As part of his latest weekly report, Goldman's David Kostin breaks down the full array of strategy "baskets" used by hedge funds at this moment to outperform the market in 2014. In a nutshell, here are the best and worst performing HF strats so far in 2014.
India, Pakistan Intensify Shooting Across Border; Iran Downs Israel Drone; ISIS Seizes Military AirportSubmitted by Tyler Durden on 08/24/2014 - 12:07
Since in the New Normal no geopolitical events appear to have any adverse impact on risk and asset prices (because the central banks are always there to protect investors should the market "plunge" by say 5%) with general newsflow completely irrelevant on what has been a straight line up in the S&P since the announcement of QE4 in December 2012, one might as well see how much further geopolitical events can be pushed further before it all crashes. In other words, time for this weekend's geopolitical update which covers everything from India, Pakistan, Iran, Israel, Iraq, Syria and Qatar.
Janet Yellen has essentially confirmed QE’s demise; good riddance. Unfortunately, I don’t think that is the final end of QE in America, just as it hasn’t been the end time after time in Japan (and perhaps now Europe treading down the same ill-received road). The secular stagnation theory, that we think has been fully absorbed in certainly Yellen’s FOMC, sees little gain from it because, as they assume, the lackluster economy is due to this mysterious decline in the “natural rate of interest.” Therefore QE in the fourth iteration accomplishes far less toward that goal, especially with diminishing impacts on expectations in the real economy, other than create bubbles of activity (“reach for yield”) that always end badly. What Krugman and Summers call for is a massive bubble of biblical proportions that “shocks” the economy out of this mysterious rut, to “push inflation substantially higher, and keep it there.” In other words, Abenomics in America. Japanification is becoming universal, and the more these appeals to generic activity and waste continue, the tighter its “mysterious” grip.
An earthquake of 6.0 magnitude, the largest in the region for 25 years, shook the San Francisco Bay Area early on Sunday, waking residents and causing some power outages and minor damage, according to initial reports.
"Their various reconnaissance aircraft have been wandering around foreign airspace for decades and watching the military secrets of other countries like a disgusting thief spying over his neighbor’s fence. However, when the neighbor comes back with a big stick, the thief will turn tail and run away, blaming the neighbor. When you show people weakness, they will bully you. When you show people strength, they will respect you. We believe the Chinese Air Force and Naval aviation should maintain a high level of vigilence and morale in southeast coastal region to prevent the further US action. America has lost face and does not want to show the world they are sick. They have been lording over other countries for so long, and they will never let it go after they eat this loss."
When we last met Sergei Glazyev, Vladimir Putin's chief 'integration' adviser (who has been regularly featured on these pages in the past (see Putin Adviser Threatens With Dumping US Treasurys, Abandoning Dollar If US Proceeds With Sanctions and Putin Adviser Proposes "Anti-Dollar Alliance" To Halt US Aggression Abroad for two examples) he explained "how the U.S. military and oligarchs are trying to maintain leadership in the global competition with China." Arguably the best informed main in Russia, his perspective seems important to grasp as he considers "The world today is going through a year of overlapping cyclical crises. This is a period when the global economy is changing as the structure that has driven economic growth for 30 years has exhausted itself. The world needs to transition to a new system and transition has always come about through war..."
Another day, another brilliant scheme from the think-tank that is the G-20: prevent systemic collapse from TBTF banks loaded up with record amounts of debt by forcing them to... issue more debt.
Just what Europe needs... more QE... this is the real problem - not only is demand for credit weak in the periphery as the balance sheet recession rolls on, but "real" borrowing costs are at near-record highs... Despite Draghi's earlier comments and promises, cramming SME loans down the throats of borrowers at suppressed risks will do nothing but kill bank balance sheets (most critically the ECB's)...
Michael Franzese, a former mob boss for the Colombo crime family in New York (and GoodFellas character), told CNBC, "there's a bubble there that's going to burst at some point and when it does it's not going to be good," but there is another reason he says investors should avoid the U.S. stock market - "I did a lot of things at times with people on Wall Street.. a lot of guys are shady and they did shady things with me and I don't trust them. And I don't like other people that I don't know really well taking care of my money." As we noted earlier, his advice is to hold gold (in Physical bullion bars not ETFs), because "there will always be something there," unlike stocks "where in our country, you go to sleep, everyone tells you everything is wonderful, you wake up and everything is gone."
A year ago, when chatter began about China lifting its one-child policy, we explained the implications (and warned of excess exuberance). As Bloomberg reports, it appears China's anticipated baby boom is more of a bust. Nine months after stock-market wagers on a baby boom in China reached record levels, the bets have turned into some of the nation’s biggest losers as living costs deter couples from having more than one child - less than 3% of the 11 million Chinese couples eligible for another child applied for permission by the end of May, jeopardizing government efforts to bolster a population that the United Nations predicts will start shrinking by 2030.
A "Yes" vote for Scottish independence represents a "high risk" event according to Citi's Michael Saunders. With the so-called 'neverendum' now less than a month away, Citi continues to highlight three particular concerns if Scotland does vote for independence: Scotland’s relatively weak fiscal position, Scotland’s large banking system and uncertainties over the currency arrangements of an independent Scotland. The Scottish Government seems to be seeking a policy of "sterlingisation" - which even their economic advisors judge "is not likely to be a long-term solution." For now a "no" vote is most likely, however, even if the Scottish referendum does not pass, the UK political landscape is likely to remain in a state of flux.
President Obama's cunning plan to 'quasi-ouster' Shiite PM Maliki, in the vague hopes that a more egalitarian all-inclusive Iraqi government could be formed that will magically lead the 'people' of the Sykes-Picot-defined nation to coalesce in sovereignty against The Islamic State has, somewhat understating it and perhaps unsurprisingly, hit a roadblock. As Bloomberg reports, Obama's effort to have Arabs take the lead in combating Islamic State suffered a setback when Sunni lawmakers quit talks on forming a new Iraqi government after Shiite gunmen killed scores of worshipers at a Sunni mosque. The killings in Diyala province derailed attempts to form an Iraqi government with bigger roles for Sunni Arabs and Kurds that would strengthen the fight against the terrorist group. It appears the common knowledge of who is friend and who is foe remains very much in the air. We suspect, in some dark corner of Washington, Hillary is grinning from ear to ear.