to the International Monetary Fund.
Bank of Mexico has kept the key rate unchanged at 4.5% since 2009 as inflation has generally remained within its target range of 2% to 4%. The country's foreign reserves have risen to $165.4 billion, as of the end of August 2012.
Though the currency has been hit by U.S. fiscal-cliff concerns, it is still up about 9% year-to-date vs. the dollar. Additionally the longer-term outlook for the peso looks promising, given the country's macroeconomic position, rising exports and comfortable foreign exchange reserves position.
Risks: The economy is still very much dependent on the U.S. as a consumer of about 80% of its exports. Any contraction in the U.S. economy in case it goes over the fiscal cliff, will affect Mexico.
Don Vandenbord, portfolio manager at Camarda Wealth Advisory in Fleming Island, Fla., with $250 million in assets: IShares MSCI Japan Index Fund ETF (EWJ).
EWJ will benefit from the easy-money commitment of incoming Japanese Prime Minister Shinzo Abe. The recent landslide victory of Abe's Liberal Democratic party is seen as a mandate for Abe to champion pump-priming stimulus efforts, as Abe vowed to take all necessary action to rescue the Japanese economy from the woes of deflation.
The yen immediately weakened after the election results were announced, and EWJ broke above six-month resistance on strong volume, and the benchmark Nikkei index rose above 10,000 for the first time in nearly nine months. Continued weakness in the yen will serve as the catalyst to strengthen the competitiveness of Japanese exports and kick-start their languishing equity markets.
In December, the Japanese central bank enacted another round of monetary stimulus — its fifth move of 2012. Pressured by Abe, the Bank of Japan has also announced a review of their inflation target, which is expected to increase to 2% of GDP from the current 1%.
These policy moves and announcements, added to Abe's pledge for more stimulus, further support the weak-yen/strong-equity thesis. While Japan faces competing monetary-easing action from Europe and the U.S., the rewards for an upside move in EWJ appear to far outweigh the downside risks.
Daniel Beckerman, president of Beckerman Institutional in Oakhurst, N.J., with $35 million in assets: WisdomTree Emerging Markets Small-Cap Dividend (DGS).
India has been growing at over 5% per year. China's growth rate has been over 6% per year. The excessive rate of growth relative to the U.S. is expected to continue in the near future. Furthermore, the debt levels are relatively more favorable for the emerging market countries. Russia and South Korea, for example, hold less than a third of the level of U.S. debt relative to GDP.
Because of low input and labor costs in the emerging markets, there has been accelerating growth in manufacturing there over the years. This has led to a large accumulation of wealth there. They want access to consumer goods, housing, autos, communications, and technology. DGS trades at 12 times 2012 earnings, which puts it at a valuation discount relative to the U.S. market. Small-cap companies tend to be more insulated from large global concerns.


Read More At IBD: http://news.investors.com/investing-etfs/122412-638214-mexico-poland-among-2013-foreign-market-picks.htm#ixzz2GBcG1y64

Friday, December 21, 2012

Trading VIX Futures And The VXX: Forward Curve, Momentum, And Inter-Market Effects

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
At NAS Trading, we believe that VIX futures and the VIX ETN (VXX) currently present some of the best profit opportunities for individual traders.
What exactly are VIX futures? It is always best to go straight to the source. The CBOE education site states:
"The CBOE Volatility Index is based on real-time prices of options on the S&P 500 Index, listed on the Chicago Board Options Exchange (Symbol: SPX), and is designed to reflect investors' consensus view of future (30-day) expected stock market volatility... The contract multiplier for each VIX futures contract is $1000."
If you have ever looked at a chart of the VIX ETN note or VIX futures, it has likely occurred to you that this seems to be a great market to sell short. A cursory glance suggests that this market has a tendency to experience significant and prolonged downtrends that seem inevitable after each period of volatility ends.
This article looks to flesh out this tendency and gain a better understanding of how to profit from it. We will also look for times when it pays to go long both VIX futures and VXX.
Three factors that can be particularly useful to VIX traders are :
  • Forward curve dynamics
  • momentum effects
  • price signals from the SP500 futures contract
If you are not familiar with the effect the forward curve has on futures market returns (Or don't know what the forward curve is), I suggest that you read my article on the topic (here).
The forward curve relationship is particularly important in the VIX futures market, which in turn makes it very important for understanding price dynamics in the VIX ETN. Lets look at today's forward curve in the VIX futures as displayed on my quote board:

It is a bit easier To visualize in graph form:

As you can see, the market is in steep contango (upward sloping), which means that if the spot price does not change, then the futures contract will lose the difference between the forward price and the spot price between now and expiration. For example, lets consider the December 2012 contract, trading at 23.2. The current spot price is 17.74. This means if the spot price does not move, the December 2012 contract will have to lose 5.46 Points ($5,460) between now and expiration (spot price equaling contract price).
Now it is true the market usually anticipates a pickup in volatility during the fall, and it is not at all realistic to assume that the spot price will not change. However, the huge slope demonstrated in the forward pricing curve creates a massive headwind for longs, and tail wind for shorts. This is relevant to VIX ETN because this securities market exposure is created using VIX futures. If the VIX futures market is in steep contango, this will have a real effect on the NAV of the ETN.
I hope the above demonstrates why understanding forward curve dynamics is critical to successfully trading VIX futures or the VXX ETN. All else equal, steep contango is the short seller's friend, and backwardation (downward sloping forward curve) is the long side's friend.
The second factor we are going to look at is the "trend" or "momentum" factor. We are going to do this in two different ways. (Note: For this part of the study uses a continuous chart of the most liquid VIX futures contract from Jan 3, 2007 to September 4, 2012). Lets get started:
All else equal, would you rather sell short The VIX Futures contract after the prior day has closed up or down (based on the prior open to close relationship)? Lets examine the historical results:
  • For all days, the close to close return is .-0313, for a cumulative return of -44.87 (-$44,870)
  • For days where the prior open to close relationship was up, the return was .0217 for a cumulative return of 13.45 ($13,450)
  • For days when the prior open to close relationship was down, the holding period return was -.0741, for a cumulative return of -57.15 (-$57.150).
While these results are not strong enough to trade on their own, it does seem to suggest that using just a one day period, price weakness tends to be followed by price weakness, and price strength tends to be followed by price strength. As a side note, the Nearest month VIX Futures contract lost value (open to close) about 53% of all days during the past five years.
Next, Lets next examine Trend/momentum in VIX futures using a very simple Trend following system:
  • Sell Short when the 10 period moving average crosses below the 20 period moving average, buy back (cover) when the 10 period moving average crosses above the 20 period moving average.

The results are really quite remarkable but not entirely surprising, as are aware that the market has historically had a tendency to have prolonged downtrends. Total profit is $91,370, percent win is over 70%, and average trade is $3,514. Total trades is low, however this suggests that even when measured using this very short term trend signal, there is a high degree of trend persistence on the downside.
Lest you think I tweaked the inputs to get the above results, know this: Every moving average combination I tested between 10 and 50 was profitable, with an average trade profit between $800 to over $6000.
On to our final factor. I have seen that many traders attempt to use the VIX index to create trading signals for the SP500 futures or some other stock index contract. Lets consider the opposite. Lets see if a long term trading signal in the SP500 futures contract can have an impact on VIX futures close-to-close profitability.
We know that volatility tends to explode during significant markets declines. If we want to profit by shorting the VIX futures or VIX ETN, it would be nice to avoid these periods. Will a trend signal in the SP500 effect close-to-close returns in VIX futures? Lets check it out:
  • To start, lets consider that the average close-to-close return (as mentioned above) for VIX futures during our test period is -.0311, with a total loss of -44.87 ($44,870)
What is the average return from today's close to tomorrow's close, if today the SP500 mini contract closes above yesterday's value of the 80 period moving average?
  • The average daily loss increases to -.169, and the total loss increases to -137.15.
I tested this with moving average values between 30 and 200, and the results are logically consistent - meaning that pretty much every moving average length tested increased the average daily loss. This suggests that it is better to look for opportunities to short VIX futures when the SP500 futures are in an uptrend, as defined by our very simple trend signal (Today's close is above the X period moving average).
What about buying opportunities? If we flip around the above logic and test "What is the average daily return in VIX futures when the SP500 futures closed below the 80 period moving average" we find:
  • The average daily return jumps to .14, and the cumulative return is 92.6 points.
Lets add one more feature. What if the SP500 futures have closed below the 80 period moving average, and today's close in the VIX futures are greater than today's open?
  • The average return (close to close) jumps to .21, and the cumulative return is 66 points. The cumulative return is lower than the prior example because their are fewer simulated trading events when we include an additional parameter.
Based on the above, it looks like selling short VIX futures while the SP500 is in a downtrend is not a good strategy. In fact, results indicate that this is a good time to consider long trades. I have not examined it yet, however it would be interesting to see if the Forward curve effect coincides with the SP500 downtrend effect. I have observed that the VIX curve moves into backwardation during panics as the volatility, as the nearby contract ramps up - so this is possible.
Take away:
My analogy for these markets is that VIX futures and the VXX ETN trade similar to low quality, volatile stocks that are at times heavily promoted, (When they need to raise new equity to fund money-losing operations) yet have tendency to bleed returns after the stock promotion ends.
In the same way, bouts of market fear and volatility "fund" VIX trading products. The incredible "ramp up" of a volatility bull market scares shorts, yet ultimately the decline will once again set in. Our studies suggest that it is counter-productive for shorts to attempt to fight the market and sell short VIX products when upside volatility and momentum is positive.
This article is intended as "food for thought." Studies should be updated regularly in order to be in tune with changing market patterns. We will be tracking VIX futures and VIX ETNs in the subscription service.
Further reading:
Simon, David P; Campasano, Jim: The VIX Futures Basis: Evidence and Trading Strategies (Bentley University - Department of Finance, University of Massachusetts at Amherst - Isenberg School of Management)
Alexander, Carol; Korovilas, Dimitris: Understanding ETNs on VIX Futures (University of Reading - ICMA Centre)

Wednesday, November 21, 2012

人民币汇率15次涨停

人民币汇率15次涨停
 
http://www.creaders.net  2012-11-21 00:04:52  新华网  [0条评论,查看/发表评论]
      据报道,中国外汇交易中心数据显示,20日人民币兑美元汇率即期市场早盘报出6.2297的价格,再现「涨停」现象。这是十月下旬以来人民币兑美元汇率即期市场上的第15次「涨停」,是汇改七年以来从未有过的现象。   分析人士认为,在国内外外汇市场出现新变化的背景下,近期人民币汇率走势正进入新阶段,在靠近均衡点、波动日益加大的情况下,企业宜提高自身应对能力。
  「双顺差」决定人民币升值走势
  分析人士认为,就近期而言,美元的走软是引发人民币走强的直接动因。
  「上週五美国国会领袖称与奥巴马进行的财政悬崖会议『具有建设性』,该发言有助于风险情绪回升。」中国银行相关资金交易员指出,作为避险货币,美元走势受市场情绪波动影响较大,上週五风险情绪回升引发美元回落,从而导致最近两个交易日人民币再度走强。
  不过从长期来看,人民币兑美元汇率走强有着更为根本的塬因:从经济基本面看,我国国际收支的双顺差格局直接引发人民币汇率持续走升。
  「今年以来,尽管我国对外贸易顺差有所收窄,但外汇市场美元供大于求的格局始终未变,这是决定人民币持续升值的最根本塬因。」中国社科院世经政所研究员张斌指出。
  国际金融问题专家赵庆明认为,贸易差额是观察汇率变化的基本因素。今年以来,我国贸易顺差逐季扩大,全年贸易顺差将突破2000亿美元。贸易顺差的扩大,无疑会增加外汇市场的美元供应,推高人民币汇率。
  央行行长周小川在其新着《国际金融危机:观察、分析与应对》中谈到汇率问题时指出:汇率走势与经济基本面密切相关,总体来讲,国际收支平衡虽有明显改善,但资本项目和经常项目双顺差的基本面并没有发生逆转。
  连续「涨停」传递新信号
  不过值得关注的是,与以往相比,当前我国外汇市场出现了一些新变化。
  有数据显示,近期人民币兑美元即期市场曾出现十余个交易日盘中「涨停」现象,这一现象在2005年汇改以来的七年中从未发生过。
  「种种迹象表明,央行对外汇市场的管理强度有所弱化,正在减少对汇率的干预,汇率走势将更多地由市场供需来决定。」张斌认为,从最近央行口径外汇占款的大幅减少可以看出,央行的购汇力度有所减弱,市场正在汇率走向上扮演着更为重要的角色。
  对外经贸大学金融学院院长丁志杰认为,最近央行外汇占款增加很少,表明央行不再在外汇市场上增持外汇,反映央行对人民币升值的容忍度在上升,体现在市场上便是人民币升值要比以往快一些,盘中不断「涨停」。
  过去几年来,基于对人民币升值的担忧,我国央行会在外汇市场购入一定数量美元,以平抑每日的人民币走势,并形成央行外汇占款。最新数据显示,9月份央行外汇占款微增20亿元,可见购汇规模明显减少。
  汇率抵达「均衡点」考验企业应对力
  分析人士认为,当前监管层放由市场决定汇率走势的背后,凸显人民币汇率已日益逼近均衡水平的事实,未来汇率双向波动的幅度或有所加大。
  张斌认为,从央行容忍人民币升值可以看出,当前人民币汇率已接近升值目标。自2005年我国启动人民币汇率改革以来,七年来人民币兑美元汇率升值幅度已接近30%,下一步还将升值至何种程度,成为外汇市场一直无法忽略的话题。
  而经济学家吴敬琏日前在国际金融论坛2012年年会上指出,自去年四季度人民币兑美元汇率出现连续跌停之后,人民币汇率已接近均衡水平附近。
  专家指出,人民币抵达均衡水平意味着汇率走势将面临从「单向升值」走向「双向波动」,波动幅度的加大将考验企业的应对能力。
  丁志杰认为,外贸企业应尽早建立汇率风险防范机制,合理利用外汇远期合约等金融工具规避汇率风险,通过远期结汇锁定汇率,或在订单合同中加入价格调整条款等方法规避汇兑风险

Tuesday, November 13, 2012

Carry Trades Lose Most Since ’11 as HSBC Gauge Warns: Currencies

Carry Trades Lose Most Since ’11 as HSBC Gauge Warns: Currencies

The foreign-exchange market is signaling more pain ahead for currencies that benefit from a sustained global recovery, five years after the onset of the worst financial crisis since the Great Depression.
HSBC Holdings Plc’s Global Hazard Indicator, which combines implied volatility readings in options for the dollar, euro and yen, shows wider price swings in currencies over the next year than in the coming three months. If history is any guide, that means the dollar and yen will strengthen and higher-yielding, higher-risk currencies such as the Brazilian real and South African rand will depreciate.
Enlarge image 

Carry Trades Lose Most Since ’11 as HSBC Gauge Warns

Kiyoshi Ota/Bloomberg
The Bank of Japan added 11 trillion yen ($137 billion) to increase its fund to 66 trillion yen on Oct. 30.
The Bank of Japan added 11 trillion yen ($137 billion) to increase its fund to 66 trillion yen on Oct. 30. Photographer: Kiyoshi Ota/Bloomberg
Enlarge image 

Carry Trades Lose Most Since ’11 as HSBC Gauge Warns

Gianluca Colla/Bloomberg
HSBC expects the opposite, with the greenback’s status as a haven diminishing on the approaching fiscal cliff as investors reduce dollar holdings linked to the U.S.’s mounting economic burden.
HSBC expects the opposite, with the greenback’s status as a haven diminishing on the approaching fiscal cliff as investors reduce dollar holdings linked to the U.S.’s mounting economic burden. Photographer: Gianluca Colla/Bloomberg
 
 The euro will decline to $1.22 by the end of 2013, according to Citigroup. Photographer: Chris
 
Ratcliffe/Bloomberg
While reports in the U.S. show gains in jobs and consumer confidence, and data from China signal that services industries are rebounding from 19-month lows, foreign-exchange speculation is a losing bet. The UBS V24 Carry Index that tracks profits from the so-called carry trade, where money borrowed in low- yielding currencies is used to buy those from nations with higher rates, is at about the lowest level since early 2011.
“The market is not yet fully convinced that we are back to normal trading conditions, and sees the potential for renewed turbulence in 2013,” said Daragh Maher, a strategist at HSBC in London. “There are plenty of potential triggers for renewed volatility on the horizon,” he said, citing potential spending cuts and tax increases in the U.S., the sovereign-debt crisis in Europe and political change in China.

Easy Profits

Investing the proceeds of dollar-denominated loans should offer easy profits because the Fed has said it probably will keep the target rate for overnight lending between banks near zero through mid-2015. The carry trade can lose money when the currency used to fund the strategy strengthens, or the targeted currency weakens, or some combination.
Instead, selling borrowed dollars to buy reais in Brazil, where the target interest rate is 7.25 percent, has lost about 3.5 percent this year as the real tumbled 21 percent from its 2012 high in February, according to data compiled by Bloomberg. The same trade with the rand has lost about 3.9 percent.
“The ample provision of liquidity by central banks is at least helping to calm markets and make them more stable than they would otherwise be,” Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, said in a Nov. 7 telephone interview. “The tendency for major currencies to be driven by interest rates is somewhat diminished compared to where it has been in the past.”

Declining Speculation

Foreign-exchange speculation is declining as $607 billion in U.S. spending cuts and tax increases set to take effect Jan. 1, concern that European leaders aren’t moving fast enough to fix the region’s debt crisis, and slowing growth in emerging economies from China to Brazil weigh on sentiment.
The world economy will expand 3.3 percent this year, the least since the 2009 recession, the International Monetary Fund said on Oct. 9. The Washington-based IMF also said it sees an “alarmingly high” risk of a steeper slowdown.
Average daily volume in foreign exchange conducted through ICAP Plc’s EBS trading system fell 46 percent in October from a year earlier, the company said last week.
For all the efforts to restore confidence in the financial system, the world’s foreign-exchange market, where $4 trillion trades each day, is saying that the global economy can’t stand on its own without the unprecedented stimulus by the Federal Reserve, European Central Bank and Bank of Japan. (8301)

Dollar Favored

The euro slid as much as 0.3 percent to $1.2673 today, the weakest since Sept. 7. The yen gained against its major counterparts, climbing 0.5 percent to 100.57 per euro and 0.3 percent to 79.29 versus the dollar as of 3:22 p.m. in Tokyo.
Rising volatility may favor the dollar as investors seek the haven of the world’s reserve currency. The euro will depreciate to $1.25 next year, and the dollar will strengthen to 83 yen from 79.50, according to median estimates of more than 35 strategists surveyed by Bloomberg.
HSBC’s three-month hazard index was most recently at 10.3 percent, below the one-year level of 12.1 percent. The three- month gauge topped the one-year measure by the widest margin in October 2008, a month after Lehman Brothers Holdings Inc. filed for bankruptcy and pushed the financial system into crisis.
The amount by which the one-year index exceeded the three- month measure peaked at 2.9 percent in March 2011, just before the global economy faltered and the MSCI All-Country World Index (MXWD) slid 18.3 percent over the next six months.
The discrepancy may be more a reflection of investors paring bets, rather than speculation for a weakening economy, according to Steven Englander of Citigroup Inc.

‘Very Soft’

Investors who wagered on increased realized volatility may be getting discouraged by a lack of price fluctuation, causing them to unwind positions and artificially drive down near-term contracts, he said.
“With realized volatility so low, everybody who bought volatility sees their positions losing value, which means they sell it back into the market,” Englander, head of Group of 10 currency strategy at Citigroup in New York, said in a Nov. 7 telephone interview. “Until that process is finished, you have short-term volatilities looking very soft.”
Realized volatility on one-month euro-dollar options reached its lowest level since 2007 on Oct. 31, dropping to 6.76 percent. Historical volatility for three-month euro-dollar contracts fell to 7.42 on Nov. 6, also the weakest since 2007.
The euro will decline to $1.22 by the end of 2013, according to Citigroup. Wells Fargo, the most-accurate currency forecaster as of Sept. 20, also sees the euro slipping to $1.22 against the dollar over that period.

HSBC Euro

HSBC expects the opposite, with the greenback’s status as a haven diminishing on the approaching fiscal cliff as investors reduce dollar holdings linked to the U.S.’s mounting economic burden, Maher said. The euro will rise to $1.40 by the end of 2013, HSBC projects.

Even with the extra stimulus by central banks, the IMF said it sees a one-in-six chance of growth slipping below 2 percent.

The Bank of Japan added 11 trillion yen ($137 billion) to increase its asset-purchase fund, it’s main policy tool, to 66 trillion yen on Oct. 30. The central bank also said it would offer unlimited loans to banks.
Fed Chairman Ben S. Bernanke said Sept. 13 that the central bank would purchase $40 billion of mortgage bonds a month until an economic recovery is well-established, on top of two earlier rounds of bond purchases totaling $2.3 trillion from December 2008 and June 2011.

ECB President Mario Draghi said on Sept. 6 that policy makers agreed to an unlimited bond-purchase program to regain control of interest rates in the euro area and fight speculation of a currency breakup.

‘High Volatility’

“If you believe that an activist central bank will keep fighting, that suggests growth, which also means high liquidity and low volatility,” Shahab Jalinoos, a Stamford, Connecticut- based senior currency strategist at UBS AG, said in a Nov. 8 telephone interview. “If you think that you don’t have an activist central bank, or have one whose hands are tied by something, then you probably will see high volatility.”
Confidence among U.S. consumers climbed to a five-year high in November, while payrolls expanded by 171,000 workers in October, exceeding the highest forecast in a Bloomberg survey. China’s services industries rebounded in October from the slowest expansion in at least 19 months, adding to manufacturing gains.
Meanwhile, growth in Brazil, the largest emerging economy after China, will average 1.5 percent this year, less than the U.S. or Japan, according to 30 economists’ estimates compiled by Bloomberg.
The European Commission said the euro-area economy will stagnate next year as the sovereign-debt crisis engulfing southern Europe begins to slow export-driven Germany.
“This is going to be a very slow recovery process,” Wells Fargo’s Bennenbroek said. “Neither the official institutions, nor the private investors, are looking for a strong rebound from the major economies in any near- to medium-term time frame.”
To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

Monday, November 12, 2012

人民币涨疯了!连续10个涨停创汇改新高(图文

人民币涨疯了!连续10个涨停创汇改新高(图文)
http://www.creaders.net 2012-11-12 13:51:07 万维读者网
  万维读者网记者晓语综合报道:人民币汇率走势近期异常强劲。
据中国外汇交易中心数据,10月12日,人民币对美元中间价大涨92个基点至6.2920,创下近半年来的新高。而即期外汇市场上,人民币对美元汇率更是达到6.2291,开盘即涨停,也创下了1994年汇改以来的新高。
  连续第十个“涨停”
  连续第十个“涨停”这是人民币兑美元即期交易价格11月12日创下的战绩。
  据21世纪经济报道,当日,人民币中间价较前一交易日下跌92个基点至6.2920元,为近半年以来的最高点。开盘不久,人民币即期汇价就触及1%的交易区间上限6.2291,除午后曾短暂打开“涨停板”外,基本全天都封在这一价位附近。
  “从去年9月以来,银行间外汇市场盘中交易与过去相比明显大起大落,阶段性触及跌停和阶段性涨停交替,一方面跟央行逐渐放手有关,另一方面当时市场不成熟,还带有很重的结售汇市场的痕迹。”对外经贸大学金融学院院长丁志杰认为,而当前连续触及涨停的主要因素是交易性因素,是上阶段企业银行推迟结汇增持外汇头寸的结果。

  亦有市场人士指出,人民币这一波上涨亦与中间价的高开密不可分。“中间价开得高,表明人民币升值的信号意义很明显,企业和银行都怕亏损,争着抛美元。”一外汇交易员称。
  上周五的神秘美元买家
  央行干预汇率主要是控制中间价、汇率波幅、买进和卖出美元,而从目前汇率水平来看,并没有超出央行容忍范围,所以干预汇市可能性很小。
  与上一个交易日尾盘曾突现美元买盘令人民币即期汇价脱离“涨停”不同的是,12日,人民币兑美元日内多数时间在突破6.23关口的涨停位置,最终亦在这一价位附近收盘。
  有市场人士认为上一个交易日美元买盘突然涌现是央行入市干预。但一位接近外汇局的人士称,央行有干预汇率能力,主要是控制中间价、汇率波幅、买进和卖出美元,而从目前的人民币汇率水平来看,并没有超出央行的容忍范围,所以干预汇市的可能性很小,“上周五出现大量买家,可能是市场行为。”
  10月长假过后,人民币兑美元中间价便连刷新高,且即期汇价屡屡触及交易区间上限。人民币兑美元即期汇率自7月下旬的年内低点已升值约2.6%,9月以来已升值约2%。
  10月30日以来,人民币兑美元即期汇价更是连续十个交易日在盘中触及“涨停”。11月12日,开盘不久后继续封住“涨停”,且首次突破6.23的整数关口。
  “10月11日开始人民币中间价突然大涨,市场感到意外和恐慌,这种恐慌情绪导致银行被迫抛售美元,但只有抛盘没有买盘,所以很容易就触及涨停。”上述外汇交易员称,中间价释放出的信号比较强烈,一是与历史的比较,10月11日后中间价涨幅较大,人民币升值的信号意义很明显;二是国际上的比较,主要看美元走势,一般美元上涨,包括人民币在内的非美货币会跌,但前一交易日美元大涨,12日人民币中间价也大涨。
  此背景下,企业前期因为对人民币可能会继续贬值或至少不会升值的预期比较一致,囤积了大量美元,现在只能被迫结汇,相当于割肉止损,而以往银行从企业买入美元后一般会持有一段时间博价差收益,现在也是一拿到手就抛售,人民币触及“涨停”随之而来。
  但这会导致市场流动性匮乏,影响到企业的正常结汇,“只有央行入场买美元才能打开涨停,实际上这种情况已经出现过几次。”该交易员表示。
  多重因素支撑人民币走强
  国际金融问题专家赵庆明对中国经济时报记者表示,近期人民币持续走强有多方面的原因:首先是经济基本面走势不错;QE3和美国大选,热钱冲击亚洲和香港,预期会进入内地;之前囤积美元的企业现在大量抛售美元,导致人民币升值。
  “不只是人民币升值,港币和日元等亚洲货币均在升值。”中信银行国际金融市场专家刘维明对表示,人民币走强跟国内经济数据好转、外围对中国经济的看法发生改变,导致资金回流和市场结汇大幅增加。
  此外,据他分析,人民币升值跟QE3的关系比较大,美国QE3的影响不会立竿见影,而且它是持续每月投放400亿美元,这些钱肯定会流向亚洲。“前期持有美元的企业和个人现在抛出美元,大量结汇导致市场大幅波动,再加上资金回流和新的资金流入,人民币面临升值压力。”
  确实,近期外贸数据出现了好转。据海关总署统计,10月份中国出口增长11.6%,贸易顺差扩大至319.9亿美元,创4年来的新高。而9月份贸易顺差也达到276.7亿美元,超出市场预期。
  对外经济贸易大学金融学院院长丁志杰则表示,近期人民币汇率大涨大跌交替,一方面跟央行逐渐放手有关,另一方面跟市场不成熟有关,还带有很重的结售汇市场的痕迹。“我认为,当前连续触及涨停的主要因素是交易性因素,是上个阶段企业银行推迟结汇增持外汇头寸的结果。”
  未来双向波动将加大
  “贸易顺差扩大决定了人民币汇率未来大方向是维持升值趋势。”赵庆明认为,贸易顺差是决定汇率的最重要因素,中国逐季扩大的贸易顺差会强化人民币升值预期。据他预计,今年全年的贸易顺差肯定会超过2000亿美元。另外,港币升值会强化热钱进入中国的预期,这也会导致人民币维持强势。
  但他表示,人民币升值的幅度还要看美元的走势,“如果美元走强,人民币可能会面临贬值,但美国持续宽松政策的话,人民币可能就会升值。随着预期的分化,未来人民币汇率的波动会更加显着。”
  “未来一两个季度,人民币还会走强,但不会再像以前持续升值好几年,未来会有更多不确定性。”刘维明也表示,近期数据的改善,贸易顺差加大、结汇增加和FDI逐渐恢复,直接效应就是改变市场对人民币汇率的预期。
  他同时认为,由于欧美债务危机并未解除,未来经济增长的不稳定性,可能会导致风险反转;而风险反转对中国的外贸和资本流动都会产生显着影响,未来人民币汇率的双向波动性会加大。

U.S. Oil Output to Overtake Saudi Arabia’s by 2020

U.S. Oil Output to Overtake Saudi Arabia’s by 2020

The U.S. met 83 percent of its energy needs in the first six months of this year, on track to be the highest annual level since 1991, according to Energy Department data.
U.S. oil output is poised to surpass Saudi Arabia’s in the next decade, making the world’s biggest fuel consumer almost self-reliant and putting it on track to become a net exporter, the International Energy Agency said.
Chart: Saudi Arabia Versus U.S. Crude Production
Growing supplies of crude extracted through new technology including hydraulic fracturing of underground rock formations will transform the U.S. into the largest producer for about five years starting about 2020, the Paris-based adviser to 28 nations said today in its annual World Energy Outlook. The U.S. met 83 percent of its energy needs in the first six months of this year, according to the Energy Department in Washington.
“The IEA outlook feeds into the idea of a shift in the center of influence in the world oil market,” said Gareth Lewis-Davies, an analyst at BNP Paribas SA in London. “Given Saudi Arabia is willing to shift production up and down it will retain a large degree of influence, and remain important as a price-influencer.”
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The U.S., whose crude imports have fallen 11 percent this year, is on track to produce the most oil since 1991, according to Energy Department data. In a year when Iran has threatened to halt oil shipments through the Persian Gulf, the growing output, coupled with a gas-production boom, may help insulate the nation from supply disruptions. President George W. Bush said in his 2006 State of the Union address that the U.S. needed to break its “addiction” to foreign oil.

Oil Prices

West Texas Intermediate crude, the benchmark U.S. grade, has dropped about 13 percent this year to $85.88 a barrel on the New York Mercantile Exchange, as stockpiles swelled to a 22-year high. Prices have more than quadrupled in the past decade, reaching as high as $147.27 a barrel in July 2008.
Global demand for oil is projected to rise to 99.7 million barrels a day in 2035, up from 87.4 million last year, according to IEA, which advises industrialized nations including the U.S., Germany and Japan. Today’s report projects trends to 2035.
Saudi Arabia pumped 9.8 million barrels of oil a day last month, according to data compiled by Bloomberg. U.S. output was 6.7 million barrels a day in the week ended Nov. 2, according to the Energy Department.
The U.S. will pump 11.1 million barrels of oil a day in 2020 and 10.9 million in 2025, the IEA said. Those figures are 500,000 barrels a day and 100,000 barrels a day higher, respectively, than its forecasts for Saudi Arabia for those years. The desert kingdom becomes the biggest producer again by 2030, pumping 11.4 million barrels a day versus 10.2 million in the U.S.

Overtaking Saudi Arabia

“Around 2017, the U.S. will be the largest oil producer of the world, overtaking Saudi Arabia,” IEA Chief Economist Fatih Birol said at a press conference in London today. “This is of course a major development and definitely will have significant implications.”
An oil ministry official based in the Saudi capital Riyadh wasn’t immediately available to comment on the report when contacted by Bloomberg by phone today.
The IEA report described the U.S.’s advancement toward energy self-sufficiency as “a dramatic reversal of the trend seen in most other energy-importing countries.” The country is developing so-called tight oil reserves including the Bakken shale formation, which are extracted by hydraulic fracturing or horizontal drilling.

Iran Ban

The European Union banned oil imports from Iran in July over the nation’s nuclear program, reducing shipments from a country that was until then the second-biggest producer in OPEC.
The IEA’s members will probably pay about $125 a barrel for imported oil by 2035, compared with Brent crude prices near $109 today on London’s ICE Futures Europe exchange. The North Sea grade peaked at a record $147.50 a barrel in July 2008 before tumbling to about $46 that December, and has gained in each of the three years since then.
Efforts by global policy makers to promote energy efficiency are “disappointingly slow” and falling short of their economic potential, the agency said. Increased energy- saving measures could cut worldwide oil demand by almost 13 million barrels a day by 2035, or the current combined output of Russia and Norway. Put another way, were efficiency measures suggested by the IEA enacted in full, the increase in world energy demand over the period would be cut in half.

Natural Gas

Natural gas consumption will rise in the forecast period, driven by China, India and the Middle East.
“In the United States, low prices and abundant supply see gas overtake oil around 2030 to become the largest fuel in the energy mix,” according to the report, written by a team of researchers led by Birol.
Iraq will be the biggest contributor to new oil supplies, raising production to 6 million barrels a day by 2020. By 2035, the nation’s output rate will rise to more than 8 million, overtaking Russia to become the world’s second-largest exporter, the IEA said. The country pumped 3.4 million barrels a day last month, making it the second-largest producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia, according to Bloomberg estimates.
The forecasts for Iraq, a special focus of this year’s IEA outlook, were previously published on Oct. 9.
In emerging nations, government subsidies will continue to spur the use of fossil fuels, even as lower-carbon energy sources become more popular. State subsidies cost $523 billion last year, up almost 30 percent from 2010. Subsidy programs, which remain most prevalent in the Middle East and North Africa, have become more expensive because of higher oil prices, the agency said.
To contact the reporter on this story: Lananh Nguyen in London at lnguyen35@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

Wednesday, October 31, 2012

绝不是危言耸听 中国人的苦日子快来了

绝不是危言耸听 中国人的苦日子快来了
http://www.creaders.net  2012-10-31 08:49:42  中国经济时报
  中国人的苦日子快来了
  美国小复兴与中国探大底

  10月15日,三季度GDP增速公布,为7.4%,创下14个月来的新低。对此,不少分析人士却纷纷表示乐观。
  这些评论诸如“经济下行见底或将触底反弹”、“中国经济已触底,不存在硬着陆可能”、“经济出现明显触底信号”等等。若从短期市场信号来看,或许如此,比如人民币再升值、股市反弹、楼市地王再现、钢铁铁矿石价格反弹等等。
  然而,从全球产业结构变迁和全球货币金融竞争力重构的战略高度来看,中国经济的探底和转型才刚刚开始。
  之所以做出这个判断,首先要对中国经济过去20-30年的高速增长的动因做出清晰解释主要推动力是两次大浪潮:
  第一次浪潮是全球制造业向中国集中的“世界工厂”机遇。在1979年中国实行计划生育以前,人口高增长,从1949年的5.4亿增加到了1978年的9.6亿人,使中国储备了巨量健康的劳动力。1991年前苏联解体,冷战结束;1992年小平南巡,中国大力对外开放。恰逢全球信息化革命方兴未艾,随着ERP等远程信息管理手段的推广,跨国公司跨地域管理能力大大增强,同时石油等价格非常廉价,1994年仅每桶14美元。这使得欧美将制造业向外转移成为可能,因为中国劳动力充沛而廉价,珠三角农民工月薪曾长达20年被压在1000元以下,而且不必提供养老医疗等社会保障,资本基本无需投入改善劳动环境。这给资方提供了巨大的利润空间。
  1997-1998的亚洲金融危机进一步强化了中国的世界工厂地位,东南亚的国家饱受重创,中国因为人民币固定汇率,资本项目未开放而受冲击较小,其稳定的社会政治环境令中国制造业产业集群更具竞争优势。
  第二次浪潮是由人民币升值所引发的资产泡沫狂潮。2005年中国发生了两件大事:一是人民币开始单边升值,二是股权分置改革。前者意味着投机人民币升值的无风险套利机会,由于中国抓住世界工厂机遇,生产力不断提高,人民币内在价值增强,而长期固定汇率下,人民币的确被低估,这对国际热钱产生了巨大诱惑;后者意味着中国股市基本与国际市场接轨,成为国际热钱可投资的市场。于是乎国际热钱和海外华人资本八仙过海各显神通地涌入中国,先是在2007年10月将A股上证指数推高到6124点的巅峰;再把楼市推到了2010年底的天高。
  然而,时至今日,当年推动中国经济高速增长的因素,均已在走向衰退或反面。
  从世界工厂效应而言:1,中国人口红利盛极而衰,1979年的独生子女已经33岁了,即按大学毕业21岁算,独生子女已经进入工作10年了。与以前的劳动力是天壤之别;2,跨国公司早已渡过投入期,每年开始向外转移大量的利润;3,人民币大幅升值了32%,中国制造的货币成本大幅攀升;4,资源由原来国内的廉价提供到不得不使用国际高价资源。石油最为典型,1996年中国变成净进口国,现在56%的石油靠高价进口,100美元的油价已经很平常;5,美国国策改变,开始鼓励跨国公司回流美国或美洲,力推再工业化战略。即使在亚洲也努力寻找对中国的进口替代。6,全球贸易保护升级,东亚政治局势不再安然无恙。
  资产泡沫的负面效应如今也全盘凸显。在股市和楼市的大博弈中,由于中国企业家和投资者,他们以前并没有与国际投资者同台竞争的经验和能力,在股市10万亿计的财富再分配中,在楼市100万元计的财富再分配中,均成为输家,不仅将过去20-30年的财富积累基本亏在其中,更将未来20-30年的预期劳动收入深深套在楼市泡沫中。同时,楼市的大幅攀升也推高了制造业的成本,让中国企业更难以负荷。
  与此同时,政府在长期的繁荣周期中,逐渐扩大了财政胃口,以制定规则和手握分配权的优势,财政收入的增幅连续多年2倍于GDP的增长,加上国有企业在金融和资源的垄断,都成为中国制造业不可承受之重。
  一言以蔽之,中国过去20年的高速增长的动力机制均已盛极而衰,正面效应正陆续转为负面效应,即在旧动力机制快速衰退,在新动力机制未能再造之前,中国经济只能是继续探底,近期也只是很短反弹后,将加速探底。
  决定中国经济探底有多深的外部重要因素是美国竞争力再造的速度成果。中国上一轮的大机遇,与911事件后,美国共和党小布什政府,在石油军火寡头的诱导下,将战略矛头指向中东石油,从而陷入伊拉克和阿富汗泥沼有关,这让美国债台高筑,同时在国内放任虚拟金融创新,结果诱发了2008年的美国金融危机。那时在中美两大国的竞争天平上,第一次倾斜向了中国。
  但是,中国并没有抓住这次机遇,进行高新科技创新的产业升级,以应对未来劳动力不足的问题;也未能大力推进环保循环经济,以降低对海外资源依赖;更未能乘国际2008年国际商品资产价格大跌而购买海外优质资产,结果以中央四万亿带动全国18万亿元大兴土木,推起了一个把所有刚需者,也把中国压的喘不过气来的巨大楼市泡沫。
  与此同时,美国却在民主党奥巴马政府的领导下,努力地进行竞争力再造:先是稳定了美国金融系统;其后帮助大企业撇掉坏账;通过QE1-3,同时打击欧元,推动热钱回流压低资金价格;通过油页岩开发技术和支持新能源压低能源价格;通过加大针对中国的贸易保护,为美国再工业化创造条件。即在中国竞争力持续恶化时,美国竞争力在上升。当然这并不意味着美国没有问题了,西方文明的根本性难题金融寡头利益扩张与选民福利扩张的冲突仍未能解决,它的巨大的虚拟金融泡沫仍将一直是“达摩克利特”之剑。因此,其即使是复兴也是一个阶段性小复兴。
  很显然,未来几年中国经济的困难要比美国更大的多,同时东亚地缘政治危机,也会让热钱如惊弓之鸟大规模撤离东亚,从而使中国的问题,如同潮水退却后那样,在海滩上显得更加突兀。在未来几年,人民币兑美元将迎来一个中长期贬值周期。
  中国还有应对方法吗?有的,那就要竞争力再造。这至少包括如下几个方面:1,政治体制改革,自上而下的机构精简和自下而上的扩大民主,以大大降低行政成本;2,合理分配土地和资源财富,大部分转入社会保障体系中;3,凡是市场能做好的都交给市场,激发民间创造活力,特别是金融向民间开放尤其重要;4,A股彻底扭转“利益输送市”,变成真正优化配置资源的财富成长市,激励高新科技、新能源和环保循环经济。此外,遏制汽车等高耗能工业,大大降低对外部资源的依赖等等。
  坦率地说,从现实的困境到实现竞争力再造,将是极为艰巨的挑战,这首先需要形成一个开明的领导权威,以推动变革。
  换言之,即便一切配合到位,变革能够有条不紊地进行,中国也至少需要5-6年才能初步竞争力再造。即至少未来5年中,中国人要做好过苦日子的准备了。
  找准中国经济在亚太的位置
  2012年CCTV第十三届中国年度经济人物评选将于12月12日揭晓。作为中国经济界“一榜知天下”的年度盛典,本届年度经济人物评选的亮点是,首次推出全新子品牌亚太年度商业领袖。
  正是藉由新推出的“亚太年度商业领袖”,中国年度经济人物这个品牌正式走向国际。
  自2000年起至今,CCTV中国年度经济人物评选已走过了12年。应该说,12年里评选的年度经济人物,虽然存在各种争议,但大体实现了“一榜知天下”的初衷。不仅该评选成为中国经济界的年度“奥斯卡”,而且通过上榜的年度经济人物,也能相对清晰地感知、触摸中国经济的波诡云涌,从而为人们观察中国经济提供一个独特的视角。
  这十几年里,中国年度经济人物评选逐年获得越来越大的品牌效应,中国经济也在世界经济中获得越来越重要的位置。中国崛起乃至中国威胁,成为世界经济和政治角力的热门话题。在当前世界经济处于衰退不振,美国、欧洲、日本这几个老牌经济引擎增长乏力的境况下,中国经济增长的动能更加引起世界的关注。
  中国经济波动之于世界经济的影响,已不仅仅是纯粹的理论认知,而是实实在在的现实因素。
  借助中国经济在世界经济中发言权的扩大,将一个国内的评选推广到世界,是一个品牌的合理延伸。但如果跳出这种简单的品牌策略考虑,“亚太年度商业领袖”的推出,实际为中国经济和中国人提供了一个反观自我的机缘。尤其是中国经济经过30多年的高速增长后,正面临减速的微妙关口。如何准确认识自我,成为不容忽视的课题。
  我们已经习惯于中国经济的高速增长,习惯于以高速增长去追赶世界经济的领头羊。许多人能轻易说出欧美那些着名大公司,但极少人能了解亚太地区有哪些着名企业。除了日本,我们是否熟悉印度?是否熟悉泰国和越南?如果不是所谓的“龙象之争”,我们会否关注印度经济同样在强劲增长?而相比于这些大国,泰国、越南、印尼的经济,其实也取得不俗的成绩。
  目前,整个亚太经济已占到世界经济总量的55%,占贸易总量的44%。在世界经济危机的影响下,亚太经济尽管增长减缓,但仍是世界上经济增长最快的地区。为何会取得如此快速的经济增长?中国在其中起到什么作用?这些看似简单的疑问,其实并不是简单的世界第二大经济体所能解答。
  如果不能了解自己在亚太地区处于何种位置和地位,也就很难洞悉自己之于世界经济的角色。“亚太年度商业领袖”评选的真正价值,也许不完全在于让中国年度经济人物评选的品牌走向世界,而是让习惯于高增长的中国经济,在自身经济减速的同时,能够冷静片刻、找回谦逊,不仅理智地审视下自己所处的亚太地区,也理智地审视下自己。

Monday, October 22, 2012

Worst Carry Trades Show Central Banks at Stimulus Limi

Worst Carry Trades Show Central Banks at Stimulus Limi


The $4 trillion-a-day foreign- exchange market is losing confidence in central banks’ abilities to boost a struggling world economy.
Rather than sparking bets on growth, the JPMorgan Chase & Co. G7 Volatility Index, which more than doubled in 2007 to 2008 before policy makers employed extraordinary measures to address faltering global expansion, has dropped to a five-year low. While small foreign-exchange swings historically favor the strategy of borrowing in low-yielding currencies to buy those with higher returns, a UBS AG index that tracks profits from the so-called carry trade has fallen to the lowest level since 2011.

Worst Carry Trades Show Central Banks Reaching Stimulus Limits

Andrew Harrer/Bloomberg
The gauge has fallen 4.8 percent from a level of 450.15 on Aug. 9, before the Federal Reserve said it would buy $40 billion of mortgage debt a month until it sees improvement in the economy, the European Central Bank said it would buy bonds of indebted members that ask for aid and the Bank of Japan boosted its asset-purchase fund to 55 trillion yen ($693.4 billion).
The gauge has fallen 4.8 percent from a level of 450.15 on Aug. 9, before the Federal Reserve said it would buy $40 billion of mortgage debt a month until it sees improvement in the economy, the European Central Bank said it would buy bonds of indebted members that ask for aid and the Bank of Japan boosted its asset-purchase fund to 55 trillion yen ($693.4 billion). Photographer: Andrew Harrer/Bloomberg
Oct. 22 (Bloomberg) -- Elsa Lignos, a senior currency strategist at Royal Bank of Canada, talks about her foreign-exchange strategy. She speaks from London with Francine Lacqua on Bloomberg Television's "The Pulse." (Source: Bloomberg)
“At this stage it may feel frustrating, but waiting is not a bad strategy,” Mauricio Bouabci, a London-based currency fund manager at Pareto Investment Management Ltd., which oversees $45 billion, said in an Oct. 17 telephone interview. It would take increased volatility to tempt him back into the market, he said.
Foreign-exchange speculation is declining as mandated spending cuts and tax increases in the U.S. next year, concern that European government leaders aren’t moving fast enough to fix the region’s debt crisis, and slowing growth in emerging economies from China to Brazil weigh on sentiment. The world economy will expand 3.3 percent this year, the least since the 2009 recession, the International Monetary Fund said on Oct. 9.

Dwindling Volume

Average daily volume in foreign exchange fell 39 percent in September from a year earlier, according to data from ICAP Plc’s EBS trading platform. That’s also harming currency managers’ efforts to boost returns.
The UBS V24 Carry Index (MXWD) surged 4.55 percent in the first quarter, the most since 2009, amid optimism the economic recovery was gathering pace. It ended last week at 428.71, down 7 percent from this year’s high of 461.01 set on Feb. 29.
The gauge has fallen 4.8 percent from a level of 450.15 on Aug. 9, before the Federal Reserve said it would buy $40 billion of mortgage debt a month until it sees improvement in the U.S. economy, the European Central Bank said it would buy bonds of indebted members that ask for aid and the Bank of Japan boosted its asset-purchase fund to 55 trillion yen ($690 billion). The JPMorgan volatility index fell to 7.47 percent on Oct. 15, the least since October 2007.
“Low volatility is something that participants haven’t felt comfortable with for a while,” Adrian McGowan, head of foreign-exchange forwards, options and trading in Europe at Barclays Plc in London, said in an Oct. 12 interview. Investors haven’t been making “large” bets “because there has been so much uncertainty,” he said.

Real Weakness

The dollar fell 0.6 percent against the euro last week to $1.3024, and rose 1.1 percent to 79.32 yen as speculation the Bank of Japan will boost monetary stimulus sapped demand for that nation’s assets. The U.S. currency was little changed today at $1.3028 per euro and gained 0.5 percent to 79.68 yen as of 9.16 a.m. in London.
Investing the proceeds of dollar-denominated loans should offer easy profits because the Fed has said it’s likely to keep the target rate for overnight lending between banks near zero through mid-2015. The carry trade can lose money when the currency used to fund the strategy strengthens, or the targeted currency weakens, or some combination.
Selling borrowed dollars to buy reais in Brazil, where the target interest rate is 7.25 percent, has lost about 3.4 percent this year as the real tumbled, according to data compiled by Bloomberg. The IMF says Brazil will grow 1.5 percent this year, instead of the 2.5 percent predicted in July.

Implied Volatility

Borrowing euros and using the proceeds to buy the New Zealand dollar, where the official cash rate is 2.50 percent, produced an 8.2 percent loss since Sept. 6, when the ECB’s pledge to offer Spain assistance helped trigger a slump in three-month implied volatility for the pair.
“Carry had such beautiful, fantastic returns -- so alluring, so attractive that I think people got hooked on it like a drug,” David Bloom, global head of currency strategy at HSBC Holdings Plc in London, said in a telephone interview on Oct. 19. “In today’s zero interest-rate policy world, peppered with unconventional policies, it is much more difficult and confusing,” he wrote in an Oct. 12 research report.
Signs of strength in the global economy have emerged, including gains in jobs, consumer confidence and retail sales in the U.S., the world’s largest economy.
The Citigroup Economic Surprise Index for the Group-of-10 countries, which measures when data is beating or trailing the forecasts of analysts, climbed to a seven-month high of 18.4 last week, from this year’s low of minus 56.2 on June 26. The MSCI All-Countries World Index of shares has jumped 15 percent from this year’s low in June.

Smaller Margin

“There are still carry opportunities, but they are not as big as they used to be so your margin of error to get in is smaller,” Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities Inc. in Stamford Connecticut, said in an Oct. 17 telephone interview.
The Bloomberg-JPMorgan Asia Dollar Index has climbed 2 percent this year, while the Mexican peso strengthened more than 8 percent against its U.S. counterpart.
Doubts about the strength of the global economy flared on Oct. 19. U.S. stocks slid the most since June as companies from General Electric Co. to McDonald’s Corp. and Microsoft Corp. posted earnings below analyst estimates and euro-area leaders failed to discuss aid for Spain at a summit.

China Investment

Earlier in the day, China’s Ministry of Commerce said foreign direct investment in the world’s second-biggest economy, fell 6.8 percent in September from a year earlier to $8.43 billion. China’s economy expanded 7.4 percent in the third quarter, the weakest pace in more than three years.
In reducing its forecasts for 2012 and 2013, the Washington-based IMF said it now sees “alarmingly high” risks of a steeper global economic slowdown, with a one-in-six chance of growth slipping below 2 percent.
At the same time, the U.S. faces $600 billion in automatic spending cuts and tax increases starting Jan. 1 if Congress can’t agree on ways to reduce the deficit. Economic output would shrink by 0.5 percent next year, and joblessness climb to about 9 percent if the so-called fiscal cliff isn’t averted, according to the Congressional Budget Office.
Policy makers from Australia to Sweden, who had kept interest rates high as their economies grew, are lowering borrowing costs, reducing the allure of carry trades.

Rate Cuts

Australia’s central bank cut rates five times in the past 12 months. The Aussie’s appeal to global investors has flagged, falling 3 percent to $1.0311 since mid-September, as the spread between 10-year Australian and U.S. Treasury yields narrowed to 1.42 percentage points on Oct. 19 from 2.32 percentage points a year earlier.
Rates may be cut further, according to the minutes of a Reserve Bank of Australia meeting on Oct. 2. Sweden’s Riksbank lowered borrowing costs in September, predicting growth will slow to 1.5 percent this year from 3.9 percent in 2011.
Hedge funds focused on foreign-exchange trading have lost 0.6 percent in the past three months, according to industry researcher HedgeFund.net. That compares to an average gain of 1.9 percent since June for the industry.
Trading ranges for currencies have narrowed across major pairs. The average daily percentage change of the Australian dollar versus its U.S. counterpart has declined to 0.47 percent in 2012 from 0.68 percent last year, while for the real it has shrunk to 0.51 percent from 0.72 percent.
“We are likely to stay in an environment of low rates for longer,” Morgan Stanley currency strategists led by Hans Redeker in London wrote in an Oct. 18 research report. In such an environment, potential returns from carry trades are “likely to be limited,” they wrote.
To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net

Friday, October 19, 2012

Risk Parity: The truly balanced portfolio

Risk Parity: The truly balanced portfolio

01 Jun 2012
Martin Steward spoke with Ray Dalio of Bridgewater Associates, the pioneer of alpha/beta separation and risk parity, about strategic diversified beta portfolios
Investors who want at least part of their asset management program to be an efficient, strategic exposure to global markets that requires minimal forecasting or tactical asset allocation ability face a knotty problem.
Finding two types of risk that respond differently to the two fundamental economic environments – growth and recession – is the easy part. Fixed income assets like bonds will do well when things slow down; growth assets like equities will do well when they heat up again. Achieving a balanced portfolio should be as simple as holding both and rebalancing regularly.

But achieving this balance isn’t easy, of course, because bonds and equities exhibit different risk/return characteristics. Split your portfolio 50/50 and, while 50% of your asset allocation is in equities, those equities account for about 70% of your allocation to risk, because they are twice as volatile as bonds. 50/50 is really 70/30. Try to achieve a 50/50 risk allocation, and you end up with something more like a 35/65 portfolio. Which is great – except your gains will be paltry because bonds earn about half the long-term return of equities.

For some time two basic solutions to this problem have been proposed. The most widely implemented has simply extended the modern portfolio theory principle that underpins the initial equity/bond split (combining two assets with low correlation with one another can reduce risk more than it reduces return) into the equity side of the portfolio. By combining ‘diversified growth’ asset classes, the theory suggests that an investor can maintain the return of a growth portfolio while bringing its risk closer to that of a bond portfolio. Reality, particularly the kind of reality we got in 2008, suggests that much of that diversification can evaporate from time to time; and during these times, not only is the risk not lower, it is usually higher because volatility rises as downside directional correlation increases.

The second basic solution has come to be known as a ‘risk parity’ portfolio. As that name suggests, this also tries to bring the relative volatility of fixed income and growth assets into parity, but the key emphasis is less on diversifying the growth part than on leveraging the fixed income part (usually via bond futures). The last few years has seen a flurry of interest in risk parity, particularly among US institutional investors, but it was pioneered 16 years ago by Ray Dalio, president, CIO and founder of $120bn asset management giant Bridgewater Associates – and recent honouree in Time magazine’s list of the top 100 most influential people in the world alongside the likes of Warren Buffet, Hillary Clinton and the Duchess of Cambridge. Founded in 1975 as a provider of economic research and advice, a fixed income and currency hedging manager for corporates and, later, institutional investors, by 1991 it had launched a hedge fund, Pure Alpha, which at $71bn is now one of the world’s largest.

What is a hedge fund manager doing experimenting with dull stuff like strategic beta solutions? Well, Dalio pioneered risk parity in part because he had also pioneered ideas like alpha/beta separation, based on his conviction (now much more widely-accepted) that it is impossible to manage either one efficiently as long as they are being mixed together. Once you have decided that you should manage the two separately, it makes sense to make them both as efficient as possible on their own terms. Moreover, Dalio had a personal reason to develop an efficient strategic beta solution. “In the mid-90s I started to accumulate some money that I wanted to use to establish a family trust, and for that trust I wanted the right asset allocation mix,” he recalls. “That’s when I created the All Weather portfolio, which now accounts for virtually all of that family trust money.”

When Dalio set out the All Weather process in an article a number of Bridgewater’s clients decided they would like to allocate to the strategy, too. “They generally set up pilot programmes that represented 1–5% of their overall portfolios, which then increased through time as we monitored how the All Weather concept worked,” he says. “Typically it has settled at 10–20%; in some cases it has evolved to 100%, where clients have gone on to implement it themselves.”

So this is the essential idea behind risk parity: as Dalio puts it, once you have taken the steps to make all asset classes exhibit approximately the same risk, “you can begin to diversify for all economic environments without giving up expected returns”. Or, to put it another way, your search for diversification need no longer be constrained by fear of its impact on your long-term returns.

The first thing to observe is that All Weather’s approach to diversification differs from classic modern portfolio theory in that it is fundamental and qualitative rather than quantitative. All asset classes are priced according to what an investor would pay for the future cash flows upon which it is a claim, according to Dalio. “That’s how a bond, a stock or a piece of real estate compete,” he says, “so the most important driver of return is when the expectation of that income stream changes.”

Given that, strategic diversification through the economic cycle is achieved through a balance between asset classes whose fundamentals are best suited to different parts of that cycle, defined as rising growth (good for equities, credit, commodities and emerging market debt); falling growth (good for nominal and inflation-linked bonds); rising inflation (inflation-linked bonds, commodities, EM debt); and falling inflation (nominal bonds and equities).

That has the advantage of recognising potential correlations between different asset classes – “any portfolio that contains corporate bonds and credit should put them in the same bucket as equities because they have the same environmental bias”, as Dalio observes. On the other hand, it retains the assumption that pricing rarely dislocates from these fundamentals for long. But don’t we have half a millennium of bubbles, manias and panics to prove otherwise?

“That is consistent with neither logic nor the evidence,” Dalio insists. “In all of my time watching markets I have come to recognise that it is not at all easy to find mispricing – there are very few no-brainers. The market can get temporarily dislocated or out-of-whack for liquidity reasons and so on, but the essential proof of concept is the behaviour of the All Weather portfolio and the returns of each asset class, backtested all the way back to 1925. Imagine how much stress testing I must have done on this – it has virtually all of my money in it!”.

But even if we accept that version of the efficient market hypothesis, we then have to consider the problem it poses to the other pillar of the risk parity strategy, because it requires us to believe that, while different economic environments will affect the strength and directionality of returns to asset classes differently, they will have no effect on their relative volatilities. That is crucial as it will determine the extent to which the leverage that we employ introduces a new, unwanted risk into the portfolio.

Consider what it is we are gearing-up in a risk parity portfolio: the volatility of assets with relatively low volatility. So our next question should be, ‘What causes one asset class to be more volatile than the next?’

Interestingly, Dalio offers two explanations. First – and as we have seen, this seems to be the main theoretical basis for All Weather – he makes a duration argument: “If the income stream of an asset is longer then we assume that it will have structurally higher volatility.” In other words, because most bonds have a set maturity date but cash flows from equities are potentially perpetual, the risk (and therefore volatility) associated with equity cash flows is structurally higher.

“By borrowing cash, the first thing you do is raise the expected return of the item you are leveraging to a higher level than the item you are borrowing,” Dalio explains. “The yield curve is normally upward-sloping, so bonds tend to yield about 2% more than cash over time, so when I borrow cash to lever bonds 1:1, I add another 2% yield by picking up the spread between what I’m borrowing and what I’m buying with the borrowed cash. It’s an increased duration risk. So the question is simply, are these asset classes going to outperform cash? That’s why we stress tested this portfolio through the Great Depression and Japan’s depression: sure enough, it underperformed cash – but still radically outperformed the traditional 60/40 portfolio”.

Risk parity makes the most sense if we believe that the duration is the key determinant of risk premiums, because under that assumption pricing across most asset classes would share a common delta (in the form of duration). As a result, one could expect the volatility regimes of different asset classes to remain proportionate and correlated through time, and this is important because it removes the big risk that leverage might otherwise introduce – the risk that the volatility of (say) bonds increases by a much greater proportion than that of (say) equities for a significant period. That holds even in the case of a severe spike in volatility – as long as it spikes proportionately across all asset classes.

But as an additional explanation Dalio points out that most higher-returning asset classes are already leveraged. “The average public company has a debt-to-equity ratio of 1:1,” he observes. “If a law passed tomorrow that prevented companies from borrowing, the risk and return of equity would be less. That’s where the equity risk premium comes from.” If this holds any water, our conclusions about relative volatilities must be very different: first, we would expect equity volatility regimes to synchronise with the credit cycle, as corporations expand and contract their balance sheets; but more importantly, we might expect the volatility regimes of government bonds and equities to be negatively correlated, as public debt expands to fund automatic stablisers during recessions and contracts thanks to an increased tax-take during the good times.
Common sense would suggest that risk premiums are determined by both of these factors, along with a host of other economic, sentiment and behavioural inputs. But while Dalio acknowledges the importance of debt in determining risk premiums, and the folly of assuming that “the volatility of the recent past is representative of future volatility”, the All Weather strategy is squarely based on “one assumed level of volatility” for each asset class, determined largely by its duration.

“Changes in the volatilities of different asset classes are significantly positively correlated,” says Dalio. “That’s good because it maintains the diversification benefits of the two assets alongside one another. The reason is that the same fundamentals are driving the volatility across all those markets: so in 2008, equity prices shifted from one level that discounted more income for the future to another level that discounted less income for the future, while the same influence was translated into bond price movements. We feel that the returns from these asset classes since 1925, and the performance of All Weather, suggests that these co-movements at different points in time are very reliable.”

Figure 2 tests some of these assumptions using Bridgewater’s simulated total return streams for nominal bonds and equities since 1970. Figure 2.a shows how variable the spread between equity and bond roling annualised monthly price volatility can be – and it is perhaps surprising how much of the line is below zero. Again, that’s not necessarily a problem for risk parity as long as the correlation between the two volatilities remains positive. But figure 2.b also shows that rolling two-year correlation between annual equity and bond volatility can swing from almost perfectly positive to more than 70% negative, and that lengthening the sample period does almost nothing to reduce these extremes (correlation for the five years to February 2003 was –0.72, and to April 1994, +0.97). Correlation over the full 18 years comes in at +0.76; figure 2c shows the coefficient of determination at 0.07, and since the turn of the century that has only risen to 0.26.
As Dalio observes, such dislocation as there has been over eight decades has not been enough to de-rail the All Weather portfolio. We might observe that low correlation appears to have coincided with periods of low-volatility in equity markets, and high correlation with high volatility: that would account for the lack of impact that the dislocations have had on the portfolio. But the idea that the co-determination is stable is questionable, at least, raising the prospect of dislocations coinciding with periods of high equity volatility in the future.

Risk parity strategies have an intuitive plausibility and All Weather, in particular, has an impressive set of real and simulated numbers to confirm that intuition. Like most risk parity strategies, All Weather, which now managers $50bn, set out its stall very effectively during the turmoil of 2011: while US equities finished the year flat and a conventional 60/40 portfolio returned about 1.6%, the risk parity portfolio finished the year up just short of 19%.

But investors who consider this approach for their core beta portfolios might also consider the implications of what may be its internal contradiction: the idea that it is possible to diversify economic exposure to the credit cycle, and yet leverage parts of that exposure differently on the assumption that the credit cycle has no affect (or a uniform affect) on asset volatility. Fundamental diversification is famously the only free lunch in finance. One can leverage that free lunch by gearing-up the entirety of a fundamentally-diversified portfolio. There is no reason to think that gearing-up parts of that portfolio amounts to the same thing.





Author: Martin Steward

Thursday, October 18, 2012

Get set to buy stocks after a market crash

Get set to buy stocks after a market crash

Commentary: Old Masters of Wall Street teach the art of investing


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By Jonathan Burton, MarketWatch
The mother of all modern manias, the Tulip mania saw prices for fancy tulip bulbs soar to prices many times a skilled artisan’s annual income. A Satire on the Folly of Tulip Mania by 17th Century Flemish painter Brueghel the Younger is a clear indictment against mindless speculation.
SAN FRANCISCO (MarketWatch) — Wall Street has never been a market for old men — but when the going gets tough, the graying veterans get the 3 a.m. call for help.
Today’s stock-market gurus were 25 years younger on Oct. 19, 1987, when they learned a painful lesson in the throes of a full-blown investor panic. The Dow Jones Industrial Average /quotes/zigman/627449 DJIA -0.12% lost almost a quarter of its value that day — its worst single-session percentage drop ever. “Black Monday” conjured fears of that other October crash almost 60 years earlier, which ushered in the Great Depression.

The five greatest market crashes

In October 1987, Wall Street saw its biggest one-day percentage slide ever. MarketWatch's Christopher Noble and David Weidner take a look at what happened then and in other market crashes throughout history. (Photo: AP)
In fact, the day after Black Monday was a terrific time to buy stocks.
A $10,000 stake in the 30 Dow stocks on Oct. 20, 1987 would be worth more than $137,000 now, according to investment researcher Morningstar Inc. That’s an 11% annualized return, including dividends, and even factoring in shareholders’ “lost decade” between 2000 and 2010.
But buying at points of maximum pessimism takes steel nerves most investors don’t have. Few of us could readily follow Baron Nathan Rothschild’s famous dictum to “buy when there’s blood in the streets — even if it’s your own.” Fear and doubt, in our own lives or caroming off of global, large-scale events, are powerful and limiting emotions. Read more: David Rosenberg on how to protect your money from the next stock crash.
So how do you take the plunge after a plunge?
The old Masters of Wall Street, how well they understood — and still do. Market pros see the wisdom in Warren Buffett’s admonition, channeling his mentor Benjamin Graham, to “be greedy when others are fearful, and fearful when others are greedy.” Read more: Warren Buffett's winning ways, 50 years on.
They realize, as the revered market analyst Bob Farrell noted in his famous “Market Rules to Remember,” that there’s money to be made given that “fear and greed are stronger than long-term resolve.” Read more: 10 investing rules tailored for a tough market.
REVISITING THE 1987 stock market CRASH


Stock crashes are money-making opportunities
If a crash of 1987 proportions happens again, says money manager Jim O’Shaughnessy, stock investors should do one thing: Buy.
David Rosenberg: Protect your money
Get set to buy stocks after a market crash
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Take our poll: Do you expect another crash?
/conga/story/2012/10/1987crash.html 231503
They heed the advice of the late Sir John Templeton, the legendary stockpicker, who included “Do not be fearful or negative too often” among his “16 Rules for Investment Success.” Read more: Templeton's 16 rules.
And they respect Jack Bogle, founder of the Vanguard Group and the patron saint of the individual investor, who has said time and again that “investors win and speculators lose.” Read more: Bogle: Forget trading and start investing.

All shook up

After the market closed on Oct. 19, 1987, it was easy around lower Manhattan to recognize who worked on Wall Street: they looked ashen and shocked. Yet a few investors read the situation differently. The next morning they arrived at their offices with wallets open. Read more: Jim O’Shaughnessy says market drops create money-making opportunities for stock buyers.
Templeton was one of them. “Let’s find stocks to buy” was his reaction to the crash, recalled Martin Flanagan, now chief executive of mutual-fund firm Invesco Ltd. and then the chief operating officer of Templeton’s firm.

“Today you could see that was an obvious thing to do,” Flanagan recounted in an obituary of Templeton in July 2008. “At the time it was not obvious at all. To have that kind of conviction and leadership is absolutely unique.” Read more: John Templeton, a pioneer investor.
Most of us, in contrast, would be inclined to sell on the cheap during downturns and hold tight when prices are expensive.
“In fearful times, people think that returns will be low and risk is high. In times of exuberance, people think that returns will be high and risk is low,” said Meir Statman, a finance professor at Santa Clara University in California.
Statman added: “First, understand this is a natural emotion. Second, find ways to counter it. You have to be a contrarian with your emotions. If your emotions say put it all in gold, you should have another voice — a voice of reason — saying if gold is so good, the price must be reflecting that.” Read more: Why another stock crash like 1987 is inevitable.

Michael Belkin predicts 40% stock market drop

Hedge Fund Consultant Michael Belkin spoke at The Big Picture conference, predicting a 40% stock market drop in the coming 12-15 months.
Easier said than done. What in someone’s wiring allows them to override the instinct to run from danger, and to give up a seat at the table when everyone else is eager to play?
Statman ventures that its helpful for investors to think like traders, who tend to see the big picture. They realize that one bad day in the market isn’t going to wipe them out, so they regroup and get back on the horse.
“Losses are part of what you are going to experience,” Statman said. “It’s not the end of the world.”
Behavioral studies show that people with such an attitude don’t have as much loss aversion — our strong preference to avoid losses even more than make a gain. “They know that not every decision is going to be a winning decision, but they ask themselves, What is a smart decision?” Statman said. “If they continue to make smart decisions, then luck is going to average out.”
Big scores after tumultuous events can also iron out a lot of misses.
“Opportunities to make fortunes usually come in times of greatest dislocation,” said Soo Chuen Tan, a managing member of investment firm Discerene Value Advisors in Stamford, Conn. “You can train yourself to look for dislocations and read all the material on value investing and see the returns one can get if one invests at points of maximum pessimism.
“But that only takes you part of the way,” Tan added. “An important element of value investing is psychological temperament. You either ‘get’ it in your gut, or you don’t. When you read a headline about Greece blowing up, do you think, ‘Where’s my cash and can I move it to a safer bank account?’ Or do you say ‘When’s the next plane out to Athens?’”
MarketWatch this week has been revisiting the 1987 stock market crash. What do you think? Do you expect another crash like 1987’s? Make yourself heard: Click here to take our poll :
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Jonathan Burton is MarketWatch's money and investing editor, based in San Francisco.