Investment Letter September 2017

Over the past 10 years – in the liberal parts of the world at least – political and financial economies have forked apart. The large scale corporate world has become stronger as government authority has paled. Doubtless, on the government side of the ledger, this is partly due to an erosion of faith in governments… Read more »

Investment Letter June 2017

On the last page of his book, Homo Deus, Yuval Noah Harari poses the questions: “What’s more valuable – intelligence or consciousness? Intelligence is decoupling from consciousness. What will happen to society, politics, [investment] and daily life when nonconscious but highly intelligent algorithms know us better than we know ourselves?” I have added the word… Read more »

Investment Letter from Hong Kong March 2017

The stimulating free port of Hong Kong remains a compelling eye glass through which to comprehend China, its politics and economy. All its 5.5 million adult inhabitants are China watchers, by inclination or necessity. Their world view was formed, to some extent, by the Cultural Revolution. The most recent arrivals in Hong Kong are investors… Read more »

Investment Letter January 2017

The election of Donald Trump has caused perturbation from Baltimore to Beijing: a rude volte face to the graceful Obama years, a reversal of international liberal orthodoxy, a rebuttal of globalisation, an aggressive restatement of weaponised American hegemony, and on. Those that voted for him love it, much of the rest of the world is… Read more »

Investment Letter December 2016

The election of Donald Trump has caused perturbation from Baltimore to Beijing: a rude volte face to the graceful Obama years, a reversal of international liberal orthodoxy, a rebuttal of globalisation, an aggressive restatement of weaponised American hegemony, and on. Those that voted for him love it, much of the rest of the world is… Read more »

Investment Letter November 2016

We draw close to the end of the Obama presidency. The very fact of it was remarkable even if the substance of it disappointed almost everybody. What comes next? The world, bar Vladimir Putin and those in America who will vote for Trump, would undoubtedly prefer Hillary Clinton to win the US election but it… Read more »

Investment Letter September 2016

The outperformance of high quality equities has been one of the most distinguishing factors of the post global crisis period. “Quality” is loose moniker and there are disparate characteristics that can be construed as quality. More often than not it is associated with higher margin companies with solid balance sheets and well established and well… Read more »

Investment Letter July 2016

In the historical context, the landscape of modern investment has been defined by the relatively free movement of ideas, capital and increasingly, people. Through the eyes of most urban folk and the majority of the political elite, these are generally taken to be unalloyed gains, uncontroversial goods. That a larger number have voted for a… Read more »

Investment Letter May 2016

There have been a fair number of reversals already this year: a retracement in oil prices, the cooling of the dollar, the rise of gold, recovery in commodity currencies… the list continues. The great immovable force is the backdrop of high indebtedness, now a pervasive global phenomenon. The Debt Supercycle describes the defining economic development… Read more »

Investment Letter March 2016

The particular combination of a supported Chinese currency, stronger oil prices and dovish Central Banks has been helpful to markets, at least in the near term, with benchmark equity indices striving to erase January’s precipitous falls. We have also seen a counter-trend recovery, although uneven, in Emerging Markets, part helped by a recovery in the… Read more »

The Cerno Capital Investment Quarterly Issue number 5

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Investment Letter January 2016 (Part 2)

We were recently sent a piece of strategy research from a respectable macro consultancy. The article was entitled “No Recession = No Bear Market”. This statement of logic supposes that bear markets are the consequence of economic recessions, which they most often are. It ignores the possibility that measurable bear markets (-20% on a given… Read more »

January 2016 – Chartbook

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Investment Letter January 2016

For the past six post-crisis years, equities have been at the vanguard of financial risk asset performance. We believe they have now entered a bear market. The economic recovery that took place post the crisis was unusual and perhaps we should expect this bear market to be different, too. For although it is sometimes possible… Read more »

Investment Letter December 2015

The best performing global equity sectors in 2015 have been Consumer Discretionary and Technology (both +4.6%), hardly a bonanza. The worst two have been Energy (-23.7%) and Materials (-15.9%), deflation in two nutshells. Whilst the positive side of the coin has not been very positive at all, the dispersion in sector returns has been high…. Read more »

The Cerno Capital Investment Quarterly Issue number 4

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Investment Letter October 2015

With a few exceptions, 2015 will be remembered as an unremarkable year for financial returns in mainstream portfolios. As a multi-asset investor with a bias to longer term investment the lack of opportunity has been comment-worthy, a phenomenon in itself. Like London tube trains that are too packed to enter, we have remained on the… Read more »

Investment Letter September 2015

Sinology used to be a specialist occupation of a few classically trained civil servants: it lead to a career in the foreign service and postings to Hong Kong and Beijing. Suddenly, everybody is a sinologist. We have described the change in fix of China’s currency on August 11 as a regime change: http://cernocapital.com/rmb-regime-change/ On reflection, that… Read more »

The Cerno Capital Investment Quarterly Issue number 3

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Investment Letter June 2015

At the time of writing, the Greek crisis has entered an intense phase. A clash between political logic and economic reality. The logic of coaxing Greece back to the European bosom is compelling, as is the domestic logic of remaining in the Eurozone (on better terms), when compared with capital controls, ejection from the euro… Read more »

Defining Megatrends: Demographics & Debt

When investors talk of long-term trends, they are often referring to the next three to five years. Few envisage horizons past the ten year mark. Yet super long-term trends do exist and are slowly but definitively changing the world socially, economically and politically. In our minds, some of the largest of these are demographics, debt,… Read more »

Investment Letter May 2015

The tale of the tape is that global equities are up 7-ish and bonds down 2-ish year to mid-May: a 9-ish variance in favour of equities. This, most basic of summaries of the key asset allocation call between the frontline liquid asset classes, is, however, significant. A 60-40 investment style, the acme of balanced investment,… Read more »

Investment Letter April 2015

Last week, the investment group at Cerno Capital made its customary annual trip to the GMO London conference. This is the only such investment conference that the whole team attends, such is the esteem in which GMO is held here on Sackville Street. For those readers not familiar with the firm, GMO is an acronym for… Read more »

Investment Letter March 2015

In an environment where asset markets lack the depth of opportunity, opinion has become shrill, sustainable advances more elusive, investment potholes ever deeper. Currency attribution has begun to loom large in portfolios. This can be perceived in a number of guises: dollar strength, euro weakness, EM weakness, yen stability. Like beans on a drum, there… Read more »

The Cerno Capital Investment Quarterly Issue number 2

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Investment Letter February 2015

In the famous outlaw film of 1969, Butch Cassidy and the Sundance Kid, two anti-heroes of quite distinct personalities combine forces. The early scenes of the film are filled with tales of derring-do, laddish behaviour, drunkenness and opportunistic heists. By virtue of their charm – and the contrasting blockheadedness of the authorities – the pair… Read more »

Investment Letter January 2015

Last year’s winners could be described as a near equal assemblage of deflationary and reflationary themes. The six best performing mainstream financial assets were as follows: China Shanghai ‘A’ shares Spanish government bonds Italian government bonds German bunds S&P 500 Nasdaq Composite Excluding Chinese shares, whose rise was boosted margin, margin that is now being… Read more »

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