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Global Macro Trading and Resources for The Macro Trader

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Category: Economy

The Real OC

5 December, 2007 (15:31) | Economy, News | By: admin


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.

-Trade Macro-

Goldman Sachs Raises $4.5 Billion For Two New Hedge Funds

15 November, 2007 (10:45) | Economy, Global Macro, Hedge Funds, Macro Trading | By: admin

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.

-Trade Macro-

Morgan Stanley Buys >20% of Barton Biggs Traxis Partners

14 November, 2007 (15:41) | Diversification, Economy, Global Macro, Hedge Funds, Macro Trading | By: admin

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.

-Trade Macro-

Iluka Up 10% On Ospraie Purchase

14 November, 2007 (15:33) | Diversification, Economy, Global Macro, Hedge Funds, Macro Trading | By: admin

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.

-Trade Macro-

Where We Are

17 June, 2007 (23:30) | Economic Indicators, Economy, Global Macro, Macro Trading, Models, Stock Market, Trading Wisdom | By: admin

While we will probably get a short term pullback in interest rates we remain bearish on bonds.  Basically every indicator and model that we follow show bonds as a sell.  It is probably safe to say that the inflation numbers are a joke and while 2.7% may sound good it is wrong.  Just like calling a fat man skinny doesn’t make it true, the same goes for “low” inflation.  Guess what it is at least 1% higher and probably closer to double the reported numbers.  There will be more posts in the future on this.

For Bonds

-Governments-Sell

-Corporates-Sell

-Junk/High Yield-Sell

The signals for Government and Corporates have been on sells for weeks now but the high yield only came in as a sell three weeks ago.

As for stocks as much as it pains us to say it we see the SP500 staying in bull mode for the immediate future.  Virtually all of our models remain in a buy mode.  So although we wouldn’t be initiating or adding to our positions right now we remain on a Hold.

Stocks

US Domestic-Buy/Hold

Favored Area-Large Cap Value

Top Two Sectors-Energy and Materials (XLE and XLB)

As for precious metals we are bullish on them right now.  Not wildly so but we have had a few buys on for several weeks now.  So for metals we are 40% invested with the rest in cash right now.

Gold-Long 40% of metals allocation.

As for the economy as a whole we remain short term neutral and long term bearish.  In the next few months we should be alright but by  mid fall we wouldn’t be surprised if we see the fabled recession.  That is a ways off but we would not be surprised if it came about.

In the currency world we are short term short the Euro, Pound, Swiss Franc, and the Swedish Krona.  In the coming weeks or months we will revert back to the short dollar position that long term has done so well.  In addition to that we are long term bullish the Australian Dollar.  If we actually go into hyper inflation mode the AUD will benefit significantly and if inflation stays where its at the AUD will still be OK.  Overall a good risk reward trade.

That is it for now.  Come back often because we are ramping up the posting.

Happy Trading and as always Manage Your Risk,

The Macro Trader

Disclaimer-None of this is investment advice.  It is the opinion of the authors.  If you choose to trade off of this you do so at your own risk and none of the gains (unfortunately) or losses (fortunately) are the fault of TradeMacro.com.  Be safe, do your own due diligence on anything you see, and keep a level head.