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Pretty Much Everything Is A Good Bet Right Now (Bridgewater Associates, Bloomberg)
Bridgewater’s co-CIO Bob Prince recently told clients, “You want to be borrowing cash and hold almost anything against it,” in a client conference call.
Bridgewater is long equities around the world, and shifting to long commodities positions, said Prince. This is a clear indicator that the hedge fund is anticipating that the prices of various securities will rise.
A few weeks ago at Davos, Ray Dalio, who runs Bridgewater, said that 2013 would be the year when large amounts of cash moved into markets, and that investors should position for price appreciation in risky assets.
ETF Investors Are Avoiding Brazil (Wall St. Journal)
In the three months through January Brazilian ETFs saw outflows of several hundred millions of dollars, according to Morningstar. U.S. investors are reducing their exposure to Brazilian ETFs because the country is lagging behind it’s other Latin American counterparts.
“Brazil has some strong cross currents that are developing into real head winds for investors,” Paul Christopher, chief international investment strategist at Wells Fargo Advisors told the WSJ.
“The bigger picture is that people are realising there are other intriguing markets in Latin America,” Lee Munson, chief investment officer at advisory firm Portfolio LLC told the WSJ.
This Is How You Can Hedge For Inflation (iShares Blog)
Investors don’t really need to start worrying about inflation until 2014, but it’s never too soon to develop and implement a strategy to hedge against it, according to CFA Russ Koesterich.
He recommends natural resource and energy companies, international equity markets with large commodity exposure, physical real estate, and of course, gold as good hedges against inflation.
However, Treasury Inflation-Protected Securities might not be such a good idea, he says, “While TIPS will protect purchasing power, this protection comes at a hefty price. Real yields on TIPS are currently negative.”
Interest Rates Will Remain Low Around The World (Financial Advisor Magazine)
According to PIMCO’s head of global portfolio management Scott Mather, investors will likely see a long period of below-average interest rates in many regions of the world, thanks to a huge debt overhang. This effect will be more evident in developed nations, he said.
Which is why investors should stay away from developed countries with activist central banks and high government debt, and instead increase exposure to countries that were seen as riskier in the past, but are now more financially sound than their more developed counterparts.
“He said PIMCO believes that bond yields will remain constrained over the next several years, but that dislocations will occasionally occur in the different pockets of the fixed-income market.”
This Is Why High Yield Bonds Aren’t Worth Buying (Economic Musings)
Of late there’s been a run on high yield (HY) bonds, which has resulted in a rally in both spread and price, said CFA David Schawel, in a blog post.
“High yield is as overbought as I have ever seen it,” said Loomis Sayles’s Dan Fuss, CFA, in his recent comments to Barron’s. “This is absolutely, from a valuation point, ridiculous.”
Price appreciation for HY bonds have run their course, said Schawel. “HY bonds are starting to exhibit negative convexity, with prices exceeding 105 cents on the dollar. In other words, future price appreciation is capped because of the callability of the bonds.”
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