Perspectives Blog

U.S. rates – An intriguing six point three

Zach Pandl, Portfolio Manager and Strategist | June 9, 2014

…on this point. One view holds that while the unemployment rate matters at some level, Fed officials are focused on much broader measures of slack, and have perhaps put renewed emphasis on wages as well. For instance, a recent paper by economist Andrew Levin (previously Janet Yellen’s chief of staff) puts the degree of broad labor market slack at around 5.5 million full-time equivalent workers (see figures 1 and 2; these are our estimates using Le…

How bad is China’s credit crisis?

Weili Jasmine Huang, Senior Portfolio Manager | February 3, 2014

…ough the pooling of proceeds from wealth management products provided by banks. China’s shadow banking system is by no means simple in structure but is not dominated by complex derivatives.” (from April 2013 San Francisco Fed paper “Shadow banking in China: Expanding Scale, Evolving Structure”) • China’s trusts sector consists of 60 or so trust companies, which are largely owned by agencies of the states. That means the government still has a tig…

Surveying the landscape for M&A

Robert McConnaughey, Director of Global Research | March 3, 2014

…ver, longer term results paint a less pretty picture (Exhibit 3). Over the longer term, the results for acquirers have generally been poor, with average underperformance over one, two and three year periods. A recent academic paper on the subject by Mehmet Akbulut of California State University* has drawn a lot of attention, particularly in the wake of some recent all stock deals in the technology sector. He goes one step further, by examining th…

A primer on preferred securities

Carl Pappo, Head of Core Fixed Income | March 10, 2014

…a way to buy a high quality company and receive an enhanced yield relative to the senior unsecured debt. Currently, the yield on traditional preferred securities is 200 to 250 basis points above the yield of senior unsecured paper. • U.S. corporations can deduct 70% of income received on certain preferred securities (DRD Preferred securities). • Individuals pay a maximum statutory rate of 20% on qualified dividend income (QDI) distributions, rel…

Holding multiple investments does not ensure better diversification

Columbia Management, Investment Team | April 23, 2014

…e for investors looking to put this into practice is that there simply are not that many traditional assets out there with low correlations to effectively lower the risk in a portfolio. [For a detailed analysis, see our white paper, “Reducing risk: Absolute return and the pursuit of better diversification.”] This is why well-designed absolute return products — which seek positive expected returns through multiple return streams with consistently…

Steady as she goes

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | April 7, 2014

…ore in hours worked. Gains across sectors in March were close to past norms, except manufacturing which was especially weak (down 1K overall). Weakness in manufacturing was mainly in non-durables (food, plastics, apparel, and paper). Some of the weakness may have been due to weather, but I would point to payback from the inventory swing. Gains were at or slightly above trend in professional/business services with about half from temporary jobs. S…