Many fund managers have been saying that we are in another bubble, but this time it is different. Not in the sense that “It won’t happen this time,” but in the sense that it is a global bubble and that almost every asset class is taking part in the bubble.
Jeremy Grantham recently popularized this concept with his paper
It’s Everywhere, In Everything: The First Truly Global Bubble
There are several articles worth of information and opinions here but my question today is: If there really is an all asset class bubble, who will be able to profit from it? Probably not your mutual fund manager since he is most likely long only and 98% invested, probably not your bond fund manager since he is also most likely held to the same long only and mostly invested constraints, probably not your private equity fund since money would dry up and we would be in a slow if not retracting economy, etc. Basically the majority of fund managers out there not only won’t profit from it but because of their investment constraints they will most likely lose a lot of money from it.
So who is left to profit from popping bubbles? Funds that have a flexible mandate. Obviously we feel that Global Macro Funds should benefit the most from this type of scenario. Other types of trading that should benefit would be CTA’s, good Short Sellers, and funds that for the most part are long volatility.
The Macro Trader
P.S. download and read the Grantham paper. Even if you disagree with what he says it will make you think.