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Friday 23 November 2012

Next Stop For Capital Markets via Biggest ETFs (5-Year Performance)

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Last Updated: 24th Nov '12

We at FPM, with proprietary analytical tools, felt consolidated in our process of ultimate "enterprising execution" that less narrative and more active visuals are better. So we analysed the wide universe of ETFs to gauge the investment climate. The above ETFs performance chart shows medium term trends in select asset classes for the past 5 year to end-October 2012.

We're lending our hedge fund metrics analysis to measuring ETF performance over the past years to montth-end October '12. The basis for converging hedge funds and ETF analysis are to do with the fact that a) many hedge funds are increasingly using ETFs to express their directional / hedge views on macro variables and, b) FPM strongly believes the terms for passively-managed / index-following ETFs are compelling for any multi-manager portfolio. Low fees and greater liquidity, than say hedge funds, gives an easy access to directional 'kicker' allocation.

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This article is a  'celebration' of where we visualise poorly allocated resources will shift as exemplified in the long-only Investment Sector Funds (ISFs as I like to acronym ETFs). In the visual-nature of this article, a professional heavyweight investor's view below, which we at FPM finds curious! Just in case you haven't seen Jefferey Gundlach's proposition in the main-stream financial media entitled Gundlach Sees No Lost Decade as Biggest Bears Flirt With Stocks published by  Alexis Leondis - Sep 14, 201:

Stocks Won't Repeat Lost Decade, Gundlach Says

Whatever the pretext of the Bloomberg and DoubleLine Capital's presentation. Doubleline is the $40 bn AuM asset management firm that Gundlach founded in Los Angeles in 2009. In terms of  the article's propaganda, what is stark is that an eminent bond-shop is compellingly allocating to equities! There are myriad reasons for this perhaps. Is the representation of the article that listed equities may enjoy a prolonged rally soon and that bonds might fall out of favour?  Aside of the confidence-trick policy measures to kick-start economic continuity, we had better believe in an "earnest economic recovery and stability".

Earnest economic recovery and stability might be interpreted as consumers and corporations continuing to transact / turnover in expanding economic activity. Yet, industrialisation on an unprecedented global scale with BRIC-populus inclusion is potentially mind-blowing as a game-changing milieu!

While the  great forces of economic entities grapple for the dwindling finite earth's resources, nature is battling back via "climate revolution". FPM's supports the progressive and special Dame Vivienne Westwood, who has campaigned to stop climate change and commends  economic prudence. The damaging climate-change threat is real (viz. greater intances of extreme weather and indicatively,  insurance-linked bonds market). The policy makers, corporate executives and relevant individuals should have commensurable "active resistance" or response. It follows that economic activity therefore has to be curtailed to some extent. 

STOP PRESS: an evidence of this view is "India's capital widens ban on plastic bags" published on AFP 23rd November.

Back to the Bloomberg presentation: Gundlach's interview is either taking the heat off the credit  sector from overheating / 'bond bubble', or he really suggests equities are recovering towards a secular bull-run, at least auguring an investment climate flip-flopping between favourable to equities and bonds cyclically. From our fund manager transactions (FMT) perspective, Gundlach proposition is the same as an equity-focused hedge fund leveraging of its research into the broader capital structure asset plays and building a fixed income / credit team. The speculation is that, equity-threats are opportunities for some.

FPM's "Next Stop" Views:

+ Less bond lure as inflation-creep is simmering in dissimulated headline figures.

+ Equity rally has scope as capital structure of companies better refinanced in debt / equity ratio terms. Expecting equity returns to stop being a residual call on companies' earnings except fincos.

+ The switch away from risk-averse gold assets are likely to flow into black gold, i.e. asset flow into countries and companies realated to raw-material resources in emerging and frontier markets. Not just oil and commodities, take China, it is rich in one of the greatest resources "human capital"!

+ China and other rapidly expanding economies will inevitably catch a cold from the developed nations' consumers sneezing! So for those economies developing domestic consumption and wealth will become a priority than typical export-driven-growth model.



Monday 12 November 2012

You're 'Avin A Laugh!

New! New! New!
In FPM digests of a more concise nature than our regular exhaustive, earnest and expansive posts, we aim to share some of our anecdotal observations. Often these musing may have serious undertone; every wit has a degree of truth, it has been said.  "You're 'avin a laugh" is the header for FPM's series of future short posts based on media release;  'YAL!' is the abbreviation leading these shorts, of which the first one is:

YAL! - Consider this syllogism: Stock picking is not either a folly or a game, but professionally viewed as an incisive active asset management expertise. Mitt Romney's stock, at least in the field of politics on Tuesday 6th November, suffered a blow-up or deal-break, as in the investment parlance! So those alternative investments illuminarie who stock-picked and publically backed M.Romney seemingly did not excercise incisive expertise! Or it was an innocent little folly with a vested agenda that had more economic upside than downside.

From either perspective these headline-assuming stock-pickers for US presidency and its assembly deserve some extent of mark-down or denigration [while they themselves and, by degrees investors, laugh all the way to the bank!]. If hedgies can short stocks, then in a similar manner they can also garner negative publicity through their publicised associations. Remember there are many donors who also choose to remain anonymous.

Name and Shame:

Anthony Scaramucci, founder of fund of funds firm SkyBridge Capital, was Obama's former Harvard Law School classmate and his supporter for the 2008 election . Recently, he's challenged the president for his administration's regulatory posturing toward Wall Street, and has switched sides. Mr Scaramucci has been holding fundraisers for Romney.

Others who've backed the political affiliations and aspirations include:

David Tepper - Appaloosa Management
John Paulson Paulson and Co.
Dan Loeb – Third Point
Cliff Asness - AQR Capital
Paul Singer - Elliott Management
Ken Griffin - Citadel Investment*
John Griffin - Blue Ridge Capital*
Julian Robertson - Tiger Management
Louis Bacon - Moore Capital,
Bruce Kovner - Caxton Associates,
Lee Ainslie - Maverick Capital
Ricky Sandler - Eminence Capital

*Verify if the 'Griffin' is a mix-up with John Griffin of Blue Ridge Capital

In FPM Research-Integrity based balance of power we like to highlight those that reportedly backed the eventual winning stock too.

Hall of Fame:

A Forbes magazine survey printed a list of the top 40 donors to the political action committees for both candidates, as the list stood at the end of September, and showed that only four hedgies gave $500,000 or more to Obama's Super PAC “Priorities Action USA”. Top donor to the left-leaning lobbying was David Shaw with $2 mn   :

James Simons - Renaissance Technologies
George Soros Soros Fund Management
DE Shaw -David Shaw
Marc Lasry - Avenue Capital

FPM's presidential stock pick was a deep out-of-the-money speculation on Ron Paul. Now that should solicit a remark like 'YAL' from the reader! That's not so bizarre, since Peter Thiel of Clarium Capital and Paypal fame also supported the Liberal outside candidate for Republican presidential nomination.

Its Friday afternoon in London in the week after the US elections and China's Party Congress. Lastly, a food for thought:
"Intellectual eminence carries with it corresponding moral responsibilities. The greater a man's talent, the greater his power to lead astray!" Bertrand Russell