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Asset Managers With $74 Trillion on Brink of Historic Shakeout

This is quite amazing via Bloomberg:

“The industry that gave rise to investing titans Peter LynchBill Miller and Bill Gross is facing an existential crisis.

For years, mom-and-pop investors frustrated by high fees and subpar returns from big-name money managers have been shifting their savings into ultra-cheap funds that simply mimic the returns generated by benchmark stock and bond indexes. Passive investing, as it is known, was in. Active was out.

At first, few noticed the trickle of money out of funds run by star money managers into cheaper index products. But now, no one can ignore the flood. The exodus from active funds has sent fees inexorably lower, led to the loss of thousands of jobs and forced large-scale consolidation among firms. That’s pushing the industry, with $74 trillion in assets as measured by Boston Consulting Group, towards a shakeout where only the strongest will survive.”

 

The graphic tells the story:

Major US stock indices close with (go on, have a guess!) …. big declines

Ladies and gentlemen, as a special for today only, the four stock codes to watch are

  • U
  • G
  • L
  • and Y
Closing numbers for the big 3 are showing:
  • S&P index down 87.99 points, which is -3.00% at 2,844.06
  • NASDAQ index down 279.54 points or -3.49% at 7,724.53
  • Dow down 772.89 points or -2.92% at 25,712.12
Off lows but not a good day. All three with their biggest daily losses for this year.
The context of the moves today:
  • global growth weaker and weakeneing
  • global trade getting rocked by trade wars
  • The Federal Reserve recently cut and is likely to do so again (a bit of tail and dog, chicken and egg here …. shoose whichever you like)
  • Stock valuations are …. well … high. Some ludicrously so, but they have been for years …
  • what have I missed?

Goldman Sachs says the yen is undervalued – downside risk to 103 target

Via a Goldman Sachs note, says yen remains cheap, unlike many other safe havens

  • positive news out of the US-China meeting could weigh on yen in the near term
  • but its role as a portfolio hedge bodes will continue
Downside risks to GS’ 12-month USD/JPY target (at 103)
  • proprietary models set 95 as fair value
  • bullish yen view supported by BOJ having limited monetary policy space to ease further
  • net outflows from Japan have shifted to “cross-border direct investment from portfolio flows, and outbound foreign direct investment could pull back on global trade uncertainty”
More:
  • trade disputes
  • unsettled global markets
may lead to a choppy USD

Life is too short

The great thing about trading is that if you’re good enough at in, you’ll never have to work again.

But whether you’re working or not; making money or not; the one thing you can’t buy is time. It’s Summer and it’s the weekend, so enjoy what life has to offer.

It’s with sadness that I read about the death of John Noyce. He was a foreign exchange technical analyst at Goldman Sachs and wrote “The Charts That Matter Next Week”. He was 36 and died of cancer last week

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