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Multibillion Hedge Fund Manager: "Ultimately QE Will Fail; US And China Might Enter Recession At The Same Time"
By Russell Clark, investment manager of Horseman Capital Management, March 2015 monthly newsletter
I have somewhat depressingly spent most of my time as a fund manager net short. I had expected way back in 2012 that I would move the fund net short, capture a big move lower in markets, look like a hero and go long. To use a boxing analogy, I thought it would be a quick knockdown against an inferior opponent. Mike Tyson versus Michael Spinks in 1988 is what I had in mind.
However after some early initial success, particularly with mining shorts I have found myself in a dog fight. I have found myself using all sorts of tools and tactics to maintain my short position. I have used bonds, currency exposure and a long book designed to make money should my short book come under pressure.
When I started thinking about going short, I recognised that we live in the world where almost all central banks have been pulled into the Bernanke idea of asset bubble led economic growth, and that they would go to extraordinary lengths to keep the party going. Philosophically I knew this was foolish, but more importantly empirically I had noticed that Central Banks and government have a long and inglorious history of achieving the exact opposite of their stated aims. Examples of this include the US policy of promoting home ownership via Freddie Mac and Fannie Mae, has ultimately led to lower levels of homeownership. In the 70s, the authorities believed that higher inflation led to lower unemployment, until it didn’t. In the 1990s, currency pegs in Asia were believed to give macroeconomic stability, until they did not. There are numerous other examples.
Ultimately, the current QE programs will fail. I think most likely through a large devaluation in the emerging market currencies. We have already seen all the members of the BRICS family devalue, except for the only one that really matters, China. Increasingly policy making activity by Chinese authorities, including a recent policy of promoting margin trading by domestic investors to create a bull market in stocks, strikes me as particularly desperate.
So rather than being in a quick knockout fight, these last three years have more closely resembled the “Rumble in the Jungle”. In this fight an aging Muhammed Ali took on younger George Foreman. The bookmakers gave Ali next to no chance of winning, as George Foreman was both fast and strong and had easily beaten fighters that had recently beaten Ali. In the first round, Ali tried for a quick knockdown but to no avail. In subsequent rounds, Ali allowed George Foreman to catch him on the ropes while he leant way out of the ring, trying to limit the damage of the punches. As the fight wore on, George Foreman started to grow visibly tired, and Ali started landing punches. Ultimately, by the eight round George Foreman was spent, and Ali went in for the kill.
I am increasingly finding it easier to short, particularly in the US markets. Having dodged and parried so many blows from Central Bank QE programs, the market is seemingly failing to break higher. Breadth is narrowing in the US stock market, and credit spreads widening. Economic data, with the exception of jobs, which is a lagging indicator, indicate the US economy is peaking. To me it looks like the US and China might go into recession at the same time. For this reason I have been adding continually to the short book since the beginning of the year. The market looks tired and weak. Time to look for a knockout punch. Your fund remains net short equities and long bonds.
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And before you ask, yes: one can make money shorting the "market"
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Sounds like a DP that's gonna hurt.
rus is out of the loop.
Ultimately.....one can drive an 18 wheeler through that time frame. This year? Next year? 2020?
and anyone still playing this rigged casino who doesn't time "ultimately" right down to the nano second will continue to get raped by the central banksters and their ilk
"Will fail"? Will?
Hey Horseman Capital Management....Try to read this. And get out of your ivory tower. Zero rates and QE will hurt you not China.....
China can only fail the day we stop buying millions of iPhones or millions of TV's or millions of shoes or millions of furniture....
In China, The POSITIVE surplus/reserves increased by a factor of 6.15 times in the last decade from USD 614 bn to USD 3,859 billion. https://research.stlouisfed.org/fred2/series/TRESEGCNM052N
In US, the DEBT/negative deficit increased by a factor of 2.38 times in the last decade in the opposite direction. https://research.stlouisfed.org/fred2/series/GFDEBTN
Even the most obscene amount of debt being printed in the US of over USD 18 trillion now, is not growing as fast as the reserves in China!
In addition some of the top most brains like from LSE in UK have shifted their base to China to study the impact of money flows both in and out of China, in both directions, of which China is the undisputed leader now. I recommend to anyone with an open mind try to read this article below and see what has happened in the last decade.
Foreign Direct Investment: Can China Teach the World a Lesson?Anyone want to make money.
Buy in USD: CN, ASHS, ASHR
Buy in HKD: 2823.HK, 2828.HK
Just checkout the Maritime Trade report from UNCTAD: http://unctad.org/en/PublicationsLibrary/rmt2014_en.pdf
gazab .
I really hope Horseman was short the Chinese markets in the last 2 years....
I pray that Horseman keeps his shorts on...so that all his clients money keeps moving to people like me....
More advice from a billionaire who made his lucre from the system (and QE).
Thanks, Buddy... keep all those hot tips coming our way! (And don't trip on your way out the back door.)
And how did you buy your computer, or pay for the internet connection?
I wish they were hot tips, but unfortunately for you, all of them are 50% up in just 6 months....timing, my friend, timing....if the wind blows east, you better set your sail right or you might capsize.
If you open your eyes, you may see a different world. Keep them closed and you will be left snoozing....
Follow the data....that's all I can say.
Ask the question why ...everytime you see the TV or read the news, because thats what 99% of the world reads or hears....inlcuding the wars or uprisings or ice cap meltdowns or stock price moves....everything has a reason as to why it happens.
And no, this world is not a conspiracy theory. We are real, as real as these computers we type on or the electricity that powers them all......or the stock prices that move and the air that we breathe....
Think...it's a virtue!
I will shut the back door while leaving...but can you even get in?!
If it includes selling of souls, no thanks. Most of us here on the hedge value our own and others' dignity more than that.
What people don't understand is that just like in normal population, the 99% of people have no say. Same goes in banking. 99% of people, actually 99.99% of the people in banking have no say.
Imagine the crooked banks of Citi, UBS, HSBC or JP Morgan. Only the CEO and his Top 10 cronies are the crooks including the dozen board of directors. All of them should be __________ in the Top European and US banks. Look at Jon Corzine he is a great example. He keeps resurrecting endlessly because he is at the top of the totem pole.
Just like in any business, whether small, with 20 employees or large with 100,000, if a CEO and his cronies dont want certain things to happen, THEY WILL NOT HAPPEN. No matter what a low end sales guy wants to do.
Imagine what they do in top banks. If a guy at the bottom of the totem pole makes a billion in a fees from a bond deal or a merger deal, everyone in the world including the CEO knows about it. The guy or gal is rewarded and sent on expensive trips, paid millions in bonuses, in 1 case I know have been gifted Ferrari etc not to mention stock options. However, when the same chap makes a mistake, the CEO says..WHO..? WHAT? I dont know that guy...just like Clinton said in the White House...I dont know THAT girl!
Not all bankers are crooks. They do what is allowed to be done to make the big bucks. And 99.9% of all bankers are sincere hard working folks who were led to believe that finance is a great business and trust me until 20 years ago, until commissions started, it was.
Banking and accounting was boring and mundane but necessary and even today is. That is why almost any developer or coal company or oil company or accounting firm can go bankrupt but not a bank. Except in some cases where the pressure is intense or political motivations take over for example lately in Spain, Mauritius or South Africa or Ukraine. Not because the banks are holier than thou but because banking is necessary. I would not go as far as to call it evil.
Assuming that every banker including the mom and pop working in your down the street branch trying to make ends meet and live a decent life are crooks is completely unfair. There are bankers living in cities and towns worldwide in Utah or Lagos or Shenzen or Perth. They are pretty decent people and live a normal life like a driver or a plumber or an IT specialist or a small businessman owning a supermarket or a gas station or running a lathe factory or makes plastic cups or manufactures socks.
You should read this article to find out how Swiss bankers living the high life have been hung to dry by these top CEO bankers....because they are not needed any more. Such bankers were used as tools. I dont feel sad or sorry for them because they deserve it. But they believed that the 'system' will not end so catastrophically and there will be someone to protect or help them and they will keep cruising until the end helping clients hiding untaxed moneys from all over the world. These individuals are paying the price for the sins of the Top 20 executives including board of directors in every Top 100 bank.
By the way, did you know that there are perhaps more than 20k or 30k banks in the world? Once again, only Top 100 banks can break the law with impunity and get away with it. The smaller banks around the world which is again 99% of all banks, they cannot break one damn law.
Also you must remember, that if there was no untaxed money created by politicians and any businessman then there would be no bankers to blame. So part of the bad blood of bankers also needs to go to people who created and owned the black and untaxed money. Why dont we blame the businessman who owns the black money but blame the banker alone?
We must also blame the Govt who kept sleeping for so many decades in each country and allowed the untaxed money to be hidden. Due to this extensive money being available, banking became crooked and evolved and has morphed into a clusterfuck that it is today. The model kept evolving and now bankers are being blamed. There was not much untaxed money in the world about 30 years ago and at that time bankers were not paid the big bucks. The banking model evolved purely because there was this money floating around and banks made a business model out of it. Thats all.
There are also views that Iran and Russian and Cuban and N Korean sanctions enrich certain people. Because those millions of people out of which there are dozens of people who pay 10% to get their money 'fixed' overseas or remitted. Once again the bankers facilitate it but they are not the culprits. The culprits are the people who have the money. Because if they will not pay this enormous fees the bankers will not be able to do anything or be incentivized.
Enough of banking secrets for one day! Dont believe that everyone except the bankers are holy people! PLEASE!
America’s Most-Wanted Swiss Bankers Aren’t Hard to FindWe must also ask our political leaders like Elizabeth Warren and many more around the world to ensure that the CEO of any corporations including a bank must pay the price for things done under his/her watch. Just like they get rewarded with a 'sir' or money or ministership or whatever when they do a good deed. They must may the price for a bad deed. Until all corrupt businessmen and CEO's are put in jail (like what China is doing currently) our children will unable to distinguish between right or wrong and humanity will not end because of lack of food or water but we will end human society in the 21st century because we will not be able to distinguish between right or wrong!
Can we envision a future, where a crime like murder or rape cannot be distinguished between what is right or wrong?
Why should it be any different if any businessman or politician who is entrusted with taxpayers money or a banker who breaks the laws etc.... whoever takes a bribe or does things that are illegal should not be punished and prosecuted with the full wrath of the law?
If only there were some ways to recalculate and restate and revise and relatavise on the meaning of "GDP". Bold and persistent experimentation has got to get bolder and more persistent.
...or the meaning of recession.
We have not left the recession and are heading for depression.
If only we lived in a world where nobody cared about calculating "GDP" nor used it as a spring-board for fantastic speculation.
<<If only there were some ways to recalculate and restate and revise and relatavise on the meaning of "GDP".>>
Only statists need to speak of "GDP" figures.
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com
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But Yoda Yellin has a printing press Death Star
Chimerica construct is descending into final phase of dissolution with both sides no longer satisfied with their part of the arrangement.
Translation: "I've been wrong and lost a lot of money but maybe I'm right this time."
I don't know, they seem to have had pretty good returns the last few years. Unless you're counting missed opportunities, but then we all lost mllions for not buying APPL at $5.
a lot of you lost money by believing the hype and *selling* apple too. Tech stocks arent going away, and you gotta look at stuff relative to other stuff. HTC good - Samsung will dip/regress soon as most of the people interested in buying a galaxy or note - have.
Though even I am not sure about this watch. not at the current price.
http://www.macobserver.com/tmo/article/multiple-methods-now-reveal-apple...
http://bostinno.streetwise.co/2015/04/20/apple-aapl-stock-price-rise-due...
http://www.iphonehacks.com/2015/04/apple-surveys-apple-watch-try-on-cust...
sure, luxury items are doing well in many ways, but I think they need to come down in price by 150 or so.
I may be wrong however.
The fund has been profitable during its entire short period.
Wait, when did the US exit the last recession?
2001?
So then Dow 25K it is. Boxer analogies never work out.
Au contraire...
'Everyone has a plan'... (until a sneaky uppercut ruins it)
Thanks Bernanke... what a f' uped world you've created.
Be still my beating heart... If any major economy hits recession now it will be painful, two at once, especially these two just might do the global system a fatal wound. China has been iffy for awhile but has used their command and control to beat the shit storm back. The US is floating on magic money and market manipulation. One slip anywhere will be all it takes and the energy bond markets are going to light the fuse.....
What if the Fed and Treasury keep bidding up these companies until the very day they go BK?
Newsflash, if the US and China go into recession at the same time, that is going to be extremely bullish for both currencies.
Truth is China will be up while US goes straight down the drain.
did u see that article on www.bloomberg.com where they actually today (after as always crappy Chicago numbers which haven't been good since the last crash) said economic numbers in U.S. Still not good. They have a good chart in it and did everything they could to not say worst since Lehman so they said worst since financial crisis.
Yea I know I was laying in bed last night thinking now that means if they are going to try to time all the downturns till the downturn happens itself and w all go down to rise again at the same time.......
And I watched it dance in my mind as all the problems with that .....
I too feel comfortable with my rattlesnake portfolio containing shirts and all kinds of yummies. And ur right... About how the market feels too despite the pretend economy they would be selling us if they didn't have to catch up with the stranglers saying... U know I don't care if I miss gains at this market top... As compared to the tech crash was ride until it turned over.... Sure politics is trying to make it that kind of economy without the ecin My backing it up.... Just a matter of time before it all blows up and I know I don't have to wait till jan 2017 as one dude pointed out via the lei chart that be latest date .....which we won't make it to before it turns....
I usually would never short a market here..... As usually the fed has to crank it up till the yield curve goes recessionary ..... Then even then it can take time for the market to roll over if it has enough momentum....
This market isn't that good.... Foolish tossing of money isn't fixing the issues .... Another reason to feel secure in ones shorts.
the best parts were fight related rememberences which had little to do with his sad tale.
"Chicago numbers which haven't been good since the last crash)"
Chicago is bankrupt.
It's what happens when you live well beyond your income for years and cook the books.
Too much of America never rebounded but then again it's got the big fat gov sitting our face cause they're still pissed they never got laid as adolescence ....so they drive like shit like the person who isn't getting obviously laid!
And can u believe Chicago bonds r starting to reflect that fact.... I myself was a bit blown away. Had no idea they could do that here in Kiki Layla land economy since truths too ugly to be spoken and lies can't cover up enemy truths enough...
QE will fail and the bubbles will pop when a Republican wins in 2016. Oh and U6 will suddenly be figured into unemployment.
Why would you short the market now when you know the Dow is headed to 36,000?
The because I got tiered of watching the gnashing teethers run around breaking everything and it's kind of funny watching how on a dime now this is all about fixing things but these things can't be fixed and I can tell u easily the Dow won't hit 36K before the next correction.
And things they do have opposite effect but u know they can't stop their bad habits.
I feel comfy buying uvxy at these levels. And short r still inexpensive but they have gone way up since the beginning of the year.... Though I am not doing it through direct options....
God gold in some yummy lows this year and silver and the miners.... Got some long yields in expectation to fed tightening now pushed out to never or maybe or what ever the jumping crickets r saying as peeps listen w crickets chirping.... Not a good economy usually no one is listening to the fed when they begin rate increases as since they are into the good economy.
I could give u a zillion reasons along with the fascist state of what I personally have seen and I know that ain't gonna work for the ecinrest my as I did when it first got intense several decades ago.
And we have so many different things coming at us as tidal waves set in place long ago ..... Too much to pretend to fix like they really want to other than fuck me out of a fucked up winning bet..... If they thought intention was to be long they would just be breaking things again.
It's fun to watch this pretend for a change mostly.
I still need the market to go up to get more and more yummy shorts and hope they will go long term for tax reasons ......
Come on Dow 19K or if u think u can do it 24K. Yi ha get her up!
Simultaneous spontaneus double negro knock out .... quite rare .... I'd pay to see it !
QE fails will WWIII begins, until then the beatings for savers will continue.
With first two economic entities go to recession and 3rd on the edge for over 2 decadecs, this is not good.
With first two economic entities go to recession and 3rd on the edge for over 2 decadecs, this is not good.
I'm pretty sure QE has done exactly what it was meant to do. Funneling money to the people that don't actually need it. Banks, MIC and healthcare, big pharma and all corporations loading up on buybacks. Maybe fighting a 15 year, let alone a 50 year war isn't possible with real interest rates. In a real capitalistic market banks would have failed but as we all know we don't live in a capitalistic society. We live in a crony capitalistic world, where banks own our money, our corporations and our government.
QE hasn't worked for 90% of the people. Its allowed bad policies to be extended, its allowed less people to own more of everything. Saying its GOING to fail when it already has is just plain stupid.
But is he a legendary hedge fund manager?
Two entirely different beasts here:
US: Entirely reliant on wall street criminals at this point. The numbers are all fake and the tiny amount that's not fabricated is cast into existance by the Fed. When the US market crashes, it takes down EVERYTHING along with it.
China: The stock market is meaningless. You trade on it if you have inside information or are a momo. The total market cap is a joke. Pensions are not tied to it, nor are mortgages. There is so much redundancy in the Chinese market now that some companies dying is actually a GOOD THING. As it is right now, it's a race to the bottom for literally everything and it goes so fast it's insane.
The US is more or less played out, there are few if any more tricks left in the bag. China's still got a whole nother deck of cards to waiting to crack open.
never under estimate how bought the democrats are....or the brazen tactics Wall Street to rape the taxpayer.
absolutely not. The Chinese know that America$ is in decline and have hedged accordingly - not just with Russia and Brazil and India and Pakistan but central asia.
America has been fucked, over and over by large corps and the banks, and is going to continue to get fucked bloody.
For all their downsides, the Chinese have not arranged to fuck themselves in the longer run via trade deals and know they have to keep the peasants happy.
Their biggest problem may well be clean water and other environmental shit.
the decline of the FRN and America's consumer economy of fat fuck walmart shoppers isnt even in their top 20 problems.
trust, yo.
Ha Ha too funny, we never got out of DEPRESSSION let alone go into anohter recession.
Oh right I've been short the market and am up 50% plus even though the market has gone up 50% since 2012. Sure look right here I typed it in here on my scorecard
His Excel looks pretty.
LIES!
Signed, Jim Cramer
I believe it beggars the point to say that QE failed.
I believe it makes more sense to look at what QE accomplished and assume that every other proposed 'purpose' for QE, EXCEPT WHAT IT ACTUALLY DID, is a lie.
When you invest in companies that continually expand their share count by giving away 'free' shares, you understand that the purpose of this operation is to take away some of the ownership from the existing stockholders, and to deliver it to some other people who receive the new shares. It is called 'DILUTION'. And companies that do it find raising cash through share issuance harder than those that don't, because every prospective shareholder understands that DILUTING companies habitually rob their shareholders.
QE is the same thing, only the 'Shares' are called 'Dollars'.
So, ask not whether QE succeeded, but only whom it was actually intended to benefit.
They would have promptly stopped doing it if it had failed.
Therefore, (and clearly) it was simply not intended to do what they claimed it was.
Short term short selling by speculators is a mechanism by means of which these speculators steal from long term investors. Hedge fund managers who try to use short selling as a long term strategy are behaving stupidly, and we should not feel sorry for them. It was a disappointment to learn that the Chinese authorities have allowed short selling. One suspects that they are making a serious mistake by imitating the Americans in this matter. And it contradicts socialist doctrine by rewarding parasites.