08-12-2014 Book Discussion: The Financial Domino Effect: How to Profit Now in the Volatile Global Economy
Tuesday, August 12th, 6:00pm to 7:30pm
Chair: Don Brown, CFA
A Book Club Committee 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
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Time: 6:00pm: check-in and reception with wine and pizza
6:30pm: book discussion
Location: Biltmore Court
520 S. Grand Ave., Suite 370
Los Angeles, CA 90071
Parking: Self-Parking at Pershing Square (located directly across the street on Olive St.): $10.00.
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Dress Code: Business Casual