Global macro trading has made a huge comeback the last two years as financial markets have completely crumbled. While most people were long and levered most macro traders were shorting housing, financials, going long and then later short Treasuries and doing all kind of stuff in the commodities space.
In fact in 2008 there were only two strategies whose performance was, on average, positive for the year. Global macro trading along with dedicated short sellers made money while everyone else was losing it. In fact according to Credit Suisse and Tremont Advisors global macro is the most successful hedge fund strategy since 1994, the start of their database.
If you had a chance to read “Inside the House of Money” copyright 2006 you were able to read interviews with several great macro managers, and one guy who later blew up, talk about their views going forward. Macro managers were the only guys out there that were warning people not only about housing but about debt in general and all of the dangers inherent with misused leverage. Is it any surprise that these guys make money?
If any of this comes to you as a surprise then you need to rethink your strategies as it should be obvious that looking at the macro view, big picture, etc is imperative to avoid huge investing disasters. They were positive as a group during the 2000 bear market and they were once again positive in the 2007-2009 bear market.
What do you do if you want to participate in global macro trading but are new to it? What about if you are already a macro trader but want help in order to find even more great trading ideas? In November 2007 The Macro Trader was launched to the public and has done well. In fact its model portfolio generated a 1.17% return in 2008 against a 50% loss in the SP500. If you aren’t reading the weekly newsletter you are missing out on actionable trading ideas across several asset classes.
TheMacroTrader.com is now offering a FREE course on macro trading. The course covers all of the major macro topics such as definition of Global Macro, asset classes, asset class drivers, models to exploit different asset classes, basic economics, technical analysis, trade management, and risk management.
The course is FREE and all you need to do is fill out the short form and then go to your e-mail and confirm that you want to receive the course. The course is sent in PDF format so that you can print it out. We hope that you find it useful and welcome any comments or criticisms.
To sign up for the course click on the following link Macro Trading 101.
Active Beta is a term that is not often heard but the concept is often discussed. In this post at The Macro Trader They discuss how they are implementing the concept of relatively passive, risk controlled, capturing of risk premia.
If you are searching for alpha the post is worth reading, as is the newsletter.
Ok so we aren’t talking about Mischa, Adam Brody, or Rachel Bilson. Nor are we talking about LC, Kristen, Jason, etc. (btw we are embarrased that we even know who these people are). What we are talking about this time is Orange County or more specifically the treasurer of Orange County.
For a brief background on that job Here is a good summary. but the short version is that in 1994 Bob Citron was the Treasurer of Orange County and he blew up. Ok not Jack Bauer blew up but he got into some great derivatives that lost tons of money for the County and in the process forced them to declare bankruptcy. He bought “sophisticated derivatives” that he thought would go up and then added a ton of leverage compounding (in his mind anyways) his gains but in reality it made the losses a lot larger than they had to be.
Anyways fast forward to today and they have a similar although probably not as bad of a problem. Here is a link to Bloomberg that explains the current Orange County Debacle. Here is a hint……they hold a lot of SIV’s. In fairness so far there is no proof that they have lost all their money or anything. They hold about 20% of their money in SIV’s and so far have not written any of them down. And luckily as opposed to Citron it doesn’t look like they used any leverage or anything so their overall risk is a lot less.
Still it is pretty amazing that the OC got into anything even remotely esoteric considering their history with financial derivatives.
The title says it all. We are half way through the second day of trading for OZM the IPO of Och-Ziff Capital Management. Och-Ziff is a large hedge fund company that decided to cash out to the public. Following FIG and BX OZM has sold off as well and is currently below its offering price. Only time will tell how hedge funds work out as a stock market investment but for now they have been bad.
Our guess is just like any industry the good ones will thrive over time and bad ones will not but the timing on going public couldn’t have been much worse. Everything has gone down lately so going public in the middle of all the turmoil didn’t help it out much. Several other fund companies have indicated interest in going public so only time will tell. One interesting thing is that we have not heard about any of the “legendary managers” wanting to go public. Bruce Kovner, Paul Tudor Jones, Stanley Druckenmiller, George Soros, and Nick Roditi. No doubt the thought has crossed their mind but we haven’t seen anything in the press showing interest.
The title says a lot. Goldman just raised $4.5 billion for two new hedge funds. Guess what the funds strategy is? Credit and Distressed Debt. What does this tell us? To me it means that Goldman sees how bad the credit markets really are and see a way to profit from it. So if you have been following the current mess (and honestly if you are reading this then you are) this is a good indication that it is far from over.
In other Goldie Hedge Fund news they are still down in their two biggest funds Global Alpha a quant fund and Global Equity Opportunies a equity macro type fund.
Morgan Stanley has purchased a less than 20% stake in Traxis Partners. The Macro hedge fund started by Barton Biggs. This follows Morgan Stanley purchases of Avenue Capital, Front Point Partners, and Lansdowne partners in the past year. They are trying to buy their way into the hedge fund space and so far it is working all right.
This purchase was near and dear to Morgan because Biggs used to be the chief market strategist at Morgan before claiming that Hedge Funds were in a bubble and then leaving to start one. Traxis has about $1.5 billion under management and has done decent since inception. A few years ago Barton Biggs also wrote the book Hedge Hogging.
Ospraie Management the macro fund ran by Tiger Alumni Dwight Anderson purchased 12% of the Australian mineral sands miner Iluka. Wednesday on news of the purchase the stock was up 10% in the Australian market.
Ospraie Management is one of the premier Macro Commodity funds out there. They invest in many things but focus primarily on hard assets and companies that deal in hard assets such as metals, oil, etc. They have reportedly returned about 22% anually since inception with this year being one of their few underpreforming years.
GlobalPensions.com says that many pension plans are planning on raising their allocations to Emerging Markets. Most of the reasoning given is that they have been pleased that the current credit crunch in the United States has not had a very strong effect on the emerging markets.
We think that they are mostly right. Being globally diversified is typically a good thing but their reasoning is a bit weak. In a short country specific credit crunch global diversity is a great thing but don’t fool yourselves. If the current crunch (todays market rally notwithstanding) is prolonged it will effect global markets as well. Especially the rapidly growing emerging markets companies that need financing to continue their growth.
As anyone who has been here is a while has noticed we have not been posting much at all. We are changing directions with TradeMacro.com. Going forward this site will be dedicated to educating and informing people about Global Macro Trading. We will post newsworthy items and educational articles so that you can better understand what Macro Trading is, the benefits, the drawbacks, the risks, and the rewards of Global Macro.
Thanks For Visiting,