Juggling Dynamite

Some lucid assessments in this segment.

When the road ahead is uncertain, there’s no wiser choice than to listen to those with experience – who have seen enough market cycles to judge what’s most likely to happen next. Today we’re fortunate to welcome financial advisor Ted Oakley, managing partner & founder of Oxbow Advisors.

Ted has over 40 years experience helping clients, mostly high net worth families, protect and build wealth through good times and bad.

Here in mid 2023, we’ll ask him if the current powerful bull rally means the coast is clear for investors to pile back into the markets again, or if the bear market that attacked last year is simply drawing as much capital into the markets as it can before it strikes again. And we’ll find out how he’s currently positioning his client’s assets for what he sees lying ahead. Here is a direct video link.

Danielle was a guest with Jim Goddard on Talk Digital Network, talking about recent developments in the world economy and markets. Here is a direct audio link.

As fund managers massage portfolio dressing into quarter end today, it’s another good time to review the classic wisdom of Fred Schwed, Jr. from his 1940 book critiquing the investment industry, Where Are the Customers’ Yachts?  Happy Canada Day!!:

When there is a boom and everyone is scrambling for common stocks, take all your stocks and sell them. Put the proceeds in the bank [T-bills]. No doubt, the stocks you sold will go higher. Pay no attention to this—just wait for the recession which will come sooner or later.  When it gets bad enough to arouse the politicians to make speeches, take your money out of the bank [T-bills] and buy back the stocks.No doubt the stocks will go still lower. Again, pay no attention. Wait for the next boom. Continue to repeat this operation as long as you live, and you’ll have the pleasure of dying rich.

Between 2010 and 2022, increasingly slack monetary conditions added trillions to the global money supply, and it was all looking for something to do. Some flowed into ideas and efforts to improve life on Earth. A lot more was thrown at unproductive, counter-productive and mathematically challenged pursuits. Private and public investment funds ballooned on the inflows, and the real estate sector was a massive beneficiary. Now, those malinvestment conditions have rapidly unwound.  A new report from Moody’s Investors Service highlights trouble in the private credit space:

“With monetary policy tightening, economic growth stalling and less capital flowing into risk assets, there are likely to be rising defaults among private credit borrowers,” the report said.

At the same time, the tighter financial and economic conditions are expected to curtail the flow of capital into private markets, Moody’s said: “Higher yields on traditional fixed-income assets will create more competition for private credit.”

Private equity is also levered to the moon on real estate and related securities. Most have so far avoided reporting losses by not marking their assets to market value and closing redemption windows. Now mark-to-fantasy is starting to end in defaults and sharp losses for the sector. Repurposing bricks and mortar is the new normal. Pickleball anyone? Lower rents mean lower property valuations. Even mainstream media is picking up on the story (and it’s not just happening in America):

Commercial real estate is facing major pressure as vacancy rates grow across the US. CNN’s Vanessa Yurkevich reports on how companies and landlords are being forced to get creative as spaces sit empty.Here is a direct video link.