Stephen Jen, one of the world’s best-known foreign exchange strategists, is to launch his own hedge fund on Tuesday. Mr Jen’s SLJ Macro Partners, based in London, will begin trading with just over $220m under management, people familiar with the launch say, reports the FT. The fund will be one of the higher-profile hedge fund start-ups in London this year, not least because of Mr Jen’s stature in the city. Most hedge fund start-ups are still launching with $50m or less, say brokers. He was previously the head of global currency research at Morgan Stanley – a position which earned him particular prominence during the financial crisis thanks to his prescient, often contrarian views.
There are some very intriguing flashes coming out on Reuters regarding the BlueGold hedge fund on Friday:
RTRS-HEDGE FUND BLUE GOLD DENIES IT WAS RESPONSIBLE FOR VOLATILITY IN CRUDE OIL PRICES IN LAST FEW DAYS Read more
Chart(s) of the day – Morgan Stanley’s stagflation matrix:
Global market angst over the US subprime mortgage crisis, among other factors, has prompted Morgan Stanley to update its currency forecasts, says Stephen Jen, the bank’s global head of currency research.
MS has revised its end-2007 forecast for the euro-dollar exchange rate from to $1.33, from $1.28 previously. The dollar-yen forecast is unchanged: Y118 by end-2007. Part of this adjustment reflects the state of the sub-prime market, but Jen says it also a formal expression of recognition “that US real money diversification may be a structural negative for the dollar”. Read more
As long as demand in China remains robust, the Aussie dollar should be a “major beneficiary”, says Stephen Jen, Morgan Stanley’s global head of currency research. In fact, the Aussie seems to be Jen’s favoured currency, as it is “well supported” and “likely to outperform the euro, pound and NZ dollar, even when the dollar reasserts itself”, he says.
China and Australia have a “remarkable symbiotic trade partnership”, notes Jen. “Australia’s terms of trade (ToT) have risen by 104 per cent in USD terms in the past four years. Not only has demand from China pushed up base metals and coal prices, but Australia’s import prices have also been well restrained because of China.” Read more
Well what do you know? All sorts of people, governments and institutions have been blamed for dollar weakness. But contrary to popular presumption, says Stephen Jen, Morgan Stanley’s global head of currency research, US real money managers are the biggest dollar diversifiers, not the Asian central banks.
Controlling about $20,700bn in assets – four times the size of the total global official foreign reserves – US real money managers have been diversifying aggressively out of the US since 2003, says Jen. And if you buy his line that ‘currency diversification equals currency weakness’, this explains why the dollar has shown a gradual downtrend since then – and why it is so weak now. Read more
Stephen Jen, Morgan Stanley’s global head of currency research, is taking a (very) sanguine view of recent upheavals in the currency and debt markets. In fact, he says in a sweeping note to clients this week, the general trends in the “real economies” of the world and in the financial markets are “healthy”, and “should help refresh market positions for a resumption of outperformance of risky assets”.
While risk-taking will likely become more qualified and conditional (ie, credit spreads becoming more reasonably priced), solid economic fundamentals and the still-abundant global liquidity conditions should continue to support risky assets, he says. Read more
The source of global liquidity is real, not nominal, argues Stephen Jen, Managing Director and Chief Currency Economist at Morgan Stanley.
In contrast to the popular view that central banks’ irresponsibly easy monetary policy has led to the bloated asset prices in the world, Jen maintains that the more important source of global liquidity is the (curiously) low capex/capital stock in the world. Read more