Editor's Note

The Growing Concern As Stocks Race to New Highs

With the stock market making new highs, it's difficult to be a risk manager; the party pooper, the wet blanket. 
But when artificial stimulus underlies the economy - and the structural issues with a debt crisis in Europe and the US are being ignored while the problem is not getting any younger - it is at these moments the risk manager speaks common sense.  Logical, mathematical, common sense.

Take sovereign bond fund manager Paul Singer, speaking at the Ira Sohn conference.  He is likely not to be the most popular person at the cocktail party if he keeps talking the truth about unfunded liabilities moving the US debt to GDP ratio to near 500% -- essentially a point of insolvency.  That's not popular, happy stock talk - but it is critical reality we must face as risk managers.

In this issue we take a look at the debt crisis from a European perspective with the full interview with institutional consultant Dr. Bob Swarup.  It is my opinion Dr. Swarup is speaking years ahead of his time in this interview, but it's hard to say when this bubble will burst.  It is for this reason that brief but stunning comments from Greenrock Research interest rate strategist Bob Southard are so interesting.  On page 23, he has a 1 ½ year time horizon for a market price adjustment, but says the first signs will be seen in the currency market - through a devaluation of as much as 35% -- not along the yield curve, as has been a predominate thought in debt crisis modeling.

This all reminds me of an interesting conversation that took place among a group of financial fiduciaries.

"The underpinnings of many asset markets are based largely on stimulus.  To many this represents known risk," was one thought, which was magnified in public statements at both the recent Ira Sohn Conferences and SALT thought leadership confabs.  The conversation quickly switched to Jeffery Gundlach's recent comments on CNBC, where he essentially lifted the curtain from behind the wizard of stimulus, noting that "stimulus was in its eighth inning," and that it was losing its effectiveness  the more it is depended on to "create" needed growth.  These comments were sandwiched with Stanley Druckenmiller thoughts that Fed Chairman Ben Bernanke is engaging in the exact wrong strategy at this moment in history.  Why economists and certain academics don't see the damage quantitative interference has in the credibility of the yield curve is curious.

"Central Banks entering the yield curve to an unseen extent - as much as 50% of the market in some cases - is market manipulation which always has a history of failure.  It is also logical to assume that at some point the fundamentals underlying the market might find their own gravity?"

With this as a backdrop, one might do well to take the advice of author Bob Rice, whose book, The Alternative Answer is needed now more than ever.  Mr. Rice has a strong grasp of the absurd economic fundamentals and points to real alternative solutions in his new book, which is reviewed on page 13.

This issue of Opalesque Futures Intelligence looks at other interesting topics.  Profile and analysis takes place of Campbell & Company - an old line trend follower with a newly emerging algorithm that is transitioning leadership.  Can a strategy be passed from generation to generation?  We consider this in Campbell but also a much lesser known volatility trader - T2 Associates, which is essentially a Silicon Valley mathematician who systematized the counter-trend volatility trading tactics of his floor trader father - with the operative word emphasis on volatility. Then we consider managed futures trend follower Cole Wilcox, who made a crusade for Tesla - one of three fund products he offers - a household name through a strong media showing.

This publication is dedicated to real alternatives - those designed to perform when it matters most.  I hope you find this issue useful.  If you have any comments or questions, feel free to reach out.

Opalesque launches new comprehensive Managed Futures resources website

We invite you to register at our new comprehensive Managed Futures resources website www.uncorrelated-investments.com where you will have access to free tools like:

  • Managed Futures Academy: Comprehensive educational resource
  • Video Tutorials: Understanding CTAs and their performance drivers
  • Video Portraits: Meet some of the most successful managed futures managers
  • Mark Melin's Industry Insider's Blog
  • Needs Analysis: This interactive test helps you to determine your managed futures knowledge level

Mark Melin,
Editor
Melin@Opalesque.com

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Zurich University Center for Alternative Investments: Hedge Funds Investor Conference: 29. Aug

ZHAW School of Management and Law and The Swiss Council of Hedge Funds invite to their free conference which starts 13:30 at the Au Premier, Zurich with the following speakers:

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Research & Due Diligence for Wealth Management Platforms, New York NY United States, September 15-16, 2014

Network with industry leaders in wealth management from wirehouses, regional and independent broker/dealers, RIA platforms, and consultancies. Profit from rarely shared perspectives on the current business priorities, advisor use of home office resources, innovative screening techniques, the rise of the consultants, and the challenges of offering alternative investments.

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Top Reasons to Attend:

  • Investigate the top research and business priorities for major wealth management platforms
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View the conference brochure: https://www.frallc.com/pdf/B927.pdf

For more information and to register, contact Whitney Betts at 704-341-2445 or wbetts@frallc.com. Don't forget to mention your 10% registration discount code: FMP127.

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Establishing a '40 Act Alternative Fund, New York NY United States, September 17-18, 2014

By popular demand, Financial Research Associates' Establishing a '40 Act Alternative Fund conference is back and expanded!

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Opalesque Subscribers are eligible for a 10% registration discount. Mention Code FMP127 during registration to enjoy this offer. Top Reasons to Attend:

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About OFI

This new publication addresses the interests of the managed futures community, including commodity trading advisers, fund managers, brokerages and investors in managed futures pools. Published every two weeks, Opalesque Futures Intelligence (OFI) provides original research by industry members as well as interviews with veteran industry players and upcoming managers. The coverage includes:

  • Performance information from different data bases, accompanied by commentary.
  • Top funds of the year or month.
  • Regulatory and legal developments that affect managed futures.
  • Manager profiles.
  • Results from proprietary surveys.
  • Analysis of futures strategies and markets.
  • Summary of relevant news from the global media.

A sophisticated newsletter for a growing community, OFI meets a need currently not served by other publications. It is a must-read for anyone interested in futures trading or investing.

Opalesque Futures Intelligence is edited by Chidem Kurdas. Chidem is an economist by training and a hedge fund specialist by experience. In the past she held positions as research analyst at Thomson Reuters, New York bureau chief at HedgeWorld and news editor at Infovest21. Earlier she taught economics at Pennsylvania State University and published a book about technology investing.

She writes about funds and financial regulation for a number of blogs and publications, including The Independent Review. She is a member of the New York University Colloquium on Market Institutions, Finans Network for Turkish finance professionals and the New York Financial Writers Association.

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