Wednesday, October 26, 2016

Bonddad's Thursday Linkfest

For those of you who follow me on Twitter, I'm moving from @captivelawyer to @originalbonddad.  

I'm a Financial Adviser with Thompson Creek Wealth Advisers and an attorney with the Law Office of Hale Stewart

Mario Draghi Explains Why Rates Are So Low

The first is a secular slowdown in productivity growth across advanced economies, coupled with pessimistic expectations about growth potential in the years to come, which has reduced the expected rate of return on capital. And if that real rate of return falls, it is logical that firms will only be willing to borrow at lower real rates. This is reflected in lower long-term real yields.

The second factor is a global imbalance of saving and investment, which has led real yields to fall even relative to growth prospects. On the saving side, a “global saving glut”, produced among other things by ageing populations, has bid up the price of safe assets at a time when the supply of those assets has been shrinking, thereby compressing real yields. Factors such as a decline in the relative price of capital goods have also led to a fall in desired investment.

And this has been exacerbated by the third factor: the debt overhang in the public and private sectors bequeathed by the financial crisis. This has further raised saving – as all sectors deleverage – and depressed investment and consumption.

As a consequence, the natural rate of interest – which is the real interest rate that balances desired saving and planned investment, at a level consistent with output being at potential and stable prices – has fallen over time, to very low or even negative levels. And whatever the drivers behind this, central banks have to take it into account and cut their policy rates to commensurately lower levels.

Procter & Gamble saw organic sales and volumes rise in all of its segments, spurred by gains in shampoos such as Pantene and Head & Shoulders. Even the company's shaving segment, which has felt the impact of lower-cost competitors such as Unilever's recently acquired Dollar Shave Club, notched a slight sales gain likely on the back of new offerings from the Gillette brand. By major region, sales in the U.K. remained "challenging" post the country's Brexit vote, P&G Chief Financial Officer Jon Moeller said to reporters on a conference call, while sales in China rose by 2%.

About 500,000 solar panels were installed every day last year as a record-shattering surge in green electricity saw renewables overtake coal as the world’s largest source of installed power capacity.

Two wind turbines went up every hour in countries such as China, according to International Energy Agency officials who have sharply upgraded their forecasts of how fast renewable energy sources will keep growing.

“We are witnessing a transformation of global power markets led by renewables,” said Fatih Birol, executive director of the global energy advisory agency.

1-Year Chart of FAN and TAN ETFs