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The Best And Worst Performing Assets In August: It Was A Good Month For Pet Rocks, Bad For "Hedge" Funds
In late July, the WSJ compared gold to a pet rock. Just over one month later, a whole lot of investment professionals would have loved to be invested in said pet rock (Loeb down 5%, Einhorn down 5%, Cooperman down 11%, Ackman down for the year) instead of all being grouped in the same "levered-beta" names that have left many of them down for the year. The reason: as DB summarizes August performance, "of the 39 non-currency assets that we track in this monthly review, 33 of those ended the month in the red; Only oil, Russian equities, and Gold were the only assets that actually gained more than 1% during the month."
And oil would have been red had it not been for historic 3-day short-covering, window dressing surge, so really just two assets were green for August: Russia and gold.
Deutsche Bank adds that "with hindsight August was a good month to go on holiday and forget about markets." Unfortunately, with the VIX exploding to levels last seen during the Lehman collapse, hardly anyone would have been able to actually capitalize on said holiday as sheer panic gripped the markets.
Here is the full breakdown of August asset performance, or lack thereof:
Taking a closer look at the other end of the spectrum, we saw total returns in global equities finishing anywhere between 6%-22% lower on the month and that's with a big recovery in a yo-yo last week. The S&P 500 (-6%) was an outperformer in a relative sense even though the market did briefly dip into correction territory last week for the first time since 2011 partly on the back of the perceived China's slowdown and policy surprises on the currency front. China and HK equities were clearly not immune to these developments. The Shanghai Composite and Hang Seng both ended the month around 12% lower. Three consecutive months of losses for the Shanghai Composite has brought the index back to pretty much flat for the year despite being up nearly as much as 60% in the middle of June. For the Hang Seng, August was the biggest monthly decline in nearly 4 years. In other parts of EM, we saw the BOVESPA and NIFTY down around 7-8%.
Staying on the EM theme, August was also a challenging time for debt investors with the aggregate local currency EM bond index (-3.5%) suffering the biggest monthly decline this year. This brings the YTD losses to nearly -9% - of which Asia (-5.6%) has fared relatively better than LatAm (-15.5%). Turning to DM, European equities under-performed the US. The Stoxx600, FTSEMIB and IBEX 35 were down anywhere between 7-8% in August - even though European equities are still one of the best performing markets so far this year.
Curiously European, and for that matter, US rates, did not perform that well considering it was a fairly weak time for risky assets. Bunds and OATs lost around 1% in August on a total returns basis. Treasuries were pretty much flat which in some respects is a reflection of the lingering uncertainties of a Fed lift-off in September and some discussion about China selling assets it's spent a decade or so accumulating. Credit excess returns were generally negative across the board but these losses were relatively modest in comparison to what we saw in equities. Total returns were negative for credit with HY markets down by about 2% on both sides of the Atlantic.
Finally a quick word on commodities. The asset class is still suffering although performance in August was a vast improvement to what we saw in July. Brent and WTI were up by around 4% in August after a huge month-end rally. They declined by nearly 20% in July and looked set to see similar falls in August before the mega last 3 day rally. Copper fell for its fourth consecutive month in August bringing the commodity down 17% YTD which some would argue is a reflection of global growth prospects.
And the table showing pet rocks outperforming the vast majority of assets managed by very sophisticated people. Here is just August:
And YTD:
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mmmm....Comrade Goldski!
I luv Natasha Goldski
My favorite pet rock right here... http://upload.wikimedia.org/wikipedia/commons/6/6a/Gold-Quartz-243293.jpg
Trend to continue, well, "forever".
laughing at how they r desperately capping the phony paper prices of the only 2 forms of real money again today as the globall financial debt based currency ponzi is imploding....
http://www.kitco.com/charts/livesilver.html
hilarious....
Copper and wheat are Corp bonds? In the new normal, why not...
When Hugh Hendry capitulated and started drinking the kool-aid hedge funds stopped being a thing.