AQS Performance and Perspective - November, 2017

 

AQS| Asset Management for Insurers

 

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Performance

  

Client 1         Client 2

  

Client 3         Client 4

  

Client 5         Client 6

 

Client 7         Client 8

 

Client 9

  

Managed portfolio metrics updated monthly.

 

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Corporate Issuance 12 months

  

 

Corporate Issues Last 30 Days

 

Inflation?

PPI and CPI were released on October 14 and 15.  The reports showed robust price growth.  This on the heels of September PPI/CPI which firmed in the face of hurricanes Harvey, Irma and Maria.  Toss in an October rebound in nonfarm payrolls and we have the beginnings of ........inflation?  It's as broad as it is deep.  We go into detail in this month's AQS Point of View.

 

Fed Chair Nominee Jay Powell.

President Trump nominated Jerome Hayden (Jay) Powell to serve as the next Chairman of the Federal Reserve.  He's served on the FRB Board since 2012, is a consensus builder, notably dovish for a Republican and has voted for 4 of the last 5 rate increases.  Instead of spending your time reviewing his position papers or his senior thesis (South Africa, Forces for Change), we've uncovered what we believe to be a clear indication of his legacy in the making.

 

Artificial Intelligence - AI - Coming to an Office Near You?

Love this stuff.  Periodically, the programmers get out, breathe fresh air and are determined that a computer can "think".  

 

If Windows 10 or Siri or Office 2016 is any indication - we'll call it unlikely.  It's an interesting concept that's been around since the advent of the electronic computer.  History of AI here.

 

For the moment, let's try to avoid the glitches.  Remember the movie WestWorld?  Where nothing can go worng.

 

AQS Point of View

 

AQS vs. Select Barclay's Total Return Data

 

 

Chicago Municipal Debt:  AAA?

This is something you haven't seen in a while.  The nation's third larges city, rated junk by

 

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Moody's two years ago, rated AAA.  With public pension debt at $36 billion, $500+ million in budget deficits over the next three years and a school system that flirted with insolvency it could be considered a miracle of:

a. Fiscal restraint

b. Finance

c. Alchemy

 

This squares with a presentation AQS made recently about unsecured debt.  We titled it:  "Your collateral has legs."  Bloomberg goes into the details.

 

 

Peer to Peer (P2P) Lending

 

https://mlsvc01-prod.s3.amazonaws.com/acbfd869001/6a6d5243-8a75-4417-a483-838a799bc3f9.pngHeard of Peer to Peer (P2P) lending?  Ideally, P2P provides a way for individuals who want to invest to lend to those who want to borrow.  It has experienced phenomenal growth in the past decade.  Instead, it's become more like institution to peer.  Driven by demand at the institutional level, underwriting has become lax.

 

Sound familiar?  Institutional demand has been blamed for the lax underwriting that precipitated the financial crisis.  AQS has taken a look at this latest ABS fodder.  See it here.

 

 

The Smartest Guy in the Room - Currently Anyway.

 

https://mlsvc01-prod.s3.amazonaws.com/acbfd869001/6ae279ae-1517-4906-933b-647bd70edcf1.pngDo you have a twitter account?  Did you before Trump was president?  We've quoted Jeff Gundlach, Founder, CEO and Chief Investment Officer of DoubleLine Capital more than a few times lately.  Mostly because he's been right.

 

He said Donald Trump would win the presidency in January, before the primaries.  He claims he's picked 12 in a row.

 

Lately, Jeffrey has been making some calls in High Yield.  We've summarized a few for you.

 

Don't say we didn't try to tell you.

 

 

 

NAIC 2 Yields Still Low and Tight

10 year NAIC 2 Yields and Spreads

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 Killing my eyes - make it bigger!

Mutual Fund and ETF Flows

Maybe this has something to do with it?

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Killing my eyes - make it bigger!

 

 

 

Client results shown are calculated using SIA standard investment formulae for portfolios AQS has managed in excess of one year.  Each portfolio complies with governing investment statues, regulatory testing standards and metrics.  Results vary based on the client's specified investment policy, risk tolerance, profit objective and product mix.  AQS works with each client to develop a global understanding of objectives for income and surplus growth as well as product opportunities that represent synergies in terms of growth and diversification.