Thursday, December 31, 2015
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Friday, December 4, 2015
Tuesday, December 1, 2015
Pretty much every financial asset class got smashed again in November
November was another pretty ugly month for a swathe of financial asset classes, with pretty much everything down in dollar terms.
The charts below come from Deutsche Bank’s Jim Reid, showing how stocks, bonds, commodities and currencies did around the world in the last 30 days. Other than a tiny handful of asset classes that appreciated in value, pretty much everything slumped:
It looks better in local currency terms, but the strongest performers (like Russian, German and Japanese stocks) have all seen their local currency value slide against the dollar since November, too:
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Monday, November 30, 2015
Asia stocks rise as Japan data mends, yuan status welcomed
TOKYO (AP) — Asian stock markets were mostly higher Tuesday as improved manufacturing in Japan offset weak Chinese data. The addition of the yuan to the IMF’s basket of globally important currencies raised confidence in China’s progress toward financial and economic liberalization.
KEEPING SCORE: Japan’s Nikkei 225 gained 0.9 percent to 19,926.41 and Hong Kong’s Hang Seng jumped 1.7 percent to 22,375.23. South Korea’s Kospi rose 1.5 percent to 2,021.05 and Australia’s S&P/ASX 200 added 1.8 percent to 5,258.30. The Shanghai Composite Index fell 0.3 percent to 3,433.80. Markets in Southeast Asia were higher.
CHINA CURRENCY: The IMF’s move to include the yuan along with the dollar, pound, euro and yen in its yardstick basket reflects the rising importance of China’s economy and its currency. IMF chief Christine Lagarde said the inclusion was “clearly an important milestone in a journey that had begun months, if not years ago” to a “market-driven” economy in China. The decision was based off the volume of exports involving the yuan and its use in the financial markets, among other factors. The yuan stayed in a narrow range on Tuesday.
THE QUOTE: The yuan’s “inclusion is unlikely to have great impact on short-term demand” for the currency, said IG market strategist Bernard Aw in a report. “What’s more important is perhaps the boost to President Xi’s efforts to liberalize China’s financial markets.”
JAPAN DATA: The monthly Nikkei survey of factory purchasing managers was at 52.6 in November, the highest reading in 20 months and up from 52.4 in October. The report said strong orders and a rise in manufacturing were behind the robust reading. Meanwhile, a survey on factory investment showed a higher than expected 5.4 percent rise in July-September from the previous quarter.
CHINA MANUFACTURING: An official survey shows that Chinese manufacturing was at its weakest in more than three years in November while service industries improved. The manufacturing index based on a survey of factory purchasing managers slipped to 49.6 in November from 49.8 the previous month. The index is based on a 100-point scale, with the 50-point mark separating expansion from contraction.
WALL STREET: The Dow Jones industrial average lost 78.57 points, or 0.4 percent, to 17,719.92 on worries over consumer spending. The Standard & Poor’s 500 index lost 9.70 points, or 0.5 percent, to 2,080.41 and the Nasdaq composite lost 18.86 points, or 0.4 percent, to 5,108.67.
ENERGY: Benchmark U.S. crude rose 29 cents to $41.94 a barrel on Tuesday in electronic trading on the New York Mercantile Exchange. It fell 6 cents on Monday to $41.65 a barrel. Brent crude, which is a benchmark for prices of international oils, gained 21 cents to $44.80 a barrel.
CURRENCIES: The U.S. dollar slipped to 122.92 yen from 123.25 yen in the previous session. The euro rose to $1.0583 from $1.0569.
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STOCKS FALL: Here’s what you need to know (SPY, DJI, IXIC, QQQ, SPX, URBN, UA, TGT, WMT, M)
Stocks finished off the last day of November lower in a choppy day of trading, although they managed to salvage small gains for the month.
Gold, however, fell 6.7%, and had its worst monthly loss since 2013.
First, the scoreboard:
- Dow: 17,723.67, -74.82, (-0.42%)
- S&P 500: 2,081.31, -8.80, (-0.42%)
- Nasdaq: 5,106.04, -21.48, (-0.42%)
And now, the top stories on Monday:
- China’s yuan is now officially a global reserve currency. The International Monetary Fund made it official today, placing it alongside the dollar, yen, euro, and pound in the Special Drawing Rights (SDR) basket. This could benefit the yuan, as big money managers move their holdings to the currency. It would also boost the local economy’s confidence, in a year that has been marred by two stock market crashes and a struggling economy.
- Morgan Stanley may trim a quarter of its fixed-income trading staff within the next two weeks, according to Bloomberg. The investment bank’s bond-trading revenues fell 42% year-on-year in the third quarter, and CEO James Gorman described it as the worst three months for fixed income, currencies and commodities since he took the helm in 2010.
- Retail stocks slid, after early surveys showed that Black Friday shopping activity was not spectacular. Urban Outfitters (-4%), Under Armour (-3.7%), and Macy’s (-2%) were among the biggest losers. Early data from analytics firm RetailNext showed that overall sales fell 1.5% on Black Friday, while average shopper spending dropped 1.4%. ShopperTrak estimated a decrease from last year to a total of $12.1 billion.
- But Cyber Monday looked much better. Adobe Digital Index said sales were up 14% year-on-year, at $490 million between midnight and 10 a.m. today, according to Reuters. The websites of Target, PayPal, Walmart, and Victoria Secret experienced outages or slow checkout times at various times today. The National Retail Federation had noted that most Black Friday shopping was online, and so the surge in Cyber Monday sales may lend itself as an anecdote of that behavioral change.
- The Midwest gave us a bright red light for the economy. The Chicago purchasing manager’s index plunged into contractionary territory in November. MNI’s indicator of manufacturing and business activity fell to 48.7 from 56.2 prior, missing the forecast for 54. A drop in new orders, to the lowest level since March, pushed the headline down. And, as a leading indicator, the decline in orders does not bode well for future employment. Deutsche Bank’s Joe LaVorgna noted to clients before the report a strong correlation (a 0.86 coefficient) between the Chicago PMI and the national ISM PMI. “Barring a significant bounce back in December, the decline in November suggests that activity during the final quarter of the year may well decelerate,” MNI said.
- Things were better down in Texas, where the Dallas Fed manufacturing index was reported as -4.9 for this month (-10 expected, -12.7 prior). Business executives said factory activity improved for a second straight month, while the employment index surged double-digits to 11.6, the highest since 15 months.
- In other economic data, pending home sales rose 0.2%, missing the forecast for 1%. As a forward-looking indicator, pending home sales point to another small drop in existing home sales next month, according to Pantheon Macroeconomics’ Ian Shepherdson.
DON’T MISS: MORGAN STANLEY: This is not how the bull market ends »
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A ‘Tiger Cub’ hedge fund seeded by Julian Robertson is closing
Tiger Veda Management, a so-called “Tiger Cub” hedge fund, is shutting down after 11 years, according to a memo sent to clients from the fund’s CEO.
The fund will return 80% of the capital on December 31, the memo dated November 27 said. The remainder of the capital will be returned at the end of the first quarter of 2016.
Manish Chopra launched Tiger Veda in 2005 after leaving Julian Robertson’s Tiger Management. Robertson, the original “Tiger,” has seeded a number of hedge funds.
At the end of the third quarter the fund was valued at around $280 million, according to a 13-F filing.
In the memo, Chopra expressed his frustration with finding “meaningful” long investment ideas in this bull market.
“Finding a new ‘value’ long investment has become a needle in a haystack process, and low hanging fruit are few and far between, ” Chopra wrote.
“Market wide, value stocks are of parochial interest and have far underperformed the more sexy growth, and levered & re-levered names. Value investments have become better bargains as each day passes, existing in the purgatory of ‘value trap’-land.”
Chopra continued to explain that their long bias led them to hold “far more cash than we would like.”
“I viewed this cash holding as a wellspring of future outsized returns post the inevitable sell offs after exuberant markets caved in. We have witnessed and executed on this over the last five years, when we deployed cash balances to buy when others were selling and intrinsic value presented itself at a discount.”
“Our long bias with lower gross exposure strategy evolved in conjunction with a rising equity market post 2009, as shorting stocks became a different game than when we launched the fund. Today it is betting against the house, with fellow hedge funds, corporates, bankers and governments, all being inimical to profits. With cash balances increasing even above recent history in 2015, we have disabused ourselves of the notion that we are best served to wait it out patiently.”
Those things are what led Chopra to close the fund. The decision to close did not sound easy either.
“While making this decision, I’ve sometimes felt like the Buddhist who after carefully and patiently creating his elaborate sand mandala over a lengthy period of time, destroys it in a matter of minutes.”
A call seeking comment from Tiger Veda was not immediately returned.
ValueWalk was the first to report about the fund’s closure.
Here’s the full letter:
Dear Partner,
After close to eleven years of managing Tiger Veda, and twenty years in the hedge fund business, I have decided to close the Funds. This was a difficult decision for me, but a confluence of factors confirms that this is the right time for this action.
In anticipation of closing the Funds, we have largely completed the liquidation process and plan on returning approximately 80% of capital on December 31st, and the balance shortly thereafter, with the final date of March 31st, 2016. I will keep you updated periodically throughout this process.
I have been frustrated by the paucity of meaningful long ideas in a bull market nearing the completion of its 7th straight year. Valuations are efficient or ebullient with little room for error priced in, even as risks to global economic growth build up. Finding a new ‘value’ long investment has become a needle in a haystack process, and low hanging fruit are few and far between. Market wide, value stocks are of parochial interest and have far underperformed the more sexy growth, and levered & re-levered names. Value investments have become better bargains as each day passes, existing in the purgatory of ‘value trap’-land. Because of our long bias this has led us to hold far more cash than we would like, and more than we have done so for the previous decade. I viewed this cash holding as a wellspring of future outsized returns post the inevitable sell offs after exuberant markets caved in. We have witnessed and executed on this over the last five years, when we deployed cash balances to buy when others were selling and intrinsic value presented itself at a discount. Our long bias with lower gross exposure strategy evolved in conjunction with a rising equity market post 2009, as shorting stocks became a different game than when we launched the fund. Today it is betting against the house, with fellow hedge funds, corporates, bankers and governments, all being inimical to profits. With cash balances increasing even above recent history in 2015, we have disabused ourselves of the notion that we are best served to wait it out patiently. This realization along with a few other personal and business related factors have all contributed to my decision to return capital.
I consider our investors to be true partners, and as such built a meritocratic organization with an ethos of disciplined process, transparency, accountability, a focus on critical thinking, and quality independent research. I have learned a great deal from all of you. I very much appreciate your candor and your desire to know what you own, as well as your willingness to test us on our assumptions and encourage us down the path we took together. While making this decision, I’ve sometimes felt like the Buddhist who after carefully and patiently creating his elaborate sand mandala over a lengthy period of time, destroys it in a matter of minutes. That action is performed with a view of manifold long term benefits, and I similarly expect the same with this decision. Many of our partners have become wonderful friends during this journey, and that has truly been the icing on the cake. Thanks also to the Big Tiger and his cubs for including us in the den. I look forward to staying in touch.
With humility and gratitude,
Manish
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