Website's Purpose
Current markets are far from ordinary (in the definition
or behaving as they have in the past 30 years), which requires a different approach
to investing. The past 3 decades have
had declining bond yields and rising stock prices not see at any time in the
past 10 years. The increase in asset
prices was created by a great leveraging cycle and increased profits by way of automation, outsourcing, and computerization. Whenever the markets started to experience
a slowdown the Fed would come in with accommodative measures, lowering the
interest rates on bonds, to keep the flow of capital moving and decreasing the burden
on debt holders (public, private, and individuals); allowing more credit
creation.
Now, at the start of a deleveraging cycle and the markets are going to behave much differently than they have in the past. Equities are not being fueled by automation and outsourcing, but rather by cutting costs and the availability of cheap money provided by asset re-purchase programs. Bonds, especially high quality sovereigns, have seen record low yields as a result of this buying program and the flight to safety as a result of the various crises that have come up since 2008.
In the years to come, inflation and its relation to growth will create the need to get out of these low yielding assets, changing the investing landscape in the process. Pension funds and insurance companies cannot rely in high quality fixed income assets to satisfy their liability driven investment needs, still pegged around 6 to 7%. Many institutions will have to change their portfolio makeup in order to reach these longer term goals or lower their assumed investment returns, creating shortfalls in the billions of dollars range. Mutual funds will experience their own challenges, with many investors abandoning their buy and hold strategy or moving out of fixed income (where much of the traditional baby boomers wealth is now held) in the face of rising inflation creating negative interest rates. Not to mention the increasing growth of ETF to add competition to the higher cost mutual fund industry.
These factors are all taken into account as the Vine Strategies attempt to capitalize on these changes in macro factors and the effects they will have on asset classes, sectors, and individual stocks. For more details of the basis behinds the factors above read The history of Stocks vs Bonds for more insight into the theory.
Now, at the start of a deleveraging cycle and the markets are going to behave much differently than they have in the past. Equities are not being fueled by automation and outsourcing, but rather by cutting costs and the availability of cheap money provided by asset re-purchase programs. Bonds, especially high quality sovereigns, have seen record low yields as a result of this buying program and the flight to safety as a result of the various crises that have come up since 2008.
In the years to come, inflation and its relation to growth will create the need to get out of these low yielding assets, changing the investing landscape in the process. Pension funds and insurance companies cannot rely in high quality fixed income assets to satisfy their liability driven investment needs, still pegged around 6 to 7%. Many institutions will have to change their portfolio makeup in order to reach these longer term goals or lower their assumed investment returns, creating shortfalls in the billions of dollars range. Mutual funds will experience their own challenges, with many investors abandoning their buy and hold strategy or moving out of fixed income (where much of the traditional baby boomers wealth is now held) in the face of rising inflation creating negative interest rates. Not to mention the increasing growth of ETF to add competition to the higher cost mutual fund industry.
These factors are all taken into account as the Vine Strategies attempt to capitalize on these changes in macro factors and the effects they will have on asset classes, sectors, and individual stocks. For more details of the basis behinds the factors above read The history of Stocks vs Bonds for more insight into the theory.
