Below is excerpt only from today’s edition of macro-strategy commentary courtesy of Rareview Macro LLC publication “Sight Beyond Sight”
Neil Azous, Rareview Macro LLC
Firstly, the Stock Exchange of Thailand SET Index (symbol: SET) is showing the largest negative and the Dollar-Rupiah (USD/IDR) is showing the largest positive risk-adjusted returns across regions and assets.
Of note, Thai stocks fell almost 10% at one point last night and the Indonesian Rupiah weakened by 2% to its lowest level relative to the US Dollar in 16 years. The head of the Thai bourse said no measures were needed to shore up stocks and investors shouldn’t panic and the Indonesia central bank reiterated their view that they will always be in market to stabilize the IDR currency.
Why do we start by highlighting Thai and Indonesian risk assets?
Because South East Asia is the clearest example we have seen of foreign investors pulling out of emerging markets and a prime example of what happens to stocks and currencies when there is a lack of liquidity. More…
Below excerpt from Dec 10 edition of global macro strategy newsletter “Sight Beyond Sight” includes insight for those tracking events in Asia and China-related ETFs. When scrolling to the bottom of this post, MarketsMuse readers will appreciate why we regularly cite the Sight Beyond Sight newsletter—the conclusion of this post displays the out-performance of SBS publisher Rareview Macro LLC’s model portfolio.
“…Using the ETF’s as a proxy for the spot currencies, the pressure point in the Currency Shares Japanese Yen Trust (symbol: FXY) is closer to 83.15 (vs. last price 81.85) and the Euro Currency Trust (symbol: FXE) is closer to ~122.50 (vs. last price 122.00).
There are three major points we would like to make after the overnight price action in China.
The first is liquidity related and what actually drives that stock market. The second is inflation related and looks at what, at least partially, drives the rest of the world. The third is a rebuttal to the “bomb throwers” who continue to suggest that China has entered a phase of deliberately debasing its currency.
At no point during the recent stock market rally has any dogmatic bear on China been willing to concede that the stock market (i.e. liquidity) and the profit cycle (i.e. deflation) during cyclical episodes, such as the one we are witnessing right now, can have a meaningful divergence.
But they should note that the last time the SHCOMP outperformed the H share index due to an A share rally was back in 2006 and came at the start of rally of more than 200% for both indices and from a PE level that was more than two times the current levels. (Hat Tip: Aviate)
Additionally, with Macau struggling, real estate still contracting on aggregate, and Gold a weak trading tool, the stock market is the “vogue thing to do” at the moment. Fashion is important in China, just like anywhere else. More…
MarketsMuse extends our thanks re: below extract, courtesy of AsianInvestor.net
China Asset Management and China Southern Asset Management are racing to list the first exchange-traded fund via the Shanghai-Hong Kong Stock Connect, after getting regulatory approval last week.
But this comes amid muted initial volumes for the trading link, leading to suggestions that the mainland securities regulator has encouraged the moves to help promote the scheme.
Classed as qualified domestic institutional investor (QDII) products, they will be cheaper and will have quicker settlement cycles than existing QDII ETFs. They will trade through Stock Connect until the cap is reached, then they can use QDII quota.
China Southern, the fifth biggest mainland fund house with assets under management of Rmb200 billion ($32.5 billion), got the green light from the China Securities Regulatory Commission (CSRC) on December 2. Approval came the following day for China AMC, the country’s second largest fund manager with Rmb348 billion.
Both firms plan to launch ETF products tracking Hong Kong’s Hang Seng Index using the southbound quotas of the Stock Connect trading link. China AMC’s new fund will join its existing Hang Seng ETF that buys Hong Kong equities via the QDII scheme, while this will be the first such fund for China Southern.
Each product will charge a 0.5% management fee and 0.1% custody fee; these are 25% lower than existing QDII equity ETFs. They will be classed as QDII funds. More…
Below extract courtesy of 08 Dec edition of MarketsMedia.com; reporting by Steve Marlin
Agency Broker WallachBeth Raises Tech Bar
WallachBeth Capital, a provider of institutional execution for buy-side investment managers, recently appointed quantitative trading veteran Matthew Rowley to the newly created role of chief technology officer, signaling the firm’s commitment to delivering customized services that address specific and often complex order-execution and related business-process needs.
The company’s founders, Michael Wallach and David Beth, “have a vision of the industry becoming even more technologically driven,” Rowley told Markets Media.
Matt Rowley, WallachBeth
Rowley joined WallachBeth from Crédit Agricole Cheuvreux, where he was credited with helping the firm attain a leadership position in the global electronic brokerage space. More…
Extract courtesy of reporting by FinAlternatives.com
New York Life Investment Management has acquired IndexIQ, a leader in the liquid alternative exchange-traded fund industry, for an undisclosed amount.
The high-profile acquisition is NYLIM’s first foray into the ETF space.
Upon closing of the transaction, IndexIQ will be integrated into NYLIM and marketed through New York Life’s MainStay Investments platform. It will add $1.5 billion to MainStay’s $101 billion in assets under management.
“Our entry into the ETF space is a significant leap forward for New York Life Investment Management and offers remarkable opportunities all around,” said Drew Lawton, NYLIM CEO, in a statement. “Retail and institutional investors are increasingly attracted to ETFs because they offer a cost-effective, transparent way to access investment opportunities across asset classes around the globe. IndexIQ has established itself as a true innovator and market leader offering the next generation of liquid alternative ETFs, and we intend to leverage IndexIQ’s capabilities to become the dominant provider of non-traditional ETF solutions to the market…At the same time, IndexIQ provides a robust ETF platform that New York Life can use to consider new and diverse offerings in the future.” More…
Below excerpt from a.m. edition of Sight Beyond Sight, is courtesy of global macro think tank, Rareview Macro LLC
Neil Azous, Rareview Macro LLC
New Strategy – Short Gold vs. Long Silver
This morning we sold 3000 GLD 12/20/14 P112 at .63 to close.
We rotated our short Gold bias using put options into a short Gold versus long Silver spread using futures.
The updates were sent in real-time via Twitter.
Below are two illustrations: A “monthly” chart of long Gold versus Silver and a matrix containing our trade construction details.
Note that this is not a short-term “tactical” trade but rather an intermediate term “strategic” trade. As such, it will be managed with greater latitude in terms of risk.
Similar to the 200-day Moving Average (200-DMAVG), we find long-term Linear Regression Channels can be a strong technical indicator.
For those not familiar with Linear Regression Lines, it is a line that best fits all the data points of interest and consists of three parts: More…
MarketsMuse Editors Note: Giving credit when due and in connection with below excerpt, MarketsMuse extends a “shout-out” to UK-based publication CampdenFB, one of several ‘banners’ serving the family office universe and operated under the Campden Wealth media umbrella.
“….With such pitiful returns, is it any wonder why global macro investing has fallen out of favour with many family offices?…”
Indifference to the style should not translate into ignorance of the geopolitical climate and macroeconomic data, warns Steven Drobny, founder of Santa Monica-based Drobny Capital and author of Inside the House of Money.
“Global macro is the hardest strategy to understand in the hedge fund space because of its breadth of instruments, markets, and inherent complexity, but the macro world is the driver of everything,” says Drobny. “You can’t just pick a stock based on fundamentals without understanding how it can be impacted by geopolitical risk, the price of oil, interest rates and other macroeconomic issues.”
For most developed-world family offices, Drobny says if you’re looking to diversify your portfolio, there are not a lot of opportunities within the highly correlated world of fixed income and equities. You need to look at global macro exposure.
“You don’t need to be a ‘macro guy’ trading fixed income arbitrage opportunities or frontier market sovereign bonds – or even put all your money in macro hedge funds. But you do need global macro exposure, as well as an understanding of what implicit macro bets you have in your broader portfolio,” says Drobny. “You need to look forward, not backwards, which means maintaining a strong understanding of how the world may evolve.”
The entirety of the article can be found by clicking this link
Below extract courtesy of a.m. edition of “Sight Beyond Sight”, the global macro trading commentary published by Stamford, CT-based macro strategy think tank Rareview Macro LLC.
“…For most of the second half of the year we have seen a surging dollar, and a falling euro. Nothing seems to be coming that will disrupt that.
Now a lot of US investors have asked why the WisdomTree Europe Hedged Equity ETF (symbol: HEDJ) performance has been sub-optimal. Specifically, why isn’t this “strong dollar/weak euro” play not playing out much like last year’s Japan trade (strong dollar/ weak yen) as we saw with WisdomTree Japan Hedged Equity (DXJ)?
As a reminder, DXJ is a portfolio of Japanese stocks with a currency hedge overlay (i.e. 100% of assets is hedged). So HEDJ is the European version of DXJ. The underperformance therefore is simply stock-related.
For example, HEDJ is a basket of European stocks (i.e. 100% of assets is FX hedged). The underlying basket is a Wisdometree dividend weighted basket. It does not quite have the same weightings as the iShares MSCI EMU ETF (symbol: EZU) which is market cap weighted & large cap equivalent or the iShares Europe ETF (IEV) or any other standard index, but it does have a very high correlation.
If you compare HEDJ vs. EZU (i.e. use Bloomberg COMP function, HEDJ in line one and EZU in line 2 and then change the currency next to EZU to EUR instead of USD) you will see performance come back in line with HEDJ as it displays the effect of the FX hedge.
So HEDJ is working exactly the way it should given how it is constructed and using HEDJ to get long European stocks and a weaker EUR is correct instrument for that view.
So the question becomes, how do you gain using HEDJ? More…
Below excerpt courtesy of Hedge Fund Insight
Nov 17 2014 by Neil Azous Managing Member of Rareview Macro LLC
Most of us hand over dollar bills every day without ever really looking at them very closely. They are too familiar. But if you pause to look closely at the one dollar bill, you will see, right below the one-eyed pyramid, the Latin phrase “Novus Ordo Seclorum”.
The literal English translation of that is “a new order of the ages.” Taken from a book by the Roman poet Virgil, it first appeared on the Seal of the United States, and made its way onto the currency in 1835, where it has stayed ever since. Virgil was not a man to use words carelessly, so when he wrote it, he must have intended to emphasize “new” and, therefore, put it first in the sentence and in front of “ordo.”
A few readers might find that a slightly esoteric digression into Roman and monetary history, of little relevance to the markets today. In fact, they would be wrong. We started with that overlooked phrase because, over the second half of 2014, the professional investment community has come to believe that the US Dollar has indeed established a “new order” and the trend is now here for “the ages”. More…
A MarketsMuse special update, courtesy of compiling various columns from Bloomberg, ETF.com, Fortune and a special treat: this piece was sponsored by Mr. Chow’s! (see below)
After much fanfare, the “Shanghai-Hong Kong Stock Connect” is officially connected and ostensibly, this will be the link between brokers, dealers, ETF Issuers and global investors seeking access to a menu of mainland China stocks and bonds, whose market value is more than $4.2tril (if anyone knows another acronym for ‘Trillion”, please email us or simply comment below!). Even if trade volumes during the first 2 days appeared soggy (which some attribute to aversion to MSG, not China stocks or ETFs), this is a story that, according to many experts, is a watershed moment.
Noted Neil Azous, principal of global macro strategy think tank, Rareview Macro LLC, “This is a transformational event. Though the first day ‘scorecard’ indicates that retail/local investor support in Shanghai has proven successful out of the gate, institutional interest is still nascent, as evidenced by the big drop in Hang Seng share prices yesterday.” Added Azous, “Because the liberalization of markets is 1 of 4 key anchors to China’s long-term game plan, it is easy to expect that the opening of China markets to foreign investors might be incremental, but also integral to the evolution of the global financial marketplace.”
Below please find a collection of excerpts and ETF mentions that MarketsMuse has ‘cherry-picked’ from news outlets: More…