08-12-2014 The Financial Domino Effect: How to Profit Now in the Volatile Global Economy
Tuesday, August 12th, 2014
Speaker: Ben Emons
Pacific Investment Management Company (PIMCO)
Chair: Don Brown, CFA
A CFALA Book Club sponsored event
The Financial Domino Effect is a real time book. Even that many examples are past crisis situations, the concept of a domino effect in financial markets is a "live event" that strikes portfolios negatively and positively every day.
The framework is fairly straightforward. Identify three main categories of domino effects: social-political, economic and financial. Look at a specific occurrence which category it most resembles. Then draw the likely path towards an outcome, which then ties into an investment strategy.
For example, the US faces another potential debt ceiling crisis this summer while the economy softens due to the sequester and the Federal Reserve is considering tapering its purchase program. What domino effects does an investor face?
Social-political: debt ceiling negotiation between Democrats and Republicans. Effect: uncertainty in Washington that affects markets and the economy.
Economic: sequester (automatic spending cuts) slows the economy but housing remains strong.
Financial: despite the sequester and debt ceiling, the Fed goes ahead and tapers asset purchases to avoid market distortions. The slowdown of the economy, the uncertainty of the debt ceiling and the Federal Reserve scaling back can adjust growth expectations lower.
This hypothetical example shows that a domino effect is complex and intertwined, connected. Moreover it is important to categorize the different effects and layout a potential outcome with a logical investment conclusion.
The Financial Domino Effect uses a basic framework and straddles it across different complex market situations. Each time a crisis happens, investors can hopefully use the basic framework to evaluate a path that leads to the most likely outcome. In addition, the book shows that such path comes along with symptoms like financial repression but also positive domino effects like quantitative easing.
Ben Emons is a senior vice president and a portfolio manager in the global portfolio management group at Pacific Investment Management Company (PIMCO), Newport Beach, California. Prior to joining PIMCO in 2008, he was a portfolio manager at Nuveen Investments in Los Angeles, focusing on government bonds and derivatives. He has 18 years of investment experience and holds an MBA from the University of Southern California Marshall School of Business and a master's degree in international finance from the University of Amsterdam.
As a participant in the CFA Institute Approved-Provider Program, the
CFA Society of Los Angeles has determined that this program qualifies
for 1 credit hours. If you are a CFA Institute member, CE credit for
your participation in this program will be automatically recorded in your CE Diary.
Date: Tuesday, August 12th,, 2014
Time: 12:00pm – 1:30pm, Lunch
Location: Millennium Biltmore Hotel Los Angeles
506 South Grand Avenue
Los Angeles, CA 90071-2607
Parking: Hotel Valet Parking: $20.00
Self-Parking at Pershing Square (located directly across the street on Olive St.): $10.00
Dress Code: Business Casual
Methods of payment accepted: Visa/Mastercard, American Express and Discover. If you prefer to pay by check please register online and select "purchase order" as your payment option and enter your last name as the purchase order number. Mail check to: CFA Society of Los Angeles, 520 S. Grand Ave, Suite 370, Los Angeles CA 90071.
*Credit card payments will only be accepted through the secure online registration, and not by phone or email.
Cancellations must be received in writing by 9:00 am the day prior to the event. No phone cancellations are accepted. Please fax to the CFALA office at (213) 613-1233 or e-mail firstname.lastname@example.org. Member “no-shows” will be billed the non-member fee ($50) for the event which is posted on the CFALA website.