Bob Southard of Greenrock Research: Yield Curve "Issues" To Be First Felt in Currency Markets
Bob Southard of Greenrock Research is a noted interest rate trader / market observer. Mr. Southard is moderating the interest rate panel on a highly anticipated alternative investing tour sponsored by Forward, EatonVance and JPMorgan near the end of May, early June in select US financial centers.
While some market commentators have considered the debt crisis might first be felt along the yield curve, Mr. Southard says the currency market might feel the first reverberation. "The devaluation of the US dollar won't be starting for a year and a half to two years and will take place over a period of two to three years as the problem of our US Government debt is partially shifted to those holding our Treasury reserves," he said, noting that de-leveraging in all areas was both a consumer and government issue that might result in a lack of growth. Mr. Southard is said to be watching for a 25% to 35% currency valuation loss when the debt crisis picture is clearly understood.
RPM / Sweden CTA Monthly Outlook: Trend Strategies Continued To Perform Despite Choppy Market Environment to Start April
Risk & Portfolio Management (RPM) is a managed futures portfolio management firm with $4 billion under management. The firm is noted for its research, including that on CTA lifecycle staging. RPM has a major footprint in Europe and Asia, with an emphasis on Japan. The firm's "CTA Month in Review" is typically reserved for clients and close associates. Here is a limited look:
In April 2013, trend following strategies continued to perform well on the back of falling bond yields, sustained bullish trends in equities, and violent price moves in metals markets. Fundamental trading was flat on the month while short-term trading posted losses.
The first part of the month was characterized by choppy market conditions as risky assets showed signs of fatigue following recent hefty gains. Equity and commodity markets tumbled following weaker-than-expected data coming out of the US and China. Metals markets were particularly hurt by mid-month as the price of gold hit a two-year low following the biggest one-day drop in 30 years on April 15th. In fixed income markets, bond yields turned lower across the board. As the month progressed, the recent bullish market sentiment returned with equity markets recovering strongly towards the end of the month on speculation that the European Central Bank would cut interest rates and with support from positive earnings reports. Supported by the renewed risk-on stance, commodity and metals markets followed suit and gained towards month-end while fixed income markets held steady.
Trend following managers were all up on the month proftiting from bonds, equities, and metals.
Regarding diversifying strategies, short-term trading posted losses as profits in bonds were more than offset by losing positions in energies. Fundamental trading strategies gained from equities and fixed income markets but posted offsetting losses in currencies.
Cole Wilcox of Longboard Asset Management: Tesla Gets Support, Media Attention
On April 15 I was on the phone whenCole Wilcox was discussing Tesla Moters in glowing terms. Mr. Wilcox is a well-known long term trend follower who operates a managed futures mutual fund, which is an outcropping of his previous family office management experience. He also has a private placement firm that trend trades individual stocks and launched a hedge fund dedicated to nothing other than a long Tesla trade. In both public and private statements Mr. Wilcox had set a near term target for Tesla at $100 per share, but a longer term target at $200. On April 16 the price closed at $59.90 and as of today the price is trading near the $80 range as of May 14.
Discussing an individual stock with a managed futures executive is unusual, as most trade index futures and generally concern themselves with larger market direction. It is interesting that since that note, Mr. Wilcox has taken his advocacy of the stock to new heights. He was quoted on CNN April 23, Morningstar ran an article noting the Longboard presentation on April 29 and the price continued higher. As other media appearances, such as Forbes, MarketWatch and Fox Business, Mr. Wilcox continued to make a strong case the firm was innovative in a fashion similar to Apple and had execution experience on disruptive technical projects, citing Tesla's CEO, Elon Musk, as a leader in innovative spirit.
Steve Blumenthal of CMG Wealth Management:
Steve Blumenthal of CMG Wealth Management has appeared in a variety of media, most recently WSJ Live, where he provides pointed market commentary. Typically Mr. Blumenthal has a different spin on the equity markets, and this month is no different as he looks at investor sentiment:
Investor Sentiment remains in the Extreme Optimism zone. I continue to favor inexpensive hedges to risk protect long equity market exposure (i.e. covered calls and out of the money put options). The market gains have been exceptional. This is a piece about periodic risk protection tied to investor sentiment extremes. Today, sentiment remains extremely optimistic.
As reflected in the cyclical bull trend chart, the trend remains bullish. Cause for concern will be when the 13-week EMA drops below the 34-week EMA (note how well this chart has identified the major bull and bear cyclical trends since 1/1/2000). Also interesting is the last chart in this update that shows the Current Fair Value on the S&P 500 Index to be 1410, some 200 points lower than where the market is today (based on actual reported corporate earnings through 4/30/13).
Taking a look at the broader picture, I continue to favor a 33/33/34 total portfolio asset mix that includes long-term equities, fixed income and tactical allocations. Trade Signals is specifically focused on ideas around risk managing the long equity portion of your portfolio tied to points of optimistic extreme. Please know my intent is not about making market timing "all in" or "all out" bets, it is to provide ideas around focused risk management.