Macro

A -post collection

Another growth scare...

With the recent volatility we wanted to share some of our thoughts on what is happening , and how we think about these types of interruptions of the Bull Market. Markets are hard to predict, so we do not really spend too much time on predicting them. What we do is look for powerful trends, innovation, great management teams and undervalued companies. Each and every analyst, portfolio manager or trader that interacts with our capital has the same high bar to achieve. Make sure that the capital invested is allocated in the most optimal long term risk adjusted method as possible. The investments that we own carry a strong combination of accelerating revenue and profit growth along with generally undemanding valuations. The large majority of single names

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Japan is still a good opportunity for patient investors

Profit margins in Japan are quietly surging. This is a phenomenon that we certainly have been seeing in the US for years, and incrementally in Europe. But, the rate of change in Japan is in fact, far better than the other two. Better yet, as the Wall Street Journal points out, with Net Margins at just about 6%, they have room for further improvement as they still lag these other developed markets. Since Abenomics has begun, the productivity of working age population 25-54 year old has risen sharply, from 80% to more than 85%. But the biggest evidence is in the change in real GDP per working age adult. After years of lagging the US, it is now accelerating faster than the US in recent years.

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The Turkish Sudden Stop

The plunge in the Turkish Lira attributed to a tweet and a defiant speech. But underneath there was a “sudden stop” in the Turkish currency. In 1997 this happened in Indonesia that went from a darling in the eyes of foreign lenders to a nightmare. The rupiah crashed and Indonesia’s debt to GDP soared to 170 percent. Capital flows to Indonesia ‘stopped’ leaving financial markets in disarray. What followed next was contagion spreading across the South East Asia region. A key reason for contagion is debt denominated in foreign currency. When confidence of foreign lenders shaken, capital flight leads to a currency plunge. Loans in local currency fall in value and impact balance sheets of foreign lenders. As a result, foreign direct investment collapses. In

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"IntelleCator" release - Intellectus Proprietary Economic Index

As many of you know, the team at Intellectus Partners has been working on and refining a number of Quantitative driven analytics. Today we release our proprietary economic algorithmic indicator, which we have coined the "IntelleCator". We take this opportunity to further expand upon our findings and methodology. The idea is that our economic indicator will enable the team to have a nearly real-time pulse on the health of the broader economy. This in turn, will provide us a clearer perspective on how to best position our assets, depending upon our Macro views. If we believe that we are currently in a "Growth", "Recessionary", or "middling" environment the Intellecator algo helps drive our thinking. Essentially it will allow us to make better decisions related to whether

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A pro-cyclical correction and regime change

What is happening in the markets now. Change is sometimes uncomfortable. It’s been too long since we have had a correction, so one was due. We are off more than 5% from the recent high. A 5% correction is a must and needed event to take the speculators out. We typically get two corrections of this size per year. Interestingly, it has been over 400 days since we have had one. Good opportunities begin to present themselves upon these downlegs, but a 10% or more correction could clearly be in the cards given the extent of this previous move. That said, there is already quite a bit of consternation about this sell off and it did seem as though this was already feared. That usually

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Tax policy, growth & the next two years

What are the possible outcomes from the expected and stated tax policies of the new Trump administration? Pragmatism v. Idealogy: What are the likely economic impacts? Two years without gridlock? Given that the deck is now stacked for conservatives in that they control the White House, House of representatives and the Senate ...and likely soon the Supreme Court, expect a whirlwind first two years. Here are some of our thoughts with assists from a few of our sell side coverage friends at some of the big banks. The simple logic as to what has changed: In the past Obama regime, we've had sub par growth but the FED was still raising rates. The consensus was that there was indeed some room for Chair Yellen to raise

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The Effects of a Dollar Surge

Since the U.S. elections, the dollar has surged by 5 percent while emerging market currencies fell by double. When the value of the dollar spikes, global GDP on average has contracted by 2 percentage points in the past, and eventually dip into recession territory (see Figure 1). Currently, markets are in the “first inning” of a periods of rising rates, surging dollar and contracting global GDP. This combination could have two profound effects: dollar shortage and Fed balance sheet contraction. Figure 1: Dollar and Global GDP Source: Bloomberg, quarterly data, 1980-2016 Since the middle of 1990s, global debt denominated in dollars has expanded by an average of $1.5 trillion a year, to a cumulative of $50 trillion today according the Bank of International Settlements.

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What now? Take a deep breath.....we have been here before

Now that the American electorate has spoken,it is time to sharpen our focus on how tho think through this political earthquake: A "Republican" mandate? Not like you think...It's more like an Independant and a Republican Congress. Who is DJT? Is he really a Republican in a traditional sense? It depends upon how you define "traditional" I thought I would touch on some helpful historical analogies: 1.Today vs 1968-1980 2. DJT ~ Eisenhower and Teddy Roosevelt Now vs 1968: An argument could be made that we have been in one of the most tumultuous periods in American History over the past decade or so. It is evidenced in the stock market behavior of the last 15 years. We have had two of the largest bear

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GDP Momentum

One of the key data releases next Thursday will be the first reading for Third Quarter U.S. GDP. GDP has been a “hot” topic of debate at the recent Boston Fed Conference as well as during the third Presidential Debate. The slowness of GDP has been worrisome, especially because despite a robust labor market, wages have lagged. If GDP stays slow, a tight labor market with modest wage growth may decelerate consumer spending. With an already fragile investment, trade and fiscal spending, a drop in consumer spending could “tip” U.S. GDP closer to zero growth. The dangerously slow pace of 1.3% in Q2 2016 could reverse however if consensus Q3 forecast of 2.5% annualized change is realized. The year on year slide

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"StallFlation"

In her recent speech, Federal Reserve Chair Yellen introduced a phrase that may determine how markets, economists and the public will think about the global economy going forward. Yellen suggested the Federal Reserve should allow the U.S. economy to turn into a "high pressure economy." That means an economy where labor markets are very tight, demand is robust and capital spending runs at a high rate. For Yellen to arrive at such a conclusion, there were four critical issues she highlighted for future "research:" Hysteresis. The global economy suffers from "supply damage" caused by a sharp fall in aggregate demand due to hysteresis. Developed economies saw in their real estate and financial sectors massive layoff, and supply of highly specialized workers was absorbed insufficiently. Because

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Could the global economy stall in the coming months?

The intellectus Partners Chief Economist Ben Emons on Bloomberg TV, discusses the global economy, the timing of the next Fed rate hike and the possibility of the global economy stalling in the coming months. He speaks to Bloomberg's Ramy Inocencio and Yvonne Man on "Daybreak Asia." (Source: Bloomberg) http://www.bloomberg.com/news/videos/2016-10-06/could-the-global-economy-stall-in-coming-months

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