Oaktree - There They Go Again ... Again 40min

Since I’ve written so many cautionary memos, you might conclude that I’m just a born worrier who eventually is made to be right by the operation of the cycle, as is inevitable given enough time. I absolutely cannot disprove that interpretation. But my response would be that it’s essential to take note when sentiment (and thus market behavior) crosses into too-bullish territory, even though we know rising trends may well roll on for some time, and thus that such warnings are often premature. I think it’s better to turn cautious too soon (and thus perhaps underperform for a while) rather than too late, after the downslide has begun, making it hard to trim risk, achieve exits and cut losses. ... Since I’m convinced “they” are at it again – engaging in willing risk-taking, funding risky deals and creating risky market conditions – it’s time for yet another cautionary memo. Too soon? I hope so; we’d rather make money for our clients in the next year or two than see the kind of bust that gives rise to bargains. (We all want there to be bargains, but no one’s eager to endure the price declines that create them.) Since we never know when risky behavior will bring on a market correction, I’m going to issue a warning today rather than wait until one is upon us.

Berenberg Bank - Patiently waiting: the productivity super-cycle 11min

The rate of productivity growth – the major determinant of long run economic growth – has slowed sharply since the start of the century. The so called ‘productivity puzzle’ is one of the most pertinent macroeconomic questions of our time. Are fast rates of economic growth, the hallmark of the 20th century, a thing of the past? Or is it just another ‘bad attack of economic pessimism’ as economist John Maynard Keynes wrote nearly a century ago? ... Our chart below shows two distinct ‘super-cycles’ in UK productivity growth since the First Industrial Revolution. The first cycle brought about an acceleration in productivity growth over an approximate 70-year period that peaked in around 1870 before a 30-year deceleration thereafter. It ended at the turn of the 20th century during the middle of the Second Industrial Revolution. The cycle of the 20th century followed a similar pattern to the 19th, but with much, much bigger gains in productivity and well being. ... Comparing the western world’s current struggle for productivity gains against the ongoing fast rates of discovery in energy, artificial intelligence and robotics, to name but a few, suggests that we may be back at stage one and could be heading for stage two with rapid productivity advances in a while. ... Once we fully exploit the potential of the current wave of new technologies, the risks to the future seem skewed to the upside.