KanalyBlog

What is the attraction of private equity?

Although private equity and debt offerings have caused a great deal of anxiety in recent years, investors continue to show interest in them. Kanaly Trust Chairman and CEO Drew Kanaly was quoted in the May 20, 2011 New York Times article, "An Investment Asks, How Much Can You Afford to Lose?" which focuses on the attributes of these risky deals.

Read the article.

Reducing Commodity Exposure

This week we cut exposure to commodities by roughly 50% by selling down a diversified commodity fund we began purchasing in July 2009.  Since that time, and especially since last summer when the Federal Reserve began hinting about its Treasury buying program (known as QE2), commodities have been in a strong uptrend until this month.  Our position in gold remains unchanged.  Below is why we have reduced exposure to commodities:

• Price Action - after hitting a new high shortly after Ben Bernanke's historic press conference in April, commodities lost about 10% on average in the first two weeks of May.  Crude oil declined 15% and silver is off over 30% from its high.  Although commodities have since bounced off the lows, the strong uptrend has been broken.
• End of QE2 - the imminent end of the Fed's money printing operation, at least in the short term, reduces the speculative appetite for commodities and other risk assets.  Most of the commentary written on Wall Street argues that the Fed will follow up with some version of "QE3", thereby supporting commodities and other inflation hedges.  However, we believe the bar is set high for new Fed stimulus, requiring fresh deterioration in growth and more signs of deflation.
• Global Growth Risks - commodities have been in a secular bull market primarily due to the emerging market demand theme led by China.  China's spectacular growth has been driven in part by cheap credit and abundant supply of cheap labor.  Now China is experiencing labor shortages in some areas, driving up wages.  As China and other emerging countries take more aggressive actions to deal with accelerating inflation, global growth is likely to slow and commodities could get hit hard.