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Mon, 20th February 2017

Anirudh Sethi Report

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Archives of “hedge fund” Tag

As Le Pen Odds Surge; French Stock Market Risk Hits 5-Year High, Credit Risk Spikes

Marine Le Pen’s French election victory odds reached their highest level of the campaign overnight and it appears global investors are starting to panic-bid protection against the consequences for French stocks…

Oddschecker indicates Le Pen’s incessant rise in popularity…

Senate confirms Steven Mnuchin as US Treasury secretary

The US Senate has confirmed President Donald Trump’s nomination for treasury secretary, a former Goldman Sachs banker and hedge fund manager.

The Senate confirmed Steve Mnuchin’s nomination to be secretary of the Department of the Treasury by a vote of 53-47.

Mr Mnuchin spent 17 years at Goldman before becoming a hedge fund manager, film financier and chairman of Pasadena-based OneWest Bank. His confirmation as secretary means that former Goldman employees hold two of the top economic jobs in the US, as former president and chief operating officer Gary Cohn left the bank to become director of the White House’s National Economic Council.

“China’s Carl Icahn” Hedge Fund Billionaire Sentenced To Five And A Half Years In Prison

Back in late 2015, when the Chinese stock bubble had violently burst and was suffering daily moves of 10% in either direction as retail traders scrambled to get out of what until recently was a “sure thing”, Beijing did what it does best, and found a convenient scapegoat on which to blame the market crash – which was function of the country’s relentless debt bubble and lack of trading regulations – in late 2015 it arrested one of the most prominent hedge fund traders, Xu Xiang, also known as “hedge fund brother No. 1” and “China’s Carl Icahn” for his phenomenal, and rigged, winning record in the stock market, who ran the Shanghai-based Zexi Investment.

 Which is not to say that Xu wasn’t engaged in shady activites: while the country’s stock prices plummeted in 2015, Zexi’s investments earned an average 218%, far more than the second-most profitable player, Shen Zhou Mu Fund, which reported a 94% yield, according to market analysis website Licai.com.

Daiwa to launch ‘Trump-related’ mutual fund

Daiwa Asset Management is set to start operating a mutual fund that invests in stocks related to U.S. President-elect Donald Trump’s infrastructure investment policy. Daiwa will launch the product on Tuesday.

The open-end mutual fund — the first of its kind in Japan since Trump’s election victory in November 2016 — is likely to be made available to retail investors by the end of the month.

 The U.S. infrastructure builder equity fund, which invests in U.S. companies, will quantify how much each stock will benefit from Trump’s infrastructure policy, based on criteria such as sales ratio in the U.S. and the degree of obsolescence of the target infrastructure. The details of the portfolio will be determined by how much share prices are undervalued and how competitive the companies are.

The portfolio, comprising 30-50 companies — mostly in the construction, transport and materials sectors — will be adjusted as appropriate as Trump’s policy takes form.

Trump has pledged to spend $1 trillion to overhaul the country’s aging infrastructure over the next decade.

From Flipkart to Paytm, e-commerce companies in India grow revenues, but losses skyrocket

Even without the curbs imposed on them, e-retailers don’t seem to have made too much money in FY16. While for some companies, the losses doubled, for others, it trebled, indicating many of them are simply buying revenues. In other words, they are driving sales by offering customers big discounts and spending large sums on advertising and promotions. This strategy should pay off in the long run, but for now while top lines may have grown, the losses, too, have ballooned. At Paytm, for instance, revenues have risen by nearly 200%, losses have increased fourfold.

While there’s no doubt more shoppers are buying on the Internet, the initial spurt in online spends appears to have been driven by discounts.

It’s not surprising therefore that investors are reluctant to fund too many e-commerce businesses at lofty valuations.

Between January and November, just $3.7 billion has been invested in these ventures, about half the $7.5 billion which came in during the comparable period of 2015, data from Tracxn Technologies shows.

How disillusioned investors are is clear from the markdown in the valuation ofFlipkart—the e-retailer is now valued at $5.54 billion, down from $11 billion as on 31 March, 2016, and the peak of $15 billion in June 2015.

Trump Tweets Japan’s SoftBank Will Invest $50 Billion In The US, Create 50,000 New Jobs

On Tuesday afternoon, the billionaire founder and CEO of Japan’s Softbank and was seen entering the Trump Tower, to meet with the President-elect. It appears that they had fruitful conversations, because just a few minutes later, Trump – who earlier in the day lambasted Boeing over charging too much for Air Force 1 sending its stock lower – tweeted some words of praise for the Japanese businessman.

At 2:10pm eastern, Trump tweeted “Masa (SoftBank) of Japan has agreed to invest $50 billion in the U.S. toward businesses and 50,000 new jobs…” and in a follow up Tweet added “Masa said he would never do this had we (Trump) not won the election!”

As Dow Jones adds, $50 billion of the $100 billion investment will come from a joint investment fund Softbank had set up with Saudi Arabia. Son also said that he set up the meeting with Trump and “likes him very much”, however he declined to comment on his interest in T-Mobile.

 It was not immediately clear what investments the Japanese investor would make, or what kinds of jobs he would create. However, as an immediate result of the benevolent tweets showing that Trump is favorably inclined toward SoftBank and vice versa, Sprint stock, which SoftBank already owns some 80% of and has been pushing for a merger with T-Mobile, spiked confirming that in the “Trump Normal” the biggest stock market catalyst will no longer be Fed headlines but Trump tweets.

Ray Dalio: “Good chance that we are at one of those major reversals that last a decade”

Ray Dalio was in the news overnight, and picked up by the Aussie press here

  • Says Trump’s policies would have a “broadly positive” effect on the US economy
  • Bond prices have likely made a “30-year top”
  • “There is a good chance that we are at one of those major reversals that last decade” 
  • “We want to be clear that we think that the man’s policies will have a big impact on the world. Over the last few days, we have seen very early indications of what a Trump presidency might be like via his progress with appointments and initiatives, as well as other feedback that we are getting from various sources, but clearly it is too early to be confident about any assessments” 
Ray Dalio is founder of the world’s largest hedge fund Bridgewater Associates

Doug Noland Interview: “In The Next Crisis The Fed’s Balance Sheet Will Hit $10 Trillion”

The global bubble that central banks have kept afloat for the past eight years, based on sovereign and government debt, as well as central bank credit, runs right to the heart of the monetary system. That, according to Doug Noland, means we are in for a bigger crash and deeper dislocation when it all comes to an end, and Noland has a good idea which will be the first central bank to crack.

Doug Noland of McAlvany Wealth Management has a long history in the hedge fund industry as a short seller, having worked with Gordon Ringoen and Bill Fleckenstein among others, but is perhaps best known for his ability to spot bubbles ahead of the crowd.

Studying credit data, he was initially concerned about the balance sheet expansion of Freddie and Fannie in the early 90s and started writing about the mortgage finance bubble in 2002. He also called the government finance bubble in April 2009.

In an interview with Real Vision TV, Noland said the current market bubble is a dangerous place to be and there has been a major shift from previous boom bust scenarios, where the impact has been more limited. He also examines how support from central banks has led the markets to ignore the risk – and what happens when that support is taken away.

German Politicians Accuse US Of “Economic War” Against Deutsche Bank

When we first heard the news that the US DOJ had slapped Deutsche Bank with a $14 billion settlement on September 15, a number that looked oddly similar to the $14 billion fine the EU slapped on Apple, we determined that this was likely nothing more than “blowback” on behalf of the US, saying “just a few weeks after the EU slapped Apple with a $14 billion bill for “back taxes,” the U.S. has apparently responded with a $14 billion fine of their own to Deutsche Bank to settle an outstanding probe into the company’s trading of mortgage-backed securities during the financial crisis.”

Today, after three weeks of unprecedented volatility in the stock price of the German lender which sent its shares to all time lows as recently as Friday, Germany has latched on to this line of attack as German politicians accused the US of waging economic war against ­Germany as, in the words of the FT, “concern continues to rise among its political and corporate elite over the future of Deutsche Bank.”

The German parliament’s economics committee chairman Peter Ramsauer, in an interview with Welt am Sonntag, said the move against Deutsche “has the characteristics of an economic war”, adding that the US had a “long tradition” of using every available opportunity to wage what amounted to trade war “if it benefits their own economy”, and the “extortionate damages claims” being made in the case of Deutsche Bank were an example of that. According to the German politician, the threat to force Deutsche Bank to pay a $14 billion fine over its mortgage-backed securities business before the 2008 global crisis “has the characteristics of an economic war.”“Extortionate damages claims” in the case are an example of that, said Ramsauer.

5 Market Insights from Paul Tudor Jones

Paul Tudor Jones is one of the most emblematic figures in the hedge fund industry. His best percentage returns happened during severe market corrections: 126% after fees in 1987 when U.S. markets lost a quarter of their market cap in one day. 87% in 1990 when the Japanese stock market plunged. 48% during the tech crash of 2000-2001. He returned 5% in 2008. His funds have underperformed in the past 8 years. He charges 2.75% management fee and 27% performance fee, which significantly above the industry average of 2 and 20.

Outside of financial markets. PTJ founded the Robin Hood foundation, which attempts to alleviate problems caused by poverty in NYC.

The biggest conundrum when studying successful money managers is do you pay attention to what they are doing today or do you focus on what they were doing before they became widely popular, were managing a lot less money and had a lot higher returns?

Here PTJ talks about how new powerful trends often start – basically, a big price expansion from a long base.

The basic premise of the system is that markets move sharply when they move. If there is a sudden range expansion in a market that has been trading narrowly, human nature is to try to fade that price move. When you get a range expansion, the market is sending you a very loud, clear signal that the market is getting ready to move in the direction of that expansion.

PTJ on risk management

If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.