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Ripe for a Sustainable Bullish Turn?
It was a hot and beautiful day in Montreal. I met up with my former supervisor at the Caisse, Mario Therrien, who last year was appointed Senior Vice-President, Fund Management, with the Private Equity group.
It
had been almost seven years since I last saw him, and I was glad to
hook up with him again to talk markets, alpha, hedge funds and private
equity. Mario is a smart guy who reads a lot on markets and politics. He
understands alpha and he's very well connected with key players around
the world. Talking markets with him is always fun.
Mario also
offered me one of the most exciting jobs I've ever had. I was
responsible for a portfolio of directional hedge funds (L/S Equity,
global macros and CTAs) and learned a lot conducting investment,
operational and risk management due diligence. But what I truly loved
was sitting down one on one with top hedge fund managers and picking the
minds on everything from which sectors they're investing in, to where
they think bond yields are heading, to which trends they're following.
The
toughest part of that job was the grueling travel schedule, not having
full control of the portfolio, having to trust your managers when things
were shaky, and knowing when to pull the plug when performance was
simply not up to par. But it was an incredible experience and if I had
to do all over again, I wouldn't think twice about it. Of course, with
my MS progressing, crazy travel schedules are not easy. That part of it I
don't miss.
Anyways, Mario gave me a lot of food for thought. We
talked about how crazy things got in the last few years, the "new
normal" and how the landscape has changed for hedge funds, private
equity funds and pension funds.
On pension funds, I told him the Fed has no choice but to bail them out
and he told me that the "trend towards immunization among G7 pension
funds" has contributed to lowering bond yields to historic lows.
"Pension funds are lowering their beta, cutting exposures to equities,
shifting assets into bonds, liquid hedge funds, and some private equity."
[Note: I agree with Mario,
illiquid, hard to understand hedge fund strategies, including black box,
super funky quant strategies, are out. Investors are increasingly
demanding that managers explain the rationale behind positions, and
they're not going to pay 2 & 20 for leveraged beta.]
Why are pensions immunizing their portfolios? According to Mario, "Most
mature pension plans are suffering severe pension shortfalls. They
simply can't afford to be ravaged by another bear market which will
force them to increase contribution rates. A lot of pension funds are
now focusing more on protecting downside risk."
Post 2008, the mindset has
changed and big players are focusing more on risk management, especially
managing liquidity risk. Michael Sabia, the Caisse's President &
CEO, talked a lot about risk management on numerous occasions and the
Caisse devoted an entire section on it in its 2009 Annual Report.
Unfortunately, Mr. Sabia and his senior managers still have to deal with petty Quebec politics. The Caisse recently had to categorically deny misleading allegations by one of Quebec's powerful public sector unions who questioned the Caisse's mid-year stellar results.
But
one thing that worries me is that all this focus on risk management,
immunization, is leading pension funds to not take enough risk, and many
of them will be caught off guard. Remember, when everyone is hunkering
down, worried about the next Black Swan, then you have the potential for
a sharp rally.
I am wondering if this is happening right now.
Too many pension funds and other institutional investors underweight
equities might suffer another bout of severe performance anxiety
and are then going to scramble chasing stocks higher. I spent the last
couple of weeks going over what the top hedge funds were buying and
selling in Q2, and something tells me they're well positioned for any
sharp, bullish reversal.
On this last point, read Chris Ciovacco's latest market comment, Markets Appear Ripe for a Sustainable Bullish Turn. I quote the following (but read his entire comment carefully):
Early
September is very important for the financial markets; especially for
the bulls. Numerous elements are in place for a rally to take hold now.
The markets have been weak and the bears have been in control. If the
bulls cannot make a stand soon, it will be a bad sign for risk assets.
The good news for the bulls is several factors, across numerous markets
and asset classes, are pointing to a possible rally in risk assets:
- Bearish sentiment is high at the moment. Sentiment, especially as it approaches extremes, can serve as a contrary indicator.
- The
Fed has signaled they are willing to print more money if needed.
Right, wrong, or indifferent, the markets are anticipating more quantitative easing
from the Fed. The Fed's next meeting is only three weeks away.
Markets look forward. A rally in risk assets for a few weeks is not out
of the question.
- Currency and
interest rate markets are acknowledging the possibility of the Fed
cranking up the printing presses. In recent weeks, the U.S. dollar and
the 10-Year Treasury have been firmly in the bears' camp, but they are
sitting near logical points of reversal. Recent rallies in the
10-Year Treasury have been showing signs of fatigue, which also points
to a possible reversal in interest rates.
- Better
than expected manufacturing data from China and better than expected
growth in Australia have been reflected in the copper market.
Emerging market stocks closed yesterday at a logical point of reversal;
this morning's news from China and Australia could spark a rally.
- Despite
weeks of disappointing news on economic progress in the United States,
the S&P 500 and Dow have yet to revisit their June lows, which is
hard to believe given the recent lack of interest from buyers. When
markets do something you do not expect, it is time to pay attention.
- Monday's
sell-off appeared to be a win for the bears, but unlike recent down
days for stocks, total market volume contracted relative to the volume
during Friday's Fed-induced and broad-based rally. The S&P 500 and
Dow have both held at logical reversal points.Since
a picture is worth a thousand words, we can show most of these
concepts on the charts below. When you examine the charts, ask
yourself, "Based on the actions in the past from market participants,
is it logical for this market to reverse near current levels?" If the
answer is yes, then the next thing to look for is some confirmation
from the markets, which can come in the form of market breadth
(advancing issues vs. declining issues), volume, and whether or not a
broad cross section of markets are moving in the same direction
(stocks, commodities, interest rates, currencies, etc). This analysis
was completed after Tuesday's close (8/31); so none of Wednesday's (9/1)
gains are reflected.
Finally, let me thank Mario again for lunch and his book recommendation, Steve Drobny's The Invisible Hands: Hedge Funds Off the Record. My recommendations to him and my readers are Yves Smith's ECONNED and Graham Turner's No Way to Run an Economy.
Both books are excellent and well worth reading and they remind us that
financial and economic risks don't just happen by accident - more often
than not, they're the product of defunct economic theories.
»
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You are a worse troll than Leo.
I can't stay and chat though, I gotta run out and sell all my physical before gold crashes to 900 in the morning.
Fucktard.
Johnny Bravo IS Leo! OBVIOUSLY!
Where do you even come up with this nonsense?
Does everybody who disagrees with you have to be one person?
There are more people who disagree with you than people who agree, even if the people who don't agree with you are in the minority at this particular site.
Then again, part of the popular draw of this site is its (obviously) minority viewpoint.
Some of the news stories are great here.
The posters?
Well, let's just say that there's been an "end of days" guy on street corners for the last 2000 years. Now they just post on the gold stories of ZH.
Hey, tar, call it the shock of the week, but Johnny B has a point. We've a new bucket of free money coming in from the Fed. Putting it in Treasuries (and Treasurys) is boring. And god forbid they invest in the barbaric relic they were warned about at Hawvad and UT. We could go up the stairs a few floors before the elevator drops to the parking garage. And JB gets points for reminding us that insults are poor arguments.
Another person with a government tit in his mouth. It will be hilarious if this "free money" doesn't materialize. Even if it does, the contagion in Europe will still pull the rug out from underneath you. There isn't much of a floor left in this stock market anymore.
Gemini, I'm merely observing. You're insult reveals your weak character. All I own is miners and some FAZ. It could all come down at any time. But Uncle likes to juice the market.
You will likely do well on miners (if they are PM miners). Sorry for the attack, I get a little bent on people being bullish about a fraudulent HFT driven stock market flooded with taxpayer money and multigenerational debt. The fact that markets do not follow fundamentals is quite the caution sign. This is clearly a dangerous game the Fed is playing. Unfortunately the government always loses when it comes to market interventions.....it's just a matter of time. I think someone that stands up for responsible use of taxpayer money, and the return of free (mostly)/unbiased markets is not weak of character thank you.
Okay, we're even. I Tea Party so I agree with you. SLW was heavily shorted as the spot price got kept touching 19.70 close to 4PM. Went sideways instead of down. This leg of the PM bull run may have little longer to run. Nevertheless, I'm spooked by cartel smack downs so I'm holding 40% cash since Tuesday. If it was a free market I would be fully committed.
Logic says you are correct gemini. But Ben is reaching for the lever on the press as we speak.
Taraxias,
Stop shorting this market and buy some solars!
Remember JDS Uniphase when fiber optic was "the next big growth industry" ?
Hah, Good for you Leo. "Fuck you" is really not much of an argument from Traxarias (sp?). What will you do with the $1T you will make from all your solar investments??
You can't even spell a poster's name right and I'm supposed to take you seriously?
The arguments have been made over and over and over and over again.
You'd have a better chance of getting a door knob to understand than Leo.
Enough is enough, now the only thing there's left is the cursing and the shouting.
And Leo's predictions have been right, over and over and over again, while the S&P to 450 crowd has been proven wrong, over and over and over again.
And yet, the conspiracy theories come out again every day.
They get proven wrong... but oh... it'll just happen "next time" when there's no "manipulation."
What a crock of bullshit.
You are very photogenic.
The funny thing is that that Trina Solar looks a lot like Gold's chart.
Yet, he'll say that gold is going to the moon, and Trina Solar will be 54 cents by next week.
The charts look similar to me.
Retard.
Indeud!!
I'm surprised this post didn't go up at 4:01 est. Next week when the market has a big down day there will be a post about QE 3 or how the market is oversold. Some things are too predictable.
It amazes me the number of people who read Leo, but hate on him! Either that or your not reading and just posting hate. Can't figure out which is worse. I always enjoy Leo's take even if I don't agree and appreciate ZH posting his submissions.
Actually, I love reading Leo's stuff in spite of the fact that I usually find little to agree with (and bust his stones accordingly). I find his stuff very readable and understandable, and commend that he's got big stones and a thick skin walking here into the Lion's Den of Bear Central and posting his views.
It's sort of why I read the Boston Globe in spite of the fact that I know, from intimate personal experience, they are a lying leftist rag not worthy of fish-wrap. Because even if one is not persuadable on issues it's always best to know how one's "opponents" will try the case against you, right?
Besides, who knows - Leo just may be right about this stuff!
Leo does this for kicks... He knows exactly the response that he will elicit. One of these days, the people who respond to his posts will universally decide to ignore him, unless he has something valid to say...
He's like the kid who likes to poke a stick ib the wasps nest.
There are three things that will get you disliked by the other posters at Zero Hedge.
1. Being bearish on gold
2. Being against conspiracy theories
3. Being bullish on anything else
Johnny dont forget
4. Being a brainless fuktard pumpmonkey like Johnny.
The only monkey I pump is your mom.
Retard.
HI Leo! Er um I mean 'Johnny Bravo'... LMBO
If you take the time and look around enough you find that most major conspiracy theories are proven to be true several years later (when everyone is focused on the new conspitacy theories or "Dancing With The Stars")
oh yeah...now I think about it, they never really DID land on the moon did they?
I saw a movie that proved it...
ROTFLMAO
Dancing with the Stars is a conspiracy?! That's it, this place is toast.
http://www.eonline.com/uberblog/b177640_dancing_with_stars_against_full-figured.html
Reference is there are 2 kinds of people: One that pays attention to things (like conspiracy theories) and the other that don't give a fuck and watch DWTS.
Both have a short memory time line either way.
5. Being a simpleton / hypocrite: "I'm just too intelligent to respond to these gold pieces anymore" - Johnny B
Really. What good does responding to them even do?
I make 17 arguments, and then I just hear the same low probability conspiracy theories that are never going to happen, followed by a "goled to 540000!!! BITCHEZ!!!111!!"
Why even argue with that?
I don't have to prove that people are wrong for them to be proven wrong.
Time will take care of that for me.
4. Being Johnny Bravo
What's so astute about being a perpetual bear... hmmm Mr. Astute Investor?
Is being wrong for the last 15 months and the majority of history really considered being "astute?"
It's a little difficult for an individual to be wrong for the "majority of history" given the average human life span is approximately 80 years, but then again logic and quantitative analysis was never really your thing.
Eschewing equities does not mean "bearish". There were just much more attractive opportunities to make money over the past 15 months in markets outside of equities - credit, volatility, precious metals, etc. (HY spreads at +2000 bps, Pepsi issuing bonds with an 8% coupon, gold up 40%)
You should really start in the boy's department before you work your way up to the men's floor...
Adios, Johnny Bravo!
you should be bullish on conspiracy theories. there is no other way to understand reality. there is no other way to understand what is going on today, even if it shatters your long held illusions about how great america is.
What amazes me is that you suggest that I develop a hatred for Leo without reading him.
Besides, Leo enjoys getting responses even if they are negative. If he didn't, he could simply stop posting.
Wow! you developed a hatred for Leo, by reading him, and yet continue to read. Besides, if you hate Leo's posts you also could quite reading them. I am even more amazed.
Well, first, I don't hate Leo. Secondly, I like sweets, but I don't eschew all bitter flavors either. Thirdly, reading material I disagree with, or may disagree with (after all, I cannot know until after I have read it), allows me to either question or reaffirm my conclusions -- critical things to do when seeking knowledge. Lastly, I disagree with Leo on many, many things, though historically I have agreed with him as well (I have concurred on the bangability of the women whose pics/videos he has posted on here in the past, for instance). Point being, conflict avoidance is not always fruitful. You should know, I suppose, judging by your 'middle' name.
I appreciate Leo's contributions..I dont always agree with Leo either but enjoy reading other viewpoints..Keeps me thinking...
Same here. I hope his prozac prescription never runs out.
Make fun of Leo now while you have your chance, before he becomes a full fledged crippled with his MS... and has to be afforded protection under disability and discrimination laws.
Good morning troll. I know you want us to respond. What would make you happy? Should I cuss you out? Call you mentally ill and ask you about your disability payments? Make a big deal about your shitty useless post? Scold you for being mean to Leo?
Nah! It's a free country. Post on, post on.
+409
Common sense = troll/tool repellent.
I'm with you though, gotta have that freedom of the soapbox, even for the most obnoxious and caustic individuals among us.
It's one thing to use a constitutionally protected soap box to express an informed opinion, another to use it as a platform to spew hate and idiocy.
However, we must protect the hateful so the rest of us have a platform as well. Doesn't mean we should fall for the baiting and triggering caused by the idiot.
Just remember that every "idiot" isn't always an idiot. There are plenty of wolves hiding in idiot clothing, meaning paid and professional disruptor's. While it's always difficult to tell the difference and for most, it doesn't matter, we must always remember that black ops is here on ZH.
hahaha
mmm
hahaha
I imagine it goes something like this CD:
And let's see, CD claimed holding physical gold Check
Physical silver...Check
Guns n ammo? Check
Violent tendencies? ...mmmm no seems more of a wuss
Let's put him on priority list 3 then, PM and weapon removal, but no detention center or re-education....yet.
+1 Not a troll... TOOL is a better description. And only here for 2 weeks no less!
Yup. Same here. Respect does not necessarily require agreement.
Perhaps the Down Jones receives a reverse split vis a vis a collapsing dollar. The idiots won't know the difference. It's worked for 100 years and counting.
Perhaps you (fudge packing faggot, pole smoking sloberer, stool spin sitter) might grow a pair of 30 pound man tits (just like Robert Paulson, RIP) so that you could get the dick out of your mouth and suck your own good year rubber hard nipples in a self fulfilling (milking) prophecy so that no one ever has to hear from you again. Then when you die, we can inscribe "Fannie Fucking Mae" on your tomb stone.
Don't be weedicuwuss. I have my own pwobwumz. My wancid cwap seeps into my 58W twouzuhs. I bewieve I have been affwicted with a howwible case of wectal cancuh and or mawawia.