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Alexander Ineichen  

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  • The Cardinal Question: When Will Rates Rise? [View article]
    Yes, rates will rise when the next tightening cycle begins, or perhaps a bit earlier. That, however, might take a while. The cost of capital also rises when trust is lost. Banks lost trust a couple of years ago and their cost of capital rose so fast and steep that the authorities (via central banks) had to step in. The same logic, I believe, also applies to governments. Fiat money is based on trust. The US government pays less for its capital than Italy because it is less corrupt and more trustworthy. Italy pays less than Greece or Zimbabwe for the same reason. One cannot behave untrustworthy (running printing presses without structural reform) forever. 
    The last slide suggests that the answer to the question in the title is"potentially now". 
    Mar 28, 2013. 01:01 PM | 1 Like Like |Link to Comment
  • Dump Your Hedge Funds And Buy This Stock [View article]
    An investment $100 in the S&P 500 Total Returns Index (dividends not taxed, but reinvested in the index) stood at $124 by the end of 2012. An investment of $100 in the HFRI Equity Hedge Index (a proxy for a portfolio comprised of equity long-short hedge funds) stood at $184 by the end of 2012. This is arguably a big difference.

    One mistake that is often made when examining returns of hedge funds is to only include the bull market. Since March 2009 we are all enjoying a period of reflation, everything has been going up, stocks, bonds, commodities, etc. However, examine hedge funds over the full cycle, i.e., bull market plus bear market that follows, hedge funds nearly always outperform.
    Jan 10, 2013. 12:04 PM | 1 Like Like |Link to Comment