London Calling

06.11.2017
 Eran Peleg, Chief Investment Officer       The ice age is coming, the sun's zooming in Meltdown expected, the wheat is growing thin Engines stop running, but I have no fear 'Cause London is drowning, and I live by the river -        “London Calling”, The Clash   The Bank of England raised rates for the first time in a decade. The last time it did so was in July 2007, just before the Great Financial Crisis. Interest rates were very low since due to the deflationary, weak growth environment we have been in.     On the face of…
 Eran Peleg, Chief Investment Officer     Prior to World War I (WWI), the world’s largest, richest and most dominant imperial power was Great Britain. The British Empire famously occupied one quarter of the globe. British colonial possessions in the late 1800s included Canada, India, Ceylon (Sri Lanka), Burma, Australia, New Zealand, Hong Kong, several Pacific and Caribbean Islands, South Africa, Rhodesia, Egypt and other parts of Africa. After the Great War, the world began to change and the Empire started to lose ground (ultimately, it lost its Superpower status at the end of World War II).   World War…
 Eran Peleg, Chief Investment Officer   In case you haven’t noticed, things have changed. We are witnessing a global growth upswing that we have not experienced in several years. In previous years, growth was very meager. Some countries were in or near economic recession. Corporate earnings were dropping in many regions, including in the US. But growth – of the more powerful, globally-synchronized kind – is back. The OECD is now forecasting that the global expansion will accelerate this year and next, to 3.5% and 3.7%, respectively, the fastest pace since 2011. In addition, for the first time since 2007,…
 Eran Peleg, Chief Investment Officer Land of Confusion   I must've dreamed a thousand dreams Been haunted by a million screams But I can hear the marching feet They're moving into the street.   Now did you read the news today? They say the danger's gone away But I can see the fire's still alight There burning into the night.   There's too many men Too many people Making too many problems And not much love to go round Can't you see This is a land of confusion….   From “Land of Confusion” - Genesis     Price volatility in…
 Eran Peleg, Chief Investment Officer   When the Pessimism of Others Becomes Your Friend   In recent weeks, a new fad has emerged amongst market strategists, hedge fund managers and media market commentators – everyone seems to be warning against a looming major market correction.   In contrast to moderate market pullbacks, that can happen anytime for the most trivial of reasons (especially in an overbought market), major market corrections are less frequent and will occur when market participants least expect them. They are sharp because market participants do not see them coming. They are not prepared for them. A…
 Eran Peleg, Chief Investment Officer Passive versus Active Management: A False Dichotomy   2016 was a record year of inflows into index-tracking, passive, funds -- over $430bn -- and the share of US equity assets held through ETFs and index funds rose to more than a third of the total, thus doubling their share over the past ten years.   It is not a coincidence that one of the most heated investment debates today centers on active versus passive investing. Passive strategies usually come in the form of index-tracking exchange-traded funds (ETFs) or mutual funds, charge lower fees and aim…
 Eran Peleg, Chief Investment Officer French Presidential Election: What Will Happen if Two Euro-Sceptic Canidates Make it to the Second Round?   The first round of the French presidential election is scheduled for Sunday.   If you examine the recent evolvement of opinion polls, you will notice a significant development: Melenchon, the far-left candidate, has strengthened considerably. See the rising red line in the chart below.                                                                     …
 Eran Peleg, Chief Investment Officer Europe is Doing Better Than You Think      In recent months, there has been much focus on the improving outlook for the US economy. Prices of US growth-oriented assets have move up swiftly to reflect this rosier scenario.   But the reality is that economic activity is looking better outside the US as well – a prime example is Europe.   The European region suffers from many structural problems which put a lid on the long-term trend rate of growth. However, this does not mean that it cannot enjoy cyclical upswings in economic growth.…
   Tsvi Mark, Analyst Green Bonds: A Win-Win     Finance has been growing greener and greener. The sprouting of green finance is probably best displayed in the budding world of green bonds. Green bonds are not named such because they come in a different color, but rather because they are issued to back environmentally-friendly initiatives or firms.  To receive the label of a Green Bond, the issued bonds must either come from a “green” company (companies focused exclusively on environmental issues – for example, one that builds and installs solar panels for homes and business) or from a company…
 Eran Peleg, Chief Investment Officer Are Investors Too Compacent About Fed Rate Increase?    Economic activity and inflation data have been on the rise recently. Not just in the US, but more globally. On several occasions recently, Fed officials have made it clear that they are looking to increase rates. However, investors, who are probably looking mainly in the rear-view mirror, do not believe them. Fed Funds futures (market participants' future expectations) currently reflect a shallower path of rate rises than Fed officials are predicting. In the short-term, for example, interest-rate markets are reflecting only a 40% probability of a…
 Eran Peleg, Chief Investment Officer The Writing Is On the Wall     The Berlin Wall came down in 1989. Since then, we have enjoyed a relatively stable geo-political environment. We have had wars from time to time. However, these tended to be regional in nature and did not involve or result in significant tensions between the leading global powers. In reality, there was really only one global power – the United States of America.   Things may be changing. China and Russia are increasingly challenging the position of the US. A few days ago, at an international conference, Mr.…
 Eran Peleg, Chief Investment Officer The Odds Are Stacked Against a Trump Re-Election in 2020     I am not a political analyst. However, I am the student of economic history. And at least as far as economics go, the odds seem stacked against a Trump re-election in 2020.   How is that? The argument runs as follows:                                                                                                                                                                                                                                          In recent US history, an economic recession typically occurs every 5-10 years. In the 50+ years observed (see table below), we never had more than 10 years passing between two subsequent recessions. It has now been nearly 8 years since the…
 Eran Peleg, Chief Investment Officer Is the Russian Bear Now a Bull?     The Russian equity market and the Ruble have strengthened considerably in 2016 – up around 30% and 15%, respectively. That said, from a very big picture perspective, the Russian equity market has been down in recent years, underperforming its global counterparts. The main factors driving it down have been:   Geopolitical considerations / economic sanctions Declining growth and rising inflation Low commodity prices   Russia (in USD terms) versus global equities over 10 years:                        …
 Eran Peleg, Chief Investment Officer When is the Pound Cheap?     The British Pound has dropped significantly in recent months, since the Brexit vote at the end of June. But is it actually cheap?   Economic models can guide us in establishing whether currencies are cheap or expensive. According to Purchasing-Power-Parity (PPP) models (https://en.wikipedia.org/wiki/Purchasing_power_parity), the answer is YES.                                                                                  …
 Eran Peleg, Chief Investment Officer The Risks of Complacency     The VIX index stands at 11.4%.   The VIX is a measure of the implied volatility of S&P 500 index options. It reflects investors' forward-looking expectations of US stock market volatility. When investors expect high volatility and are nervous, VIX rises. When they are calm, it falls.                                                                                    …
 Eran Peleg, Chief Investment Officer Higher Bond Yields: Are We There Yet    First some illustration from the Simpsons: https://youtu.be/a8k1eTEw4rQ   Bond yields have risen recently on the back of increased growth, inflation and interest rate expectations. The benchmark 10-year US Treasury bond yield has shot up to 2.59% from as low as 1.37% in July. Around a third of this move, up to around 1.8% yield, was an unwinding of the overbought conditions that prevailed after the June-end Brexit vote when investor fear drove up prices of safe-haven assets. However, the remaining two-thirds (from 1.8% to around 2.6%) occurred…
 Eran Peleg, Chief Investment Officer Will the Italian Referendum Deliver Another Shock to Financial Markets? A constitutional referendumwill be held in Italy on Sunday, 4th December, 2016.Voters will be asked whether they approve of amending theItalian Constitutionto reform the appointment and powers of theParliament of Italy, as well as the partition of powers of State, Regions, and administrative entities. Should the voters approve the bill, it would achieve the most extensive constitutional reform in Italy since the end of the monarchy. In accordance with Article 138 of the Constitution, a referendum was called because the constitutional amendment had not been…
  Eran Peleg, Chief Investment Officer   “Volatility is a statistical measure of the dispersion of returns for a given security or market index… Commonly, the higher the volatility, the riskier the security.” (Investopedia Definition)   After a quick July rebound from the Brexit vote sell-off (the referendum took place on June 23rd), financial markets settled back into their range-trading, low-volatility, state. This has been the state of the market for two years now, since the summer of 2014 -- only to be interrupted at times by swift, fairly unexpected, sell-offs. Volatility should be a reflection of the level of certainty (or uncertainty) about…
Cybersecurity is everywhere. Hardly a day goes by without another security breach being reported. Large retailers, small municipal governments and even individual private citizens are all equally targeted by computer hackers. It has become so common that the smaller breaches are often relegated to the back pages of the news. Many serious breaches get no coverage by the mainstream media at all, and are left for the bloggers and the tech news sites to cover. It seems that only the largest scale cybersecurity breaches and leaks make it to the front page.    The increasing number and frequency of these events…
The Clarity Private Income Portfolio, or CPIP for short, successfully launched with the first round of investments closing at the end of September. This was a satisfying capstone to months of hard work from the investment team, the back office, and the client relationship managers poured into making this project a reality for our clients. CPIP was born from several White Papers we have shared with our clients in the  past few years on the ever growing concern over traditional fixed income. CPIP is a multimanager income distributing fund designed to act as a medium term replacement for traditional fixed…
  Hagai Netser, Portfolio Manager   The third quarter of 2016 can be characterized by two contradictory market forces: On the one hand volatility was very low, dropping to near record lows for recent years (the VIX index hitting levels of 11-12% during August and September), while on the other hand - market participants and as a result markets themselves, were extremely edgy, fearing each burst of volatility might be the signal of a lurking market correction. The quarter started positively as markets rebounded post Brexit (June 23rd), returning 4.31% during July as measured by the MSCI All Countries World Index. This…
The quarter started positively as equity markets rebounded post Brexit, returning 4.31% during July as measured by the MSCI AC World Index in local currency terms. This recovery however, did not continue during August and September as equity markets were anemic, returning +0.7% in aggregate. On the back of Brexit concerns, the British Pound fell to a 31-year low vs the Dollar, trading as low as $1.2721 - its weakest point since 1985. Investment grade corporate bonds returned +1.9% as investors kept looking for yield. Chinese equities rallied 10% on the back of positive Manufacturing PMI readings: 53.5 for August…

Back Office

25.12.2016
  Clarity Capital is looking to hire a new associate for our Back Office team. The new associate will be responsible for:    Daily data updates for clients accounts from both Israeli and Foreign banks.  Daily verification of client accounts and data.  Managing relations with local and foreign banks for Clarity clients. The Back office Associate should have the following qualifications:   Relevant professional experience of up to three years.  Background in Financial Markets or Trading High level experience in excel Background or knowledge of bank systems (Advantage)  Background or knowledge of Danel-El, Tsuah, FMR systems (Advantage)  High level of…
Clarity Capital was honored to be invited to lead a discussion at the Eisner Amper Alternative Investment Conference on June 14th in New York City. Eisner Amper is one of the largest US accounting firms and every year hosts several conferences on a wide variety of accounting and investing subjects where global leaders in their fields are invited to lead discussions on their area of expertise.       Laurence Schreiber, Co-President of Clarity Capital, was invited to speak at their conference this year and lead the discussion on Multifamily Offices. Clarity is proud to be recognized as a global…