Chart of the Week: Cash is King!

Investing is a game of relative things, at least if you do it right. Whether you have a short or long horizon, somewhere the question arises as to which asset classes are actually the most attractive. And since central banks have made it a sport since 2008 to keep inflating their balance sheets, the answer to that question was rarely, if ever, cash. Until now!

I show two charts below that show the amount of ‘yield’ for the main asset classes, adjusted for duration (interest rate sensitivity) on the one hand and volatility on the other.

Chart of the week: Red-hot

The US economy created more than half a million jobs in January. That was almost three (!) times more than expected. Most importantly, such a job growth figure does not fit with a coming recession, but neither does it fit with a much hoped-for soft landing. On the contrary.

It indicates that the US labour market is still glowing even after 450 basis points of tightening.

ChatGPT and the world of finance

During my student days in the late 1980s, I was one of the few students who had access to an Apple II computer. A big difference between Apple’s word processor then and the average word processor on a PC was WYSIWYG, acronym for What You See Is What You Get. On the screen, the document was visible just as it was printed. Even then, Apple was way ahead of the competition. 

The ECB should learn from the Fed

Forget about all those bars of gold that are heavily guarded because they are incredibly valuable. Credibility is the most valuable asset for a central bank. It is the monetary version of what goodwill is to a company. In this respect, the ECB could learn a lot from the Fed. An analysis.

The more credible a central bank is, the more effective its policy is. With high credibility, a central bank needs to do less actual work to achieve the desired result: bludgeoning inflation. More words, and less action, so to say.

Chart of the Week: Risk premiums back to normal?

A post recently appeared on my Bloomberg timeline that headlined: ‘BoE’s Bailey Says Truss Risk Premium on UK Assets is Gone’. Being overweight in some UK assets, I wondered what Bailey bases this on.

So I look at some asset classes that were hit hardest by the panic sell-offs caused by then finance minister Kwasi Kwarteng’s mini-budget. Just a refresher: that mini-budget consisted mainly of tax cuts for high-income earners that were not compensated elsewhere in the budget.

Alternatives boost institutional funds, UI data shows

Data analysis of transactions of Universal Investment’s institutional clients shows that alternative investments once again proved to be supporting pillars of their portfolios, writes Sophia Harrschar, the firm’s country head Luxembourg in her latest contribution as IO knowledge partner. Private equity scored with 9.8 percent in the one-year range and with 10.3 percent per annum over five years.