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Bloomberg Markets Magazine

Bloomberg Markets Magazine June/July 2017

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Bloomberg Finance LP
Back issues only

in this issue

2 min

In his second story for Bloomberg Markets, Akshay Chinchalkar writes about using technical studies and flows data to understand what’s happening in India’s foreign exchange market (“Is the Great Rupee Rally for Real? Here’s How to Find Out,” page 26). Chinchalkar, who holds the chartered market technician designation from the Market Technicians Association, is a market specialist for charts, technical analysis, and quantitative research at Bloomberg in Mumbai. “Bloomberg’s proprietary technical indicators such as the new Chameleon Oscillator study can be helpful for predicting potential market reversals for currencies,” he says. For more info on the studies, run {TECH } and click on Bloomberg. Hugh Son has covered finance for Bloomberg in New York since 2006. He’s recently been exploring how technological change is causing upheaval and opportunity at the world’s…

4 min
where are the opportunities— and risks— in bondland?

Gemma Wright-Casparius SENIOR PORTFOLIO MANAGER, VANGUARD GROUP INC. Low productivity and other headwinds will cap inflation. Gemma Wright-Casparius, a senior portfolio manager at Vanguard Group, says lagging inflation should clear the way for slow, steady rate increases over the next two years. According to the Federal Reserve’s forecast, inflation won’t hit its target until the end of 2018, she says. “It’s maybe more of the same, just with a little faster cyclical growth rate in 2018-2019.” Steady as she goes may be the Fed’s catchphrase, yet there’s still plenty of scope for short bursts of growth or even shocks. Tail risk could come from “geopolitical events, which there’s no way for us to handicap,” Wright- Casparius says. “Sort of the known unknowns, if you will.” Such risks could resurge as volatility returns. For Wright-Casparius, tail risk…

8 min
is the land of the rising sun finally rising again?

JAPAN ISN’T EXACTLY the most obvious place to open a family theme park. Over the past six years, as the country’s epic demographic crisis has intensified, the number of children has plunged by 1 million. Yet on April 1 hundreds of fidgety kids and their dutiful parents withstood spring showers to attend the grand opening of the world’s newest Legoland. As you’d expect, the $380 millionplus project—built on former industrial land in Nagoya, Japan’s third-largest metropolis—possesses the requisite miniature town assembled from Lego bricks, not to mention amusement rides and water slides. What’s more surprising is when Nick Varney, chief executive officer of Legoland theme park developer Merlin Entertainments Plc, calls Japan “one of our three big growth markets”—the other two being the U.S. and China. Wait, Japan? A growth market? Isn’t…

1 min
really cool technology

WHEN IT’S RUNNING, this dilution refrigerator at IBM’s Thomas J. Watson Research Center in Yorktown Heights, N.Y., is one of the coldest places in the universe. Fasten a canister to this thing, and pump two different isotopes of helium into it—which results in an otherworldly chirping sound that seems to come from the ceiling of the lab—and it gets down to 15 millikelvin (–459F) inside. By contrast, cosmic background radiation—the faintly glowing remnant of the Big Bang—is 200 times hotter, at 3 kelvin. Why so cold? This is a quantum computer, a machine that aims to tap into some of the weird properties of the atomic realm, and IBM researchers need the frigid temps to control quantum information in superconducting bits on its processor. One hope for such a contraption: It…

8 min
the 0.028 percent solution

THE BOTTOM SHELF OF the fridge is laden with Heineken and Corona. The Corona is on rotation, but the Heineken is a permanent fixture: This is Amsterdam. A few strides away there’s a dark, well-stocked in-house pub. Up one flight of stairs, the atmosphere is very different. Behind a door that can only be opened with a security pass is by far the largest trading floor for exchange-traded funds in Europe. The 110 traders here, along with 30 colleagues in offices elsewhere, traded €640 billion ($719 billion) in ETFs last year and at least that much in futures, commodities, bonds, stocks, and foreign exchange. The trading volumes are those of a major Wall Street bank, but the refrigerator—and especially the pub, with its arcade games, pool table, and giant television—is pure startup.…

4 min
how seth klarman’s baupost group builds its margin of safety

STOCKS ARE EXPENSIVE. The S&P 500 has traded mostly higher than 20 times earnings since the middle of last year. For value investors, that spells tough going. Seth Klarman, portfolio manager and chief executive officer of the Baupost Group LLC, which has assets of about $30 billion, said as much in his 2016 yearend letter. “For Baupost and nearly all of our competitors, it has been difficult the last several years to earn historically strong returns,” he wrote. “But while the value cupboard has, for the most part, been relatively bare, we aren’t disillusioned.” Sticking with value would seem warranted, considering Klarman’s track record. He’s consistently produced alpha during his more than three decades at Baupost, racking up a record of 27 black years out of the past 30. By comparison, the…