One of the top story lines of the past 6 months has been the BOJ, Abenomics, and the dramatic repricing of the Yen. To date, we are looking at about a 25% drop in the value of the Yen. This is a transparent initiative to double the monetary base over the course of 2 years and it has credibility.
A few points we’ve been discussing.
- First, do bond rates really matter in a global marketplace where currency values are moving 25%? Our 10 year yield is 1.9%, yet our currency fluctuated as much as 2% each of the last 2 weeks.
- Given Japan’s monetary initiative, what is the likely response from the US? SE Asia? The rest of the world? Perhaps Japan’s devaluation has nothing to do with world market share. Maybe this is just about unlocking some of the value saved up in the currency. From this perspective, do deflationary even hit the global marketplace?
Irrational exuberance? Increased risk? Financial warfare? Voodoo economics? Well, yes, you could argue that we have all of the above.
Global Opportunities:
We have been over-weight US stocks for the better part of this bull run. There is a recent trend toward strength in International stocks, which has some validity. Japan is unleashing some pent up savings. Whether economic activity results is yet to be seen. But asset prices are moving in a positive direction regardless. Europe is certainly dealing with some challenges. But, they are addressing them in a prescriptive, principled way. In my opinion, this means a brighter relative future. Plus, valuations in places, like Europe, are cheaper than the US.
Add
BIDU-Chinese internet search company
We like the fundamentals and valuation of Baidu. A technical move this week, coinciding with our wish for some foreign exposure triggered the buy.
NOK – The new windows phone is selling out. This week, we took a small exposure in this turn around story.
TEF – A small position in a legacy telecommunications company with exposure to Southern Europe, South America and China.
GG-We’ve been watching the miners patiently. With no gold mining exposure in the portfolio, we felt the timing was right to initiate a position. Miner strength mid week was a catalyst, we took a small position in a gold stock with a strong balance sheet and nice set of assets.
World Allocation:
With some cash to deploy, we took a risk barbell view of the world. We added predominantly low risk assets, high quality floating rate bonds and, with an eye on currency diversification, some short term foreign bonds. On the risk side, we took a small position in 2 assets that would benefit from both global economic or monetary traction, Russia and Gold Miners.
Add FLOT, BWZ
Add GDX:
On recent weakness, US monetary/stagflation hedge
Add RSX:
Russia has the best dirt/land in the world, it is resource rich. Russia has population issues and is a very corrupt country, tread lightly.
We’re watching so you don’t have to.
Click here to sign up for our free weekly e-newsletter.
For information on Alhambra Investment Partners’ money management services and global portfolio approach, Douglas R. Terry, CFA is reachable at: dterry@alhambrapartners.com
Disclaimer: The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Alhambra Investment Partners LLC, do not constitute investment advice offered by Alhambra, are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and are not warranted to be correct, complete or accurate. Except as otherwise required by law, Alhambra shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use.
