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trueeconomics.blogspot.com / by Constantin Gurdgiev / October 16, 2015
My speaking points on the topic of the Markets Outlook for yesterday’s IG conference:
Short themes:
Theme 1: Markets pricing in advanced economies:
– EV/EBITDA ratios signal overvaluation;
– EBITDA/Interest Expenses ratio is at below 2010 levels (below 14%) despite extremely cheap debt.
A handy Bloomberg chart:
– Global debt cycle has turned – sovereigns are not leveraging as fast or deleveraging, but corporates leveraged up.
– Much of pricing today reflects migration from equity to debt
– In this environment – long only allocations are problematic.
Theme 2: Emerging markets, especially BRICS
– Idea of 3rd Wave – Goldman’s thesis – is based on two drivers: duration of the crisis (‘this can’t be going for so long…’) and firewalls (‘this can’t spill into the developed economies…’) both of which are
– There are no fundamentals to support robust recovery view
– Again, allocations are highly problematic.
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