Brief: "The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble,” says GMO’s Jeremy Grantham. “Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be recorded as one of the great bubbles of financial history,” wrote the investor. He compares this period the South Sea bubble, the 1929 market crash, and the dot-com boom of 2000. “These great bubbles are where fortunes are made and lost – and where investors truly prove their mettle. For positioning a portfolio to avoid the worst pain of a major bubble breaking is likely the most difficult part,” he wrote. He warns the bubble will burst in due time, “no matter how hard the Fed tries to support it, with consequent damaging effects on the economy and on portfolios.” The markets had a wild ride in 2020, briefly going into a bear market after COVID-19 lockdowns were set in place. Soon after they recovered as the Federal Reserve made unprecedented moves to support the economy, and Congress passed a stimulus bill. “I am not at all surprised that since the summer the market has advanced at an accelerating rate and with increasing speculative excesses,” wrote Grantham.
Brief : Goldman Sachs Group Inc. Chief Executive Officer David Solomon said he expects to have all his employees back at their offices by the end of the year as the vaccine rollout ramps up. “The big focus right now is we’ve got to get people vaccinated -- we’ve got to get to the other side,” Solomon said in a Bloomberg Television interview Tuesday. “I certainly would expect a lot of Goldman Sachs employees back in full by the end of the year. We will get through this, and I’m really hopeful that over the course of the next six months we see a real improvement.” The Goldman CEO said he’s encouraged by the amount of vaccine production, but flexible, efficient ways need to be found to get shots distributed, which he believes will be the biggest challenge facing President-elect Joe Biden’s administration. In addition to government actions, the private sector can play a role in speeding up vaccinations, he said. “There’s still work to be done,” he said. “And once we deal with the vaccine and the virus, and people feel safe, we’re still going to have to deal with the economic consequence of the shutdowns and the impact on our economy that this pandemic’s had.”
Brief: The world’s largest asset manager, BlackRock, has predicted that the “revolution” in monetary and fiscal policy spurred by the Covid-19 pandemic will dampen government bond real yields in 2021. The asset manager favours inflation-linked bonds, as well as risk assets such as equities and high-yield credit. Central banks across the world responded to the coronavirus crisis last spring by lowering interest rates and buying bonds, totalling 190 rate cuts and USD1.3 billion spent every hour since March 2020 on asset purchases. Interest rates are expected to enter an era of “lower for longer”, despite the potential for rising inflation as vaccination programmes are rolled out and the global economy continues its recovery in 2021. BlackRock Investment Institute writes in a recent market note: “A key takeaway is how swiftly macro policies can evolve and the lasting impact this can have on market dynamics. The policy revolution that started in 2020 is still a key driver of our investment views for this year.” The Federal Reserve has already outlined plans to allow US inflation to exceed the 2 per cent target temporarily, without hiking rates, in a new monetary policy framework.
Brief: No one in the investment world appears to have mastered the tumultuous pandemic year as well as Bill Ackman, who banked more than $1 billion in 2020. Ackman’s billion-dollar pay day is based on the gains of the shares he owns of Pershing Square Holdings — his publicly traded hedge fund — as well as estimates of performance fees and a few private investments. The 54-year-old hedge fund manager declined to comment on his spectacular year, saying he did not want to “gloat.” “Happy New Year,” he added, on the record. Pershing Square’s publicly-traded fund, now its largest, gained a net 70.2 percent in 2020, a record for the firm and multiples of the returns of the broader market and other hedge fund legends, many of whom nursed steep losses until markets began to recover from their March swoon. Ackman owns 45 million shares, or 23 percent, of that fund, earning him $720 million on the gain in the stock alone. It gained 86 percent, including dividends, for the year. But he's been uncharacteristically shy about his winnings. “It’s hard to talk about success when a lot of people are suffering, and many more have died,” Ackman told investors in a recent call.
Brief: Hedge funds increased bets against major gold miners, filings reviewed by Reuters showed, as COVID-19 vaccines weakened expectations for the yellow metal after a year of record gains. Gold prices have dipped from last year’s record highs above US$2,000 per ounce as vaccines deployed against the coronavirus encouraged investment in assets that perform well during periods of economic growth. “While we are by no means out of the woods in our view, the light at the end of the tunnel means that gold markets should begin to see an unwind of the trends that became quite exaggerated over the course of 2020,” Royal Bank of Canada analysts said last month. The bank cut its 2021 forecast for gold to US$1,810 per ounce from US$1,893. Short trades as a percentage of total traded volume for Barrick Gold rose to 24.8 per cent for the second half of last month, from approximately 14.9 per cent for the first half of December, according to filings reviewed by Reuters. Newmont Corp. saw an increase to 11.4 per cent, from 8.8 per cent, over the same period, while trades in Kinross Gold rose to 20.6 per cent, from 18.2 per cent, according to the data.
Brief: Testing financial conditions during 2020 have added to the pressure on Australia’s superannuation industry to deliver better investment outcomes and greater cost efficiency, according to Funds Global Asia’s 2020 Australia survey conducted in partnership with Calastone. Respondents predict that this will accelerate mergers between superannuation funds, while placing fresh demands on fund providers to offer wider product choice to scheme members. The Australian pension fund, or “superannuation”, sector, has been under scrutiny from financial regulators over the past four years as part of a far-reaching review of pensions and wealth management provision. The Australian Royal Commission on Misconduct in the Banking, Superannuation and Financial Services was established in 2017 to investigate misconduct and poor standards in the financial services industry. Publishing its findings in February 2019, the Commission identified “cultural failings” in the superannuation, banking and wealth management sectors and highlighted a need to reform governance, fee structures and remuneration policies which often worked to the “financial detriment” of scheme members.