On the Outlook for Global Assets; Are Carbs Really That Bad for You?; The Internet Addiction!

From: aditya rana
Date: Sat, Jan 7, 2017 at 1:53 PM
Subject: On the Outlook for Global Assets; Are Carbs Really That Bad for You?; The Internet Addiction!


The World MSCI US$ stock index has continued with its upward momentum from last year, rising 1.9% during the first week of the year, after an impressive 5% rally over the last three months. The US market led the major markets with an impressive 7.5% 3-month return, with Europe at 4.5%, Japan at 1.0%, while EM markets have lagged at -2%. The best performer over the last three months has been Russia which has posted a bewildering 19.7% return, with Turkey (-17%), Mexico (-14.5%) and Brazil (-7%) bringing up the rear. Is this trend likely to continue for the rest of the year? Rather unlikely, as argued by the $165Bn asset manager/advisor Research Affiliates. To summarise:

-The conventional wisdom is that the expected Fed rate hike in December will lead to a stronger dollar and weaker EM currencies. This rationale follows from the 1994 “tequila” crisis, when the Fed hiked rates aggressively leading to higher borrowing costs on Mexico’s short term dollar debt and a subsequent collapse in the Peso.

-The current circumstances relating to EM are very different, with many EM countries having developed deep local bond markets over the last two decades, and with governments financing mostly in their domestic markets, the relationship between US interest rates and EM FX has been dramatically altered.

-Since the 1994 tequila crisis, modest rises in US rates have typically been followed by stronger growth, declining volatility and rising EM FX rates resulting in higher total returns for EM currencies (see chart below).

-Looking at an event study of US interest rate cycles, the case for a positive relationship between rates and EM FX is further bolstered, with the US dollar consistently depreciating against a basket of eight EM currencies, following the first Fed rate hike, with an average depreciation of 4.5% (see chart below).

-Another reason supporting EM currencies is valuation, with EM FX continuing to trade at discounts to the dollar not seen since the Asian currency crisis and the Russian debt default of the late 1990s.

-Even if EM currencies just move back halfway to historical norms, the FX movement alone will provide an excess 0.75% return in addition to the 2% real yield offered by the EM index compared with 0% real yield provided by the developed FX index.

-Moving to the US election risk, contradictory statements by the president-elect and lack of policy specifics, have led to choppy markets in the EM world, and this volatility is likely to persist until his policies are better defined.

-Trump will face a major uphill task in effecting major changes, unless they fit with the priorities of a Republican Congress. Will they fund a 2,000 mile wall, finding and deporting 11 million refugees or a global trade war? Unlikely. However, they will welcome deregulation, lower corporate tax rates, and infrastructure spending. This should lead to a stronger dollar, higher rates and inflation – this view has already largely priced into markets.

-A buoyant private sector could simultaneously be good for the US economy and bad for the stock market. Over the past few years, low private investment has been hoarded in the US stock market (via buybacks). Going forward, US stocks will have to compete with a buoyant private sector , offering competitive returns with new business ventures and higher bond yields. Capital for these ventures will also have to be funded by the stock and bond markets. Lastly, fast-retiring baby boomers will be converting saved capital into goods and services for consumption. This is likely to lead to a normalisation of Shiller P/E ratios in the coming years.

-With a better US economic outlook, and rising US rates, investors will be forced to diversify into cheaper markets, including internationals tocks (Europe, Australasia and the Far East), and EM stocks, bonds and currencies.

-What about trade wars? Surprisingly few people have read Trump’s 1987 book – “The Art of the Deal”. While the negotiating tactics in the book are questionable, it does help to better understand the president-elect. In the book, he advocates taking an extreme position in order to encourage the other party to move towards what you want. Once they have moved as far as you think is plausible, you surprise them by agreeing. It is therefore important to focus more on what he does than what he says. The consensus view is that he will be awful for EM – however, if US growth improves and mutually beneficial trade agreements are agreed upon – Trump could turn out to be surprisingly good for EM.

-Therefore the recent strength in the dollar, and weaker EM assets, offers a great rebalancing opportunity- in the opposite direction to the consensus view.

A compelling argument to remain weighted in EM stocks, bonds and currencies as well as on-US developed world stocks, and use the current reversal to actually rebalance into more of the same.

Are carbs really that bad for you?

One of my favourite writers on nutrition, Dr. David Katz, Director of the Yale University Prevention Research Centre , founded the “True Health Initiative” with the its “ mission to create a culture free of preventable chronic disease by demonstrating and disseminating the global consensus on the fundamental, evidence-based truths of lifestyle as medicine. Together we can build a movement around the fundamentals of healthy living, preventing as much as 80 percent of chronic disease and premature death.”. They produce a monthly newsletter with the objective of clearing the air on the nonsense prevalent in much of the media on many popular dietary fads. I found the following article interesting with it focus on dispelling the “carbs are bad” myth!

And how do we reconcile “Are carbs really that bad for you?”with the “eat whole grains” health advice?
http://www.truehealthinitiative.org/ Dec 3, 2016.

The Study Conclusion

-A study in the British Medical Journal showed an association between consuming whole grains and a lower risk of premature death from cancer, diabetes, coronary heart disease, infectious disease, and respiratory disease. Meanwhile, another study in the journal Circulation found that people in the study who ate the most whole grains had a lower risk of premature death from all causes, as well as specifically from cardiovascular disease.

-A Look at the Media Coverage

Headlines proclaimed the life-extending benefits of whole grains: “Eating 3 Servings Of Whole Grains Reduces Risk Of Early Death By 20%” (Medical Daily), “Whole Grains Help People Live Longer, Study Shows” (NBC News), “Eat Whole Grains, Live Longer?” (New York Times), and “Could Eating More Whole Grains Help You Live Longer?” (HealthDay). We talked to Christopher Gardner, PhD, THI member and professor of medicine at the Stanford Prevention Research Center, to get his take. He said:

“Health experts have long known that whole grains are good sources of fiber, B-vitamins, and many minerals including iron, magnesium, phosphorous, zinc, copper, manganese, and selenium. These studies are not telling us anything that we didn’t already suspect, though they affirm that whole grains can be important contributors to healthy diets. However, these studies come at a time where this is a broader anti-carb, anti-grain, anti-wheat, anti-gluten craze that has been taken to an extreme. The low-carbohydrate Atkins diet, the trendy high protein Paleo diet, and countless stories and popular books from MDs add to the confusion, such as Wheat Belly, Grain Brain, or Eat Fat Get Thin.”

How YOU Would Apply the Findings to YOUR Own Life

-Gardner said that the findings confirmed what he’s always known and personally practiced. He eats steel cut oatmeal for breakfast about twice a week, for instance, as well as grain-based salads including wheat berries, farro, or quinoa. He doesn’t eat a lot of bread, but when he does, he consumes whole wheat bread with nut butter (like almond butter) or topped with avocado and tomatoes from his backyard or the farmers’ market. “The findings did not change my eating practices, they simply reinforced my ongoing food choices and eating behaviors,” he says. “On most days I incorporate whole grains one to two times a day.”

Preacher’s Practice

-“There is a lot of noise when it comes to wheat, grain, and carbohydrates with regard to health,” Gardner says. “Carbs and grains often get a bad rap.” But when people say they “don’t eat carbs,” they usually don’t realize that most of the major food groups actually contain carbohydrates. In fact, there are only two that do not contain carbohydrates: meat —which includes beef, pork, poultry, and fish — and eggs. In fact, vegetables, nuts, beans/peas/legumes, fruits, dairy, grains, and snacks/sweets/desserts all contain carbs. “Anyone going to extremes to cut or eliminate carbs from their diet would be on a path to wiping out most of the variety and much of the pleasure of the bounty of food our blue-green jewel provides,” Gardner says. “Rather than vilifying all carbs, grains, wheat and gluten, it would make much more sense to think of a carbohydrate continuum and consciously draw an informed line in that continuum. It’s also important to realize where refined and whole-grain flour based products such as breads fit into this continuum relative to the whole intact grains (i.e., unmilled, unground).”

-“Anyone going to extremes to cut or eliminate carbs from their diet would be on a path to wiping out most of the variety and much of the pleasure of the bounty of food our blue-green jewel provides.”=As Gardner says, “if you are one of the approximately one in 140 Americans with celiac disease, an autoimmune disease whose prevalence was recently reported to be either stable or in decline, you should avoid gluten in the diet (the only known treatment for celiac disease).” He explains that gluten is found in wheat and wheat-containing products (and rye and barley, to a lesser extent).

-Meanwhile, “for the carb category that includes sugar-sweetened beverages, candies, pastries, chips, cookies, cakes, and desserts (i.e., added sugars and refined white flour),” the truth is that this group has “little to no nutritional value,” he says. “These are celebratory and or pleasurable food items to be enjoyed on occasion. Hopefully your repertoire for celebration and pleasure goes beyond snack foods and desserts and you can enjoy these responsibly, which means only occasionally, and get much of the joy in your life elsewhere.”

-But what about wheat flour? Americans eat a lot of it: According to the USDA, Americans eat about 150 pounds of grains per year in one form or another, and approximately 145 of those 150 pounds are from wheat, mostly consumed in the form of bread or snack foods made from processed (white) wheat flour. “For longer lasting shelf life and greater cost efficiency, the oils in the germ of the wheat kernel have been removed, as has many of the nutrients and much of the fiber to make the white flour. Cost efficient, yes. But metabolically, there are many health professionals who simply consider this a rapid glucose delivery system, and for the many and growing number of diabetics and pre-diabetics the rapid delivery of glucose to the blood stream is not something desirable,” Gardner explains. “Every credible health professional recommends replacing white-flour containing products with healthier options. Switching to whole wheat flour will bring back the nutrients and the fiber.”

-But there’s something to know about the wheat in the form of flour: Whether white or whole, it “delivers glucose quickly to the bloodstream because there is so little digestive work to do – it has been ground and pulverized into a powder that looks nothing like the original kernel of wheat from whence it came,” Gardner explains. “If you really want to eat wheat in its ‘whole grain’ state, try something like a wheat berry salad.” He advises. Other whole grains —many of which are gluten free — include amaranth, barley, buckwheat, bulgur, corn, einkorn, farro, freekeh, kamut, kañiwa, millet, oats, quinoa, rice, rye, sorghum, spelt, teff, triticale, and wild rice.

-“Vilifying carbs, grains or the gluten in wheat is fraught with nutritional dangers for most Americans. It flies in the face of thousands of years of eating pleasures from diverse culinary practices,” Gardner says. “The actual carbohydrate-containing foods we eat exist across a carbohydrate continuum of pros and cons, which can differ from one individual to another. Before maligning and writing off entire food groups or food types simply because of the current anti-carb, anti-grain, anti-wheat or anti-gluten craze consider the many places along the continuum the line can be drawn for including vs. avoiding; choose responsibly — enjoy the greatest range of deliciousness possible, paired with health promotion and disease prevention.”

The Internet Addiction:

A fascinating 15 minutes talk by the author and consultant Simon Sinek on the issues facing millennials (those born after 1984) in the workplace in the context of the increasingly prevalent internet addiction. Do share with your kids, but it applies (in varying degrees) to adults as well!


Here’s to eating balanced diet comprising whole grains, vegetables, fruits, legumes and nuts!

I will be travelling next week so the next newsletter will be sent on January 21.

Wishing my readers a very happy, prosperous and healthy 2017!




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