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Archive for 30. September 2018

U.S. and EU—but Not Germany— Support Land Swap in Balkans

Posted by hkarner - 30. September 2018

Date: 29-09-2018
Source: The Wall Street Journal

Washington and Brussels favor Serbia and Kosovo redrawing their border along ethnic lines, an approach Berlin says would open Pandora’s box

BRUSSELS—U.S. and European Union leaders are converging toward supporting a plan under which two Balkan countries would redraw their fraught common border along ethnic lines, isolating Germany, the continent’s most influential power, in its rejection of that approach, a confidential document shows.

A recent memo by the EU’s foreign service about how to solve a decade-old standoff between Serbia and Kosovo, reviewed by The Wall Street Journal, shows the EU’s executive body has essentially adopted Washington’s argument and rejected Germany’s.

While the agreement indicates that Europe and the U.S. continue to work closely together on foreign-policy initiatives affecting the region, the rift with Germany also shows Washington’s willingness to ignore objections by the continent’s leading power in its own backyard. Den Rest des Beitrags lesen »

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Europe Is Left in the Dust as U.S. Stocks Roar

Posted by hkarner - 30. September 2018

Date: 30-09-2018
Source: The Wall Street Journal

While U.S. and Japanese shares raced ahead, Europe’s shares were left behind in third quarter

European stocks have been left behind by a rally that has taken the U.S. market to record highs in the third quarter.

Few analysts see the region catching up soon, unless there is clarity on the political and trade concerns that pushed investors to sell.

Investors have withdrawn money from European equity funds in 28 of the past 29 weeks, driving the share of Europe in global portfolios to its lowest since January 2015, when the European Central Bank announced its massive bond-purchase program, according to data from fund tracker EPFR and the Institute of International Finance.

That has largely reversed the tide of cash that poured into the region in early 2017, when an election in France elevated investors’ preferred candidate to power. In contrast, funds in the U.S., Japan and even some emerging-market equities have drawn inflows this year.

The Stoxx Europe 600 index rose less than 1% in the third quarter, compared with a 7.2% gain for the S&P 500 and 8.1% for Japan’s Nikkei Stock Average. The European index is now trading below where it was one year ago, compared with an 8.2% gain in a broad index of world stocks.

“U.S. client interest in Europe is very low right now—almost as low as it gets,” said Richard Turnill, BlackRock’s global chief investment strategist.

As the U.S. economy continues its robust run, the gap between 10-year German and U.S. government bond yields has reached its widest since the euro was launched in 1999, according to data from Tradeweb and Thomson Reuters.

The downbeat sentiment comes even as Europe’s earnings expectations for the year have remained stable, the euro and British pound have stopped climbing, and the region’s economy has shown signs of stabilizing after a tricky start.

Our view on Europe is predominantly politically driven,” said Candice Bangsund, portfolio manager at Fiera Capital, which currently holds a smaller-than-usual allocation to European stocks.

The future trading relationship between the U.K., one of the region’s largest economies, and the rest of the continent remains uncertain as Brexit negotiations drag on. Italy’s new government, meanwhile, has significantly widened its budget-deficit target, raising questions about the country’s debt sustainability and relationship with Brussels.

The U.K. and Italy’s benchmark stock indexes have both seen double-digit percentage falls in their price-to-earnings ratios this year amid the uncertainty.

European companies are also more exposed than those in the U.S. to emerging markets, and the developing world has been hit by a rising dollar, expensive oil and concerns about trade protectionism.

Roughly 19% of revenues from companies listed in the Stoxx Europe 600 come from emerging markets, according to FactSet. That compares with 14% for the S&P 500, an index of large-cap U.S. stocks.

Roland Kaloyan, head of European equity strategy at Société Générale, said the correlations between European stocks and emerging markets recently reached levels last seen in 2010.

But trade protectionism is by far the biggest risk to Europe’s outlook, analysts say.

Europe’s auto sector has been hit particularly hard by worries about tariffs, trading down about 23% from its peak in January.

“Europe is more exposed to protectionism because it has a more open economy and has closer ties to China,” said Silvia Dall’Angelo, senior economist at Hermes Investment Management.

Uncertainty about future trade relations has already hit eurozone exports. In manufacturing, export orders failed to grow for the first time in five years.

All this means there will be bargains in Europe, should more clarity come on the political front, some investors say.

European stocks now trade at 13.9 times future expected earnings, compared with 15 at the start of the year.

European companies are seeing revenue upgrades for the first time in a year, according to strategists at UBS . “A lot of investors are looking at valuations and looking for a reason to come back” to Europe, said Mr. Kaloyan.

If we got some sort of clarity on Italy or Brexit, we could see a rebound.”

Much will also depend on whether investors continue to favor so-called growth stocks such as technology companies, which make up a small portion of European indexes. Tech stocks in the S&P 500 are up roughly 19% this year and now make up 21% of that index. Tech makes up just 5% of the Stoxx Europe 600. Unless value stocks—those that are trading for the lowest prices relative to their earnings or underlying net worth—start to outperform, it will be difficult for Europe to pull ahead, fund managers say.

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The ‘Dumb’ Money Is Bailing on U.S. Stocks. That’s Smart.

Posted by hkarner - 30. September 2018

Date: 29-09-2018
Source: The Wall Street Journal By Jason Zweig

Now more than ever, investors need to consider investing in overseas stock markets
The ‘Dumb’ Money Is Bailing on U.S. Stocks. That’s Smart.

Does it make sense to invest anywhere but in the U.S?

While the S&P 500 is within 1% of its all-time high, European markets are flat, Chinese stocks are in a deep slump and the Japanese market—after a huge recent run-up—has finally clawed its way back to where it was 27 years ago.

Through Aug. 31, the S&P 500 has outperformed international stocks, as measured by the MSCI World ex USA Index, over the past one, three, five, 10, 15, 20, 25, 30, 35, 40 and 45 years, according to AJO, an institutional investment manager in Philadelphia. Had you put $10,000 in each in 1973 and reinvested all your dividends, your U.S. holdings would be worth $1.06 million; your international stocks, $356,000. Den Rest des Beitrags lesen »

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In the struggle for AI supremacy, China will prevail

Posted by hkarner - 30. September 2018

Date: 27-09-2018
Source: The Economist

Or so reckons Kai-Fu Lee, a tech insider, in “AI Superpowers”

AI Superpowers: China, Silicon Valley and the New World Order. By Kai-Fu Lee. Houghton Mifflin Harcourt; 272 pages; $28.

CHINA’S “Sputnik moment” came on May 27th 2017. On that day an algorithm thrashed Ke Jie, the world’s best player of Go, an ancient and demanding Chinese board game. Mr Ke’s defeat by AlphaGo, an artificial intelligence (AI) system developed by DeepMind, a British firm that had been bought by Google, was as much a blow to China’s psyche as the Soviet satellite was to America’s self-esteem in 1957. Within months, China announced ambitious plans to dominate AI by 2030.

Kai-Fu Lee thinks it will succeed. He is well placed to judge. He moved from Taiwan to America at 11, earned a PhD in AI in the 1980s and has been a senior manager at America’s mightiest tech firms, including Apple, Microsoft and Google. Now he runs a Chinese venture-capital fund, which gives him a ringside seat for the contest between what he calls the two “AI superpowers”, China and America.

He thinks China will win because it has the edge in the four determinants of AI success: brains, capital, regulation and data. His verdict on the last three criteria is largely persuasive. For example, China’s internet economy generates vastly more data than any other, particularly in the area of payments—many Chinese merchants eschew coins and currency in favour of digital money. Meanwhile, whereas American cities are restricting self-driving cars, the district of Xiong’an, 60 miles south of Beijing, is being built from scratch to accommodate them (along with 2.5m people). The mayors of Chinese cities are splashing cash on AI startups. Den Rest des Beitrags lesen »

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Just Incredible

Posted by hkarner - 30. September 2018

Date: 29-09-2018
Source: The Guardian by Michael Lewis
Subject: ‘This guy doesn’t know anything’: the inside story of Trump’s shambolic transition team

Michael Lewis, author of Moneyball and The Big Short, reveals how Trump’s bungled presidential transition set the template for his time in the White House

Chris Christie noticed a piece in the New York Times – that’s how it all started. The New Jersey governor had dropped out of the presidential race in February 2016 and thrown what support he had behind Donald Trump. In late April, he saw the article. It described meetings between representatives of the remaining candidates still in the race – Trump, John Kasich, Ted Cruz, Hillary Clinton and Bernie Sanders – and the Obama White House. Anyone who still had any kind of shot at becoming president of the United States apparently needed to start preparing to run the federal government. The guy Trump sent to the meeting was, in Christie’s estimation, comically underqualified. Christie called up Trump’s campaign manager, Corey Lewandowski, to ask why this critical job had not been handed to someone who actually knew something about government. “We don’t have anyone,” said Lewandowski. Den Rest des Beitrags lesen »

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