Investing Legend Louis Bacon Has Had Enough Of Algos And Central Planners, Calls It Quits
Markets are toast as Louis Bacon plans to give back 25% of his fund to investors as "liqudity and opportunities have become more constrained." As Bloomberg notes, Bacon is struggling to make money in his typically macroeconomic trend exploiting fund as "the risk on / risk off environment appears to be an abiding presence that has keep engagement low." Macro funds lost an average of 1.3 percent in the first six months of the year. Bacon, pointed out that "Markets are increasingly distorted by central banks’ attempts to squeeze drops of growth from an over-indebted private sector across much of the developed world." The U.S. markets are hindered by "a caustic political environment and an anti-business administration," he said.
U.S. banks have retreated from making markets in many securities because of the Dodd-Frank legislation, which limits them from trading for their own accounts. Bacon added that 'in some Kafkaesque absurdity,' the rule is "named after the two high protectors from regulatory oversight of perhaps the most egregious of U.S. financial miscreants, Fannie Mae and Freddie Mac."
Bacon pulls no punches as he goes after inept regulators in Europe and the US, and describes the state of affairs as "Disaster Economics, where assets are valued based on their ability to withstand a lurking disaster as opposed to what they may yield or earn, is now the prism through which investors are pricing markets." And perhaps most 'distorted' is the credit market where trading in individual corporate credits has also been 'decimated' he said. "I shudder to think of the stress that is going to occur during the new credit liquidation cycle."