Comments out from Barclays Capital this morning: They’re looking for the bullish equity window to stay open for 1-2 months but think overly optimistic expectations are priced already.
Equity investors have looked past weak company fundamental growth, instead discounting, in our view, overly optimistic forward expectations. This now leaves the equity market in a precarious position: if growth slows, then Fed fears will ease, but earnings growth will not accelerate as expected. If growth proves resilient and inflation risks increase, then pressure will rise on the Fed to taper purchases. However, the bullish window can stay open another month or two until the data settle the growth debate and the fiscal situation is less cloudy.
Important to note that big headline making M&A news and central banks liquidity are currently fueling sentiment. As we saw yesterday the moment major central banks try to reverse QE the markets react fast.
This comment from Michael Gavin, Barclays Capital, makes a lot of sense and is a good reflection of market sentiment. He notes the rock-bottom volatility, something the economists at Bank of America Merrill Lynch illustrated nicely several days ago.
Resilient equity markets, rock-bottom equity volatility, and a rangebound government bond market suggest a tranquil investor base that is not in the mood to be spooked by imminent news on politics or economics. On balance, that makes sense to us both because the high-frequency events and data are likely to shed limited light on the larger questions that now confront investors, and because the strong probability of a policy response to adverse developments should temper the market effect of many plausible setbacks.
Answer from Sir Philip Hampton, Chairman, RBS on the issue of pay in banks:
I’ve said many times that I think pay in banks is too high, especially investment banks. The bonuses are falling sharply now, especially at RBS. As a general rule I think bonuses are justified by strong financial results. Where the banking industry has failed in recent years is that high pay is associated with poor financial performance.
(from The Guardian, UK)
Liquidity has crushed volatility
Great chart to show how the central banks have crushed liquidity.
Source: Bank of America Merrill Lynch
This article in today’s Evening Standard quoting some interesting remarks from George Osborne relating to four big banks running something close to an oligopoly for payment transactions:
Today in the local paper there’s a one page ad by the Raiffeisen Bank highlighting that they are expanding in Ermatingen (the domicile of Zuberbühler Associates Ltd).
Some background about Raiffeisen
Raiffeisen, the third-largest banking group in Switzerland, is Switzerland’s leading retail bank. Over 3.6 million customers bank with Raiffeisen, and more than 1.8 million of them are cooperative members and therefore co-owners of their Raiffeisen bank. They value the crucial advantages Raiffeisen offers: client proximity, empathy, trustworthiness and the exclusive benefits for cooperative members.
This bank has close to 10’000 employees and assets under management close to CHF 150 billion and a market share for mortgages close to 15%.
A quote from the Raiffeisen Ermatingen Press Release : “The catchment area around Ermatingen is a preferred residential zone and encompases 5000 inhabitants.”
They also share one of our values: “The infrastructure needed for daily life shouldn’t be transferred more and more to large centers. Not everything should be taken out of the rural areas”. (my translation)
Having a money manager in a large center obviously has its advantages, but read the following excerpt from Business Insider about Warren Buffet and think of Ermatingen as a small Omaha:
“In some places it’s easy to lose perspective. But I think it’s very easy to keep perspective in a place like Omaha,” he said. Buffett said being far from Wall Street actually helped him.
“It’s very easy to think clearly here. You’re undisturbed by irrelevant factors and the noise generally of business investments,” Buffett said. “If you can’t think clearly in Omaha, you’re not going to think clearly anyplace.”
Zuberbühler Associates has a very open approach to collaboration with financial institutions, giving the client a wide choice of banks to work with. Raiffeisen being one of them.