Active fund managers are finally making a comeback.

Who are the hottest active fund managers?

Migration from actively managed mutual funds to passively managed ETFs and index funds hasn't abated, but not every active asset manager is affected.

Read more on the CNBC website here: http://www.cnbc.com/id/103078207

#Switzerland Offers Counterpoint on #Deflation’s Ills @WSJ

Switzerland is seeing steady economic growth and low jobless rate despite deflation. 

Switzerland Offers Counterpoint on Deflation’s Ills

Here, the Alpine country’s famed Matterhorn. Photo: Fabrice Coffrini/Agence France-Presse/Getty Images

By

Brian Blackstone

Oct. 18, 2015 1:34 p.m. ET

It’s as close to an economic consensus as you can get: Deflation is bad for an economy, and central bankers should avoid it at all costs.

And then there’s Switzerland, whose steady growth and rock-bottom unemployment is chipping away at that wisdom.

At a time of lively global debate over low inflation and its ill effects, tiny Switzerland—with an economy 4% the size of the U.S.—offers a fascinating counterpoint, with some even pointing to what they call “good deflation.”

Consumer prices in Switzerland have fallen on an annual basis for most of the past four years. They hit a milestone last month with an annual price drop of 1.4%, the biggest in more than five decades. Even after food and energy prices are stripped out, core prices fell 0.7%.

“It’s hard not to call that deflation,” said Jennifer McKeown of Capital Economics, referring to the technical term for a sustained slump in consumer prices.

And yet evidence of deflation’s pernicious side effects—recession, weak employment, rising debt burdens—is pretty much nonexistent in Switzerland. Its economy is expected to expand this year and next, albeit slowly, in the 1% to 1.5% range. Unemployment was just 3.4% in September. Government debt is low.

“Usually people associate deflation with depression,” said Charles Wyplosz, a professor at the Graduate Institute in Geneva. “In the Swiss case, the economy is doing OK.”

Some of that success is due to the shattering of another long-held maxim: that central-bank policy rates can’t go negative to offset the effects of falling prices.

Switzerland, in a bid to sap demand for the franc and drive down the currency’s value, has a -0.75% rate on certain deposits parked its central bank, meaning financial institutions pay to keep their money there. This effectively amounts to a negative real, or inflation-adjusted, policy rate because core inflation is typically a good indicator of underlying price pressure. Denmark and the European Central Bank have taken a similar path with their deposit rates.

Although wage growth has slowed in Switzerland, it was 0.6% on an annual basis in the second quarter, which combined with falling prices means strong real pay gains, boosting spending power. Meanwhile, the rate on a 10-year mortgage is only around 2%. 

ENLARGE

For years, central banks from Japan to Europe and the U.S. have been fighting mightily to buck up their inflation rates and escape the deflationary trap. The concern: that falling prices will prompt consumers to spend less—based on expectations that prices will continue to decline—and businesses will delay investment amid uncertainty about revenues.

The Great Depression and, more recently, Japan’s two-decade struggle with deflation, are typically cited as Exhibits A and B on why central bankers should do all they can to avoid the trap.

The Federal Reserve spent trillions of dollars from 2008 to 2014 on government bonds and mortgage debt to combat this risk. More recently, it opted to keep interest rates near zero six years into an economic recovery with the unemployment rate barely above 5%, in part because inflation is so low—unchanged over the year ended Sept. 30. 

Major central banks prefer annual inflation of about 2% to provide a cushion against deflation.

Faced with stagnant consumer prices, the ECB is in the midst of a €1.1 trillion ($1.249 trillion) bond-buying program. The Bank of Japan has purchased broad swaths of public and private assets, too. The reasoning behind all these moves is that once deflation becomes entrenched, it is difficult to reverse.

But in Switzerland’s case, falling prices, brought on in large measure by what most analysts see as a significantly overvalued franc, has generated some positive fruits. It has forced companies to raise productivity and stay competitive in global markets, particularly compared to the rest of Europe.

Despite the franc’s strength, Switzerland’s trade surplus was nearly 5% of gross domestic product last year, suggesting its products are still competitive globally. Consumer spending continues to grow, albeit at about half the rate of three years ago.

“You have to distinguish between good and bad deflation,” said Alexander Koch,economist at Raiffeisen Schweiz in Zurich. “There’s no crash, no strong increase in unemployment in manufacturing and as there are no bursting bubbles in other sectors, domestic demand and the labor market are quite resilient.”

Maybe it’s the Alpine air, but economists at the Basel, Switzerland-based Bank for International Settlements—a consortium of central banks—have also challenged some of the conventional wisdom on deflation’s pernicious effects.

It may have negative consequences, but “on the other hand, deflation may actually boost output,” they wrote in a March report. “Lower prices increase real incomes and wealth. And they may also make export goods more competitive.”

So why aren’t central banks embracing the Swiss example? Analysts note that it’s difficult to distinguish between good and bad deflation until it’s too late.

Nor is Switzerland without its own struggles. To keep the franc in check, the central bank may be forced to cut the deposit rate even further, analysts say, particularly if the ECB eases policy more. Super-low rates on mortgages and other forms of debt could create housing and other bubbles. An abandoned effort to cap the franc’s value to the euro led the central bank to book a loss of 50 billion francs ($52.45 billion) for the first half of the year. And average consumer price levels are still quite high compared to the rest of Europe despite declines in recent years.

But, says Jörg Krämer, chief economist at Commerzbank in Frankfurt, Switzerland’s deflationary experience shows that for some, it’s “not as harmful as most people think.”

Switzerland Offers Counterpoint on Deflation’s Ills - WSJ

#Solar & #Wind Reach a Big #Renewables Turning Point : BNEF - Bloomberg @Business

"As more renewables are installed, coal and natural gas plants are used less...[and] the cost of using them to generate electricity goes up. As the cost of coal and gas power rises, more renewables will be installed. "

The virtuous cycle has begun.

This from Bloomberg:

Solar and Wind Just Passed Another Big Turning Point

Wind power is now the cheapest electricity to produce in both Germany and the U.K., even without government subsidies, according to a new analysis by Bloomberg New Energy Finance (BNEF). It's the first time that threshold has been crossed by a G7 economy.

But that's less interesting than what just happened in the U.S. 

To appreciate what's going on there, you need to understand the capacity factor. That's the percentage of a power plant's maximum potential that's actually achieved over time.

Consider a solar project. The sun doesn't shine at night and, even during the day, varies in brightness with the weather and the seasons. So a project that can crank out 100 megawatt hours of electricity during the sunniest part of the day might produce just 20 percent of that when averaged out over a year. That gives it a 20 percent capacity factor.

One of the major strengths of fossil fuel power plants is that they can command very high and predictable capacity factors. The average U.S. natural gas plant, for example, might produce about 70 percent of its potential (falling short of 100 percent because of seasonal demand and maintenance). But that's what's changing, and it's a big deal. 

For the first time, widespread adoption of renewables is effectively lowering the capacity factor for fossil fuels. That's because once a solar or wind project is built, the marginal cost of the electricity it produces is pretty much zero—free electricity—while coal and gas plants require more fuel for every new watt produced. If you're a power company with a choice, you choose the free stuff every time. 

It's a self-reinforcing cycle. As more renewables are installed, coal and natural gas plants are used less. As coal and gas are used less, the cost of using them to generate electricity goes up. As the cost of coal and gas power rises, more renewables will be installed. 

The virtuous cycle has begun.

Source: Bloomberg

Wind and solar have long made up a small fraction of U.S. electricity—about 5 percent in 2014. But production has been rising at an exponential rate, and those two energy sources are now big enough to influence when coal and natural gas plants are kept running, according to BNEF.

There are two reasons this shift in capacity factors is important. First, it's yet another sign of the rising disruptive force of renewable energy in power markets. It's impossible to brush aside renewables in the U.S. in the same way it might have been just a few years ago.  "Renewables are really becoming cost-competitive, and they're competing more directly with fossil fuels," said BNEF analyst Luke Mills. "We're seeing the utilization rate of fossil fuels wear away." 

Second, the shift illustrates a serious new risk for power companies planning to invest in coal or natural-gas plants. Historically, a high capacity factor has been a fixed input in the cost calculation. But now anyone contemplating a billion-dollar power plant with an anticipated lifespan of decades must consider the possibility that as time goes on, the plant will be used less than when its doors first open. 

Capacity Factors Take a Sharp Turn

Source: Bloomberg, Data: BNEF

Most of the decline in capacity factors is due to expensive "base-load plants that are being turned on less because of renewables," according to BNEF analyst Jacqueline Lilinshtein. Plants designed to come online only during the highest demand of the year, known as peaker plants, play a smaller role. In either case, the end result is that coal-fired and gas-fired electricity is becoming more expensive and the profits less predictable.

The opposite is true of wind and solar, as well as new battery systems that can be paired with renewables to replace some peaker plants. Wind power, including U.S. subsidies, became the cheapest electricity in the U.S. for the first time last year, according to BNEF. Solar power is a bit further behind, but the costs are dropping rapidly, especially those associated with financing a new project. 

Latest Solar Costs by State

Source: BNEF, Annotated by Bloomberg

The economic advantages of wind and solar over fossil fuels go beyond price. Still, it's remarkable that in every major region of the world, the lifetime cost of new coal and gas projects are rising considerably in the second half of 2015, according to BNEF. And in every major region the cost of renewables continues to fall. 

http://www.bloomberg.com/

latest publication from @EY_MiningMetals on the Business risks facing #mining & #metals in 2015–2016-Moving from the back seat to the driver’s seat

The latest publication from @EY_MiningMetals on the Business risks facing #mining & #metals in 2015–2016-Moving from the back seat to the driver’s seat @EY_MiningMetals

 http://www.ey.com/Publication/vwLUAssets/EY-business-risks-in-mining-and-metals-2015-2016/$FILE/EY-business-risks-in-mining-and-metals-2015-2016.pdf