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Creativity Motivation – What is motivation – Corey K Katir
Advertising From http://www.creativitymotivation.com Describes motivation process for creativity with emphasis on intrinsic motivation by Corey K Katir Brazil stimulus fails to raise growth
From ft.com Contraction makes Brazil’s growth second slowest in Latin America and comes as Asia’s major emerging markets, China and India, are also decelerating
Rupee hits record low on India worries
From ft.com Sell-off comes despite repeated attempts by the country’s central bank to support the currency this week, as investors retreat from emerging markets
Another false dawn or reason for optimism?
From blogs.ft
By Eswar Prasad and Karim Foda
The world economy is showing scattered signs of vigor but remains on life support, mostly provided by accommodative central banks. Concerns about spillover from a worsening of the European debt crisis and slowing growth in key emerging markets are putting a damper on consumer and business confidence. Equity markets are pulling back from a robust performance in the first quarter of this year as the sobering reality of a continued anemic recovery weakens investorsa optimism.
There are some positive signs in the latest update of the Brookings Institution-FT Tracking Indices for the Global Economic Recovery (TIGER), but also much to worry about as the world economy continues to meander with no clear sense of direction.
Taming the liquidity tide
From blogs.ft
By Kevin Gallagher
In Germany this week Brazilian president Dilma Rousseff rebuked industrialised countries for creating a “liquidity tsunami” of speculative capital that is bubbling currencies, stock and bond markets across emerging markets and the developing world. A To stem the tide, her government extended a tax on speculative inflows of capital into Brazil.
A new task force report entitled Regulating Global Capital Flows for Long-Run Development,A released this week, argues that regulating flows to tame the liquidity waveA are justified more than ever in the wake of the global financial crisis.A A Countries have more flexibility to deploy such measures given the new consensus in the peer-reviewed academic literature and at the IMF that capital account regulations have been effective tools to prevent and mitigate financial crises.A A In this new environment Brazil,A Indonesia, Taiwan, Peru, Thailand, South Korea, and many others have regulated flows.
Brazil’s president Dilma Rousseff However, the report also expresses serious concern that many countries lack the ability to regulateA flows because many of the worldas economic integration clubs and trade and investment treaties have started to mandate capital account liberalisation.
Capital controls are not beggar thy neighbour
From blogs.ft
By Kevin P. Gallagher
Rio de Janeiro, Brazil. AFP/Getty Images Emerging markets have fallen victim to unstable capital flows in the wake of the financial crisis. In an attempt to mitigate the accompanying asset bubbles and exchange rate pressures that come with such volatility, a number of emerging markets resorted to capital controls. Although these actions have largely been supported by the International Monetary Fund, some policy-makers and economists have decried capital controls as protectionist measures that can cause spillovers that unduly harm other nations.
Recently-published research shows that these claims are unfounded. According to the new welfare economics of capital controls, unstable capital flows to emerging markets can be viewed as negative externalities on recipient countries. Therefore regulations on cross-border capital flows are tools to correct for market failures that can make markets work better and enhance growth, not worsen it.
High-net worth investors more confident investing in Canada and Emerging Markets than the U.S.A.
From network.nationalpost
Talk about timing. On the heels of yesterday’s blog about American mega-cap stocks — Best returns for next decade: would you believe American blue chips? — a high-net worth survey released today from BlackRock Asset Management Canada Ltd found 67% of wealthy investors are “very confident” about the Canadian markets and “far less confident” about investing in the U.S. Half thought emerging markets are a good investing opportunity right now while only 39% feel the same about the U.S.
Appalling financial literacy from the wealthy Whether or not Leith’s call turns out to be correct, I was appalled at the level of financial literacy revealed in the BlackRock survey. While almost 80% of High-Net-Worth (HNW) investors place “a great deal of importance on learning about new financial products and solutions from their advisors,” almost half (47%) of the HNW investors who owned mutual funds believed their funds did not charge management fees. Another 9% were unsure.
Earth to HNW investors: if you’re still investing in broker-sold mutual funds charging 2.5% a year as a Management Expense Ratio, then you’re paying $25,000 a year on each $1 million of assets. You’d think these financial advisors they appear to value so much would at least acquaint these well-heeled clients with the basics of how they’re compensated — and the extent to which this “embedded compensation” derives largely [completely?] from the clients’ wealth.
It seems ETFs are still a foreign concept to many wealthy investors: one in four didn’t know if they are a good investment or not and only 27% of wealthy investors with an advisor or broker said an ETF had been recommended. Worse, only 12% already own ETFs in their portfolio. Among investors 65 or older, 71% were unfamiliar with ETFs, compared to under a third of investors 50 or younger. New Hybrid Funds will cloud waters further But that’s about to change and the timing gets stranger still. At the start of this week, this blog reported on the second new major entrant to hybrid ETFs by a major Canadian mutual fund company. Both Invesco Trimark PowerShares Funds and now BMO Guardian provide a way for compensation-hungry financial advisors to introduce the idea of ETFs in a way that will compensate them more than “pure” ETFs.
Because of course these mutual fund/ETF hybrids have built-in trailer commissions [I use this phrase instead of trailer fees in deference to a request by fee-based advisor John De Goey] of 0.5 to 1%. The result of this embedded compensation is MERs that are much higher than what a discount brokerage investor would pay for ETFs directly, albeit a tad below the MERs of most actively managed mutual funds.
No doubt a year from now the followup survey will reveal the wealthy flocking to these hybrids and still declaring that, like other mutual funds, they charge no management fees. So much for the popular notion that wealthy investors are “trendsetters.” As Pelant notes, HNW investors “have as many questions and concerns about their financial situation and investment trends as anyone else.”
Certainly this group has become more cautious in the light of the 2008 crash and subsequent shaky economy: as the slide at the top of this blog illustrates, 73% said they had changed their investing style, with most “becoming more cautious.”
60% of young investors thought advisors provide no more value than the Internet
Ominously for advisors, a majority of those under age 35 agreed it’s ” not worth paying advisors or brokers for fees or transactions” while only a minority of older investors felt that way. About a quarter of the under-35s already use only a self-directed online discount brokerage account.
The study of 500 Canadians with at least $500,000 in financial assets was conducted in the second half of March by the Gandalf Group. If you’re an advisor counting on older clients not knowing mutual funds or hybrid funds charge management fees, you’d better hope this study is not “statistically significant.”
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Best stock returns for next decade: Would you believe American blue chips?
From network.nationalpost
Over the last ten years, U.S. stocks came dead last compared to stocks in the rest of the world, and against bonds, U.S. REITs and other asset classes. Yet at the turn of the century, Canadian investors were anxious to add American technology stocks and other large U.S. stocks to their portfolios — even though firms like Coca Cola, Wal-Mart and Johnson & Johnson were trading at 40 or 50 times earnings, or twice what would have been considered fair value.
Unfortunately, today many Canadians have a bad taste in their mouth over this experience, since they bought expensive stocks with what was then an undervalued currency. If you’d listened to GMO’s Jeremy Grantham a decade ago, you would have benefited from his 10-year forecast about the dismal performance of U.S. stocks. Today, Grantham has a new 7-year forecast and it’s almost the opposite of what he said in 2000. Now he’s predicting U.S. high quality stocks will top the asset charts in the next seven years, with real [nominal minus inflation] returns approaching 7%.
Leith admits he was a little early on this theme. In an interview today, he says the U.S. large-cap theme was on his mind as long ago as 2006 when it came to the health-care sector. “Before that, the model portfolio was never more than 10% outside the country. As the dollar got to 85 cents and some of these big companies came down to very attractive levels, we picked away at them and have now built the foreign content to 45% of the equity component.”
Most U.S. megacaps are global plays While many of these household names are ostensibly U.S. companies most are foreign multinationals that do as much or more of their business outside the U.S., including the Emerging Markets. Some Canadian investors may fear these names because of currency risk, assuming a domestic stock like TD Bank has less currency risk than a Coca Cola. In fact, Coke is more than 80% outside the U.S. and TD has a lot more exposure to the U.S. market than investors may think. Many of the picks above — like 3M, J&J and Wal-mart — are components of the elite 30-stock Dow Jones Industrial Average. Some, like Colgate Palmolive or UPS, are not Dow Stocks per se but are certainly well-known megacap stocks in the S&P500. All are, in Leith’s opinion, trading at a discount to intrinsic value. “My error in my earliness is that they were overvalued a decade ago, then came back to fair value and continued to overshoot on the downside, which often happens. This has gone on longer than I thought but I think it sets the stage for a long period of relatively good performance. The starting value is good, which is what really matters.”
Throw darts at the Dow and you’ll do fine in ten years
In the interview, Leith says only half in jest that “frankly, you can throw darts at these big stocks and you’ll be absolutely okay in five or ten years. Pick any of them.”
Or, I suggest, you could buy all 30 Dow Stocks with a single trade: the Diamonds (DIA/NYSE) or if you want them hedged back to the loonie, through the new BMO ETF, the BMO Dow Jones Industrial Hedged to the CAD Index ETF (ZDJ/TSX).
However, there is a reason to cherry-pick certain names, which is of course what Leith does for his clients at Odlum Brown. Refer to the slide at the bottom of this blog, which shows why Canadians can benefit from exposure to these American multinationals. The domestic market is heavy in financials and resources but has only minimal exposure to consumer stocks, health care and technology. Keep that in mind if you choose to pick some of these large-cap U.S. stocks: you might want to downplay U.S. financials if you have heavy exposure to Canadian banks; and underweight U.S. oil stocks if you already have plenty of exposure to Canadian energy and materials stocks.
Canada a play on China but don’t bet it all on that one story Not that Leith is down on Canada. He says a “textbook economic recovery is underway” and the “stars are aligned for Canada … the Canadian economy, our stock market and our currency will continue to behave favorably.” Even so, he cautions, “It would be a mistake to bet too heavily on Canada, as we do have some vulnerabilities.” One is high levels of consumer debt and an inflated housing market. Another is an overly strong loonie, which doesn’t help exporters.
The Canadian stock market hangs on China’s fortunes, which makes it both an opportunity and a risk. China is a “great story,” but so was Japan in the 1980s — it turned out to be a horror story. In short, China does have “some risk and I think you should be careful not to have too many eggs in the China basket,” Leith says in the presentation, “That means not having too much exposure to Canadian stocks.”
You can view the entire presentation here, including Hank Cunningham’s on the bond markets.
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Re-emerging markets – Austria’s firms are showing renewed interest in the CEE market
From legalweek.com
legalweek
As the CEE region begins to show signs of recovery, Austrian firms may once again be analysing how to position themselves to best capture more of the emerging work. Austrian firms that last year took a hit through their presence in the wider region are starting to feel the benefits once more. Of the most recent Austrian deals to hit the headlines – and there have been a few – a notable majority have included a primary or secondary CEE aspect, including Apax’s €1.3bn (£1.1bn) January buyout of clothing retailer Takko from Advent International, which saw leading CEE duo Wolf Theiss and Schoenherr act for Apax and Advent respectively. Both firms have offices throughout the CEE and have long positioned themselves as regional, not Austrian, firms.
Brazil stimulus fails to raise growth
From ft.com Contraction makes Brazilas growth second slowest in Latin America and comes as Asiaas major emerging markets, China and India, are also decelerating
Debate over IMF finance flows guidance
From ft.com Brazil wants fund to study acurrency wara a impact of rich countriesa loose monetary policy on emerging markets, whose exchange rates have appreciated
Brazil unveils measures to boost industry
From ft.com Government is seeking to restore the country to the ranks of the higher growth emerging markets as manufacturing sector shows signs of sputtering back to life
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I don’t know about you, but I’d think such data suggests the contrary view espoused by Odlum Brown’s Murray Leith [pictured, left] may turn out to be right. As noted yesterday, while enthusiastic about the Emerging Markets/China story, Leith was loath to put all his eggs into that one basket. Canada is itself a play on China, he noted, but he wants to hedge his bets by investing in the many good-valued U.S. megacaps that can be found today.
True, BlackRock — via its iShares exchange-traded funds business in Canada — is largely in the business of providing low-cost ETFs that make most mutual funds look like highway robbery by comparison. As iShares managing director Heather Pelant [pictured, right] says in a press release, advisors should be elevating the conversation with their clients by “carefully explaining different and/or other sound investment vehicles, such as ETF.”
These forecasts are the centerpiece of a recent set of presentations made in British Columbia by Odlum Brown Ltd.’s director of research, Murray Leith [pictured, left]. The above slide shows Leith pointing to the kind of U.S. (and a few foreign and Canadian) quality stocks he’s loading into his model portfolios these days at Odlum Brown.
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