Geoff Wilson warns of another GFC event

" at a local level there was Geoff Wilson from Wilson Asset Management, one of the stockmarket's biggest investors. Speaking as the chairman at the AGM on Wednesday he warned that sharemarket investors around the world have mispriced risk. They've got it wrong, totally wrong. Indeed, they have got it so wrong that it's going to be like 2008 all over again. Back then he said the sell off was the "greatest buying opportunity in my lifetime", which turned out to be correct, and he's now getting excited that it's all going to happen again, soon. " http://www.afr.com/markets/equity-markets/why-wilson-asset-managements-chairman-says-it-looks-like-2008-20171129-gzv1gl

China intends to dominate AI by 2030 - implications

A very useful article from the Financial Times. https://www.ft.com/content/67f6c6c2-cec9-11e7-9dbb-291a884dd8c6 : China openly plans to dominate artificial intelligence by 2030. Mr Trump appears too busy tweeting to have noticed. Yet China’s AI ambitions pose a greater long-term threat to US security than North Korea’s nuclear reach. “Whoever becomes the leader in [AI] will become the ruler of the world,” Russia’s president, Vladimir Putin, said recently. His observation followed China’s announcement that it intends to draw even with the US by 2020, overtake it by 2025 and dominate global AI five years after that. The big US tech companies remain world leaders. But the gap is narrowing. Chi

In the hunt for yield, investors are taking huge risks. Hybrids this discussion.

Summary: In the hunt for yield, investors are taking huge risks. Hybrids and Junk bonds (high yields bonds) typify this excessive risk-taking, which is currently found in many other sectors. BEWARE: In next financial crisis, very large capital losses can be expected in this space. Discussion: Hybrids are much riskier than bonds. They started out in the late 1990s as having characteristics much more like term deposits…. And we used them for our clients then. Good interest rate, high degree of certainty of getting your funds back with certainty at “maturity” … and so there was a high degree of capital certainty. But now, for at least of these most of these instruments, the capital certainty is

In 1987, the Australian market crashed more because valuations were higher

Around the 30th anniversay of the 20th October 1987 share price crash, there was a lot of discussion of that crash, but there was litle discussion of why the Australian share crash was substantially bigger than the US share price crash in the 1987 crash. In short, Australia had a bigger crash because Australian shares were substantially more over-valued than US shares at the time. By the time the crash occurred, the cyclically adjusted price earnings ration for the All Ordinaries index was a very high 25. In contrast, the S&P500 index cyclically adjusted price earnings ratio was only 18, a 30% lower valuation than average Australian shares. One morale of the story - if you buy shares when t

Could Venezuelan debt default cause global "liquidity crisis" that central banks fear

This article ( http://puzzlefinancialadvice.com.au/2017/AFR/171106_AFR_Venezuela_crisis_could_get_nasty.pdf ) includes the following comments: Will the looming Venezuelan debt default – set to be the largest and most chaotic in history – finally open investors’ eyes to the reckless risks they’ve been taking in their frantic hunt for yield? Venezuelan bond prices slumped on Friday after President Nicolas Maduro signalled the cash-strapped country was looking to restructure and refinance its foreign debt, estimated to be about $US150 billion ($200 billion). Without a debt restructure, the cash-strapped country will likely be plunged into a complicated and drawn-out default, that could be eve

Central bankers worry about "liquidity" as they start draining the cash mountain they have

During and post Global Financial Crisis central banks in USA, Europe, UK, Japan printed an unprecedented amount of cash trying to "heal" the global economic. This money printing was quaintly called quantitative easing and the magnitude of the money printing was reflected by the growth in central bank balance sheets. This article https://www.ft.com/content/bf79edee-c07c-11e7-b8a3-38a6e068f464 makes the following points: Extreme monetary easing appears to have worked. The risk now, however, is that central bankers will not be able to withdraw without prompting a crisis. Mr Powell (the new US Fed chair) has great interest in banking regulation and in the plumbing of the financial system, and h

Australia has the world's riskiest superannuation system - Chris Joye. Equity exposure too high

In this article http://www.afr.com/opinion/columnists/peter-costellos-future-fund-could-revolutionise-super-20171102-gzdyo1 , Chris Joye points out: This is precisely why Australia has ended up with the world's riskiest pension system. The OECD's latest analysis finds that of the 34 developed countries it evaluates, our super funds have the second highest portfolio weight (51.1 per cent) to equities, which is more than five times larger than the median weight of 10.7 per cent. The great counter-factual in this debate is the Future Fund. Whereas Australian Super's "balanced" fund has an enormously concentrated and correlated 84 per cent allocation to Aussie shares, global shares, property equ

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