Latest from BCA Research

Bank Credit Analyst

An important annual event is when long-time client Mr. X visits BCA strategists at the end of each year to talk about the economic and financial outlook and a write-up of the discussion is published as our Annual Outlook report. Recently, BCA’s former Chief Economist Martin Barnes had the pleasure of a chance encounter with Mr. X at an airport lounge, and this report is an edited transcript of their conversation.

Special Report

In this volume of BCA Crypto we compare gold against bitcoin. We begin by dispelling some common misconceptions that investors have about gold, and why, at its core, gold is driven more by belief than by intrinsic value. We then proceed to explain why gold still serves an important role in our economy and how it differs from fiat money. Later, we explain how bitcoin is different from other cryptocurrencies, and why it could rival gold as a reserve asset in the future. Finally, we discuss the outlook for bitcoin, as well as which macro factors investor should watch.

First Republic Bank’s earnings report showed how its struggles have exaggerated the perception of other banks’ distress. Ex-FRC, the banking system appears to be coping with the post-Silicon Valley Bank turmoil pretty well.

Inflation is hot, but inflation expectations are not. We explain the answer to this apparent puzzle and discuss the investment implications. Plus we identify two commodities that are at imminent risk of reversal.

Special Report

Government financing vehicles (LGFVs) are a key component of China’s credit system. LGFV bonds make up a 40% share of the onshore corporate bond market, and loans to LGFVs make up 20% of total loans. LGFV debt-servicing capacity is very weak. What are the ramifications of all of these for Chinese economic growth and financial markets?

Special Report

We recommend investors to be cautious on Growth Equity and Late-Stage Venture Capital. The marginal dollar is currently best suited for Private Credit at the expense of Private Equity. Our next Special Report will examine why we prefer lenders of capital.

We see a more positive backdrop for credit providers, with bilateral and structuring features as tailwinds for Private Credit. While there may be potential green shoots in some areas of Private Equity, current valuations are not attractive. We prefer Directional Hedge Funds over Diversifier and Risk Mitigation strategies. Real Estate has been an effective hedge against inflation, but now historically low cap rates are a headwind.

Special Report

This Special Report discusses why there is a non-negligible risk that the US Congress will not reach a timely agreement to lift the debt ceiling this summer. It also discusses what will happen in bond markets in the lead up to the debt limit and in the case where a deal is not reached in time.

European equities continue to inch closer to record highs, yet, their earnings outlook is deteriorating. How can investors build hedging portfolios using the message from earnings and valuations to protect themselves against the growing risk of a pullback?

The latest round of earnings calls from the systemically important banks was encouraging on balance. Households are still flush and still spending and consumer and business delinquencies remain remarkably low. Though a recession is surely coming, it doesn’t seem to be lurking just around the corner.