Saturday, 11 February 2012

Crédit Suisse Global Investment Returns Yearbook 2012

The "Crédit Suisse Global Investment Returns Yearbook 2012" was released last week, which deserves a rapid posting. The yearbook highlights three subjects:

The real value of money
Whoever is determined in thinking a research paper endorsed by a major financial institution can only by a Siren song supporting fiat currency, may need to reconsider.

Just a quote from the introduction:
With international efforts to avert recession, fears have grown about the monetary policy and debt overhang. Sentiment fluctuates between deflationary concerns and inflationary fears and the demand for safe-haven assets has surged. This article examines the dynamics and impact of inflation and examines how equities and bonds have performed under different inflationary conditions.
Currency matters
Investing in global equity rather than just domestically reduces portfolio volatility. Equities tend to outperform following periods of currency weakness, which suggests that more unhedged cross border exposure can be desirable at those times. Contrary to equity, cross border bond investment can add to portfolio risk primarily through currency exposure.
Measuring Risk Appetite
... attitudes towards risk oscillate periodically from over-exhuberance to excessive pessimism and back again. In Feb 1998, Crédit Suisse lauched the Global Risk Appetite Index ...

Country reports
The rest of the yearbook is dedicated to 19 country reports of OECD markets and a global, global ex-US and a European total report. It is preceded by an illustrative introduction on market sizes. By the end of the 19th century, European stock markets were absolutely dominant. The UK market cap amounted to about 30% of the global total, with the US second with a market cap just short of 20%. 
In 2011, the US markets total close to 45% of the world capitalisation, while the UK is down to 8.4%. Quite a few continental markets that were listed individually in 1899 (Austria-Hungary, Belgium, The Netherlands, Italy) are now dwarfed into the rest category. 
Markets not covered in the yearbook (mostly new economies) have grown to 15% of the world total, up from 3.6% in 1899.


Click to enlarge
Some commenting articles:
Investing in shares, the old maxim goes, is the way to obtain the best long-term returns on investments. But in many cases, the long-term has to be very long-term indeed to guarantee that an investor doesn’t lose money. The latest Credit Suisse global investment returns yearbook demonstrates that unfortunate timing can mean it can take several decades for markets to make up for a period of losses. Analysing data going back to 1900 shows that there was a period as long as 17 years when investing in American shares showed zero real returns – even with dividends re-invested.
http://www.thisismoney.co.uk/money/investing/article-2097825/Credit-Suisse-stock-market-returns-1900-The-24-year-spell-UK-shares-failed.html
http://finchannel.com/Main_News/B_Schools/103374_London_Business_School_and_Credit_Suisse_release_new_Global_Investment_Returns_research/
Download the Crédit Suisse Global Investment Returns Yearbook 2012 here (64 pages).

The Crédit Suisse Global Investment Returns Yearbook 2013 edition can be downloaded here.

The Crédit Suisse Global Investment Returns Yearbook 2014 edition can be downloaded here.

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