Recently, I was at an event and heard a presentation from the Chief Investment Officer at RBC Asset Management. As RBC being the 4 largest bank in North America, it has been doing fairly well in this crisis. Now in sum, from what I gather from the presentation is that he is very optimistic. In his 45 min speech I was bombarded with technical analysis and forecasts.
"This crisis is big but the global economy has absorbed some huge hits over the past two decades, and the U.S. balance sheet can accommodate the crisis."
The roots of this crisis is clearly subprime mortgage. What is interesting is that prime mortgage originations have been decreasing since 2005, but in a period of less than a year, u.s. mortgage origination's from subprime rose almost 30%. Why did in one year was there such a large increase in subprime mortgages?
The housing bust is not over, but the rate in change of prices is decreasing.
Some people have a sentiment that there is stagflation however, inflation is receding as a risk.
"Collapse in the equity markets sens indices far below fair value."
"The global stock are now marked down to 1974 levels."
"Research summarizing five banking crises reveals serious declines in equity markets during the first year, then a sharp recovery."
These were some of the statements made by the CIO. In a nutshell, his sentiments is that this is a crisis, and that we are going into recession. However, recession does not mean the end of the world. The financial system will not fail but there will be less economic growth. In the end, we will have to sit this out and wait till investor confidence returns.
The economy is like a giant engine, but throw in a wrench and you can still stall it.
"This crisis is big but the global economy has absorbed some huge hits over the past two decades, and the U.S. balance sheet can accommodate the crisis."
The roots of this crisis is clearly subprime mortgage. What is interesting is that prime mortgage originations have been decreasing since 2005, but in a period of less than a year, u.s. mortgage origination's from subprime rose almost 30%. Why did in one year was there such a large increase in subprime mortgages?
The housing bust is not over, but the rate in change of prices is decreasing.
Some people have a sentiment that there is stagflation however, inflation is receding as a risk.
"Collapse in the equity markets sens indices far below fair value."
"The global stock are now marked down to 1974 levels."
"Research summarizing five banking crises reveals serious declines in equity markets during the first year, then a sharp recovery."
These were some of the statements made by the CIO. In a nutshell, his sentiments is that this is a crisis, and that we are going into recession. However, recession does not mean the end of the world. The financial system will not fail but there will be less economic growth. In the end, we will have to sit this out and wait till investor confidence returns.
The economy is like a giant engine, but throw in a wrench and you can still stall it.
0 comments:
Post a Comment