Taken together, the policy vol crunch and regret factor must be putting the remaining bears in a paroxysm of remorseful fear.
He’s very quotable, Nomura’s Kevin Gaynor. Read more
A familiar theme in this year’s Barclays Equity Gilt Study (57th edition, just out)…
Hedge fund managers have lost 4.37 per cent on average in the year to the end of November, en route to their worst performance since 2008, according to Hedge Fund Research data, reports the FT. Big-name funds including Paulson & Co and Highbridge have been unable to recoup double-digit losses incurred in recent months. But other big macro bets have succeeded. Brevan Howard is up almost 13 per cent this year, having wagered that Treasury yields would fall, while Marshall Wace’s Global Opportunities fund, also macro-focused, is up 29 per cent so far in 2011. Read more
In which around 800 global investors polled by the Economist Intelligence Unit and BNY Mellon believe that deflation is as likely as a recovery in US housing — plus, other tail risk reflections in this chart here (click to enlarge):
Nope, no US recession just yet, say Credit Suisse’s Andrew Garthwaite and his global strategy team:
That chart (click to enlarge) and more in Hugh Hendry’s April letter to investors, H/T Tail Chaser. There’s a very interesting assault on Asian commodity giant Olam too, for Glencore watchers… Read more
Goldman Sachs plans to wind down its eight-person Global Macro Proprietary Trading arm to comply with new US rules restricting banks’ proprietary trading, reports the FT. Last year’s landmark financial-services reform legislation prompted Goldman, Morgan Stanley and their peers to close down many desks even before regulators settled on precise rules. Global Macro, housed within Goldman’s FX business, traded stocks, currencies and other fixed-income securities on the bank’s behalf. Most of the desk’s eight traders are expected to leave the bank. Goldman last year closed its Principal Strategies unit, a far larger prop desk. Bloomberg adds that Global Macro reported results through the bank’s fixed income trading division which last year generated 35% of total revenue. Read more
Investment bank strategists headed to this week’s Davos World Economic Forum are betting on emerging markets restoring the world economy to a generation-long period of high growth — the ‘super-cycle’, Bloomberg says, that will send US Treasury yields flying and favour hard commodities. It’s perhaps a telling fixation. What is striking about Davos is that a veneer of micro-level optimism goes hand in hand with a gnawing insecurity about the macro picture, the FT’s Gillian Tett writes. This is partly because CEOs are uneasily aware that hostility towards elites is rising. And while much of this has been focused on bankers, continued high levels of unemployment have prompted wider concerns about a bigger backlash in the west. Read more
After one of their most disappointing years, hedge fund managers are hoping for a better 2011 with less macroeconomic volatility and more corporate events to bet on, such as takeovers, the FT reports. Many investors anticipate event-driven funds will see a surge in inflows in 2011 as performance picks up. Equities and global macro funds are drawing a veil on a disappointing 2010, by contrast. As of the end of November, the average hedge fund had returned just over 7 per cent for the year, according to Hedge Fund Research – underperforming leading stock market indices over the same period. Equity long/short managers averaged returns of 6.7 per cent, while global macro strategies averaged just 4.5 per cent. Read more
This is ironic, Brazil.
That’s a Nomura chart showing the Brazilian government as the biggest ‘loser’ of the currency war. You know the war we’re talking about: Brazil was the first and loudest to declare it in 2010. Oops. Read more
Unbalanced, and thus blisteringly honest.
Fred Goodwin, “Mr Macro” strategist at Nomura, unplugged: Read more
What does this chart mean to you?
Hedge funds specialising in macro strategies are clawing their way back from a difficult summer, with many reporting significant returns over the past few weeks, the FT reports. The $14bn Moore Capital fund, one of the world’s best known so-called global macro hedge funds, has fully recovered its losses having been down 7 per cent this year. The firm’s flagship macro fund is now up 2.75 per cent for the year, modest compared to the industry average of 4.8 per cent, but representing a significant turnaround. Bridgewater Associates’ big bearish bets on the US economy have meanwhile scored it a 38 per cent return at its macro fund, the WSJ adds. Read more
Now for some upside to ‘the crisis upon us.’
Here’s a bold vision of the post-G20 international order, courtesy of Morgan Stanley’s inflationista-inclined analysts — meet the QE-20. Read more
It’s not just the trade balance, the NYT’s Economix notes – economic imbalances between the US and China extend to capital subsidies to different industries and beyond, making the problem a thorny one. At the same time, Chinese premier Wen Jiabao’s recent argument that renminbi appreciation would threaten the margins of China’s exporters is unconvincing, FT beyondbrics argues, suggesting that an increase in the currency’s value against the dollar would do little harm at least. In the longer term, China’s threat to the US isn’t that its goods are too cheap, but that Chinese companies are moving up the value chain towards throwing off their US rivals, says Fareed Zakaria in Time. This stand-off feels like it has gone on forever, the FT reports – and there is unlikely to be a rapid conclusion. Read more
Don’t expect the IMF’s latest world economic outlook to make for cheery reading. The world economy is forecast to grow 4.8 per cent in 2010, but growth will fall towards 4.2 per cent, according to the report with the Fund’s chief economist warning of an unbalanced recovery as the West struggles under its debt burden. However, it’s not all bad news. The outlook was bullish across all commodities, specifically highlighting copper and tin — which obligingly rose to two-year and record highs on Wednesday, the FT reports. Even so, the United States’ role as an economic engine is sputtering, the IMF says. The estimate for US growth was revised down by 0.7 percentage points this year and a similar amount in 2011, the FT also notes. Read more
The world’s leading countries should agree a new currency pact to help rebalance the global economy, the Institute of International Finance has urged, pointing to much stronger capital flows into emerging markets in 2010, the FT reports. The IIF’s managing director Charles Dallara, who once helped co-ordinate the Plaza Accord that solved the 1980s yen crisis, warned that the world faced a return to protectionism. But China — the likely target of any new Plaza Accord — would be desperate to avoid the economic fate that befell Japan, the FT’s Martin Wolf warns. When such elephants fight, bystanders are likely to be trampled, he adds. In the meantime — currency controls are rising in emerging markets from South Korea to Brazil, reports Bloomberg. Read more
Another chapter in the correlation saga. Stock pickers are giving up, the WSJ reports — with only 24 per cent of mutual funds focused on growth companies now beating growth indices this year, compared to 50 per cent on average between 1995 and 2007. Hence the rise of macro-oriented mutual funds and macro hedge funds to take advantage of way in which macro events now move stocks together in tandem. But those funds have their own problems — as it remains hugely difficult to predict and time macro events. Of course, they’re not the only funds seeing disappointing returns, with a new study revealing that a majority of private equity investors received market returns at best from 1980 to 2005, the WSJ adds. Read more
Looks like Société Générale’s economics team has some new members:
How best to summarise this long, depressing outlook on the global economy by Nouriel Roubini and Ian Bremmer? We’ll give it a shot.
First, no matter who you are, you are too optimistic: Read more
Hedge fund managers are facing growing pressure to deliver stronger performance in the last four months of the year, following another month of mixed results in August, according to the FT. The average hedge fund returned 0.17 per cent in August, according to preliminary month-end numbers from Hedge Fund Research. By contrast, the average fund was up 1.29 per cent this year until the end of July. Big-name fund managers have struggled to gain traction in particular, with global macro dividing winners from losers. Brevan Howard’s macro trading was flat through August, but Autonomy Capital’s macro fund returned 0.71 per cent. Read more
The September stock surge entered its fourth consecutive session in Asian and European markets on Monday, with mostly improving economic data over the past few days encouraging a shift into plays on global growth, says the FT. Even though US markets are taking a break for Labor Day, the S&P 500 has already rallied 5.3 per cent so far in September, versus a 4.8 per cent fall in August. Investors are playing catch-up with Friday’s jobs report, according to Reuters — but the IMF’s chief economist is still warning of weak growth in the US and Europe. Read more
The ag bull strategy has been fertilised, the M&A is pumped up on nitrogen, the grand game of playing emerging-world food demand is back on.
Watch out for the whiffs of ammonia around the balance sheets though. Read more
It’s bullishness, but not as we know it.
Here’s the Nomura take on investing in a world beset by a slowing US recovery: Read more
So, you’ve heard it before, but this time, it’s official – at least, by most key measures. China has now overtaken Japan as the world’s second-largest economy, just seven months after becoming the world’s third-largest economy in January.
As the FT reports on Monday: Read more
Paging Martin Wolf. Given recent coverage of global imbalances stalking the market and, uh, teenager-backed bonds on FT Alphaville, here’s an intriguing Goldman note on the role of demographic factors in future current account imbalances.
Intriguing, because the imbalances look like they’re going to get a bit sharper, much sooner — and with a much more middle-aged appearance. Read more
Hedge funds now account for 20 per cent of trading volume in the Treasuries market, up from just 3 per cent in 2009, as managers attempt to profit from growing volatility and pricing inefficiencies arising from the Federal Reserve’s monetary policy shifts, reports the FT. Fixed-income arbitrageurs have joined such bond-trading global macro funds as Brevan Howard and Moore Capital in penetrating the once-sedate $10,000bn market — but at a cost. The average global macro fund is down 0.74 per cent this year.
Meanwhile, Tips yields are acting funny, with the five-year offering a negative real yield, Felix Salmon writes. That’s saying something about the perceived volatility of traditional inflation hedges like stocks, Nemo at Self-Evident says. Read more
Industrial output in China has risen the least in almost a year and retail sales growth has also softened in the latest statistics from what now appears to be a slowdown in a key driver of global growth, Bloomberg reports. Inflation has meanwhile quickened its pace, reaching 3.3 per cent. But Asian economies are still proving surprisingly resilient in their export performance, the FT says. The question, however, is whether China in particular can orient towards stimulating internal consumption fast enough to make up for signs for slowing growth. Read more
Older entries
1Bernanke weighs in on robot wars; brings Keynes for backup
2Secret liquidity and Scottish independence
3Spain's awful unemployment
4Pump up, debase
5S&P 2,100, by Goldman Sachs
Show more6Buyback to enrich
7Collateral crunch-counting gets sophisticated
8Everlasting credit, the long view
9Apple Operations International, facts (?) du jour
10In which the FTSE puts the crisis behind it
Show fewer