18 Jan 2022

MarketWatch

I want to draw your attention in the table below to the CTA outperformance relative to the broader hedge fund community. Ditto’s copy trading platform is primarily focused on the CTA community, it is my belief that this sector will be a valuable source of risk adjusted returns over the next few years.

You will be forgiven if you haven’t heard of the hedge fund BlueCrest Capital Management (I hadn’t) and its founder Michael Platt. Platt’s wealth grew to $12.8 billion on the back of his firms mouth watering returns. If I could do these returns with $1m I would be impressed but he is doing it with billions.

I always like to see how bullish the hedge fund community is. It is clear you wanted to have beta exposure the last 18 months, the HF community is still slightly long the market but clearly less so.

Not sure how come Ray Dalio is getting so much airtime at the moment. Every time I check my Bloomberg news he is getting quoted. Maybe Bridgewater are about to renew their Bloomberg subscriptions.

China

Do not for a minute fall for the well timed release of better than expected 8.2% GDP beating almost all forecasts. This came out before the Winter Olympics starts next month and at time when Xi Jinping is trying to solidify his reign as the undisputed Supreme Leader, probably until his death. These numbers should be taken with a fine grain of salt. As you can see in headline local currency it is maintaining its trend growth of the last 6 years.

If the growth numbers are so good then why the need to cut interest rates. Its important to note that they did not cut the benchmark interest rate, that will be reported on Thursday the 20th. However they did cut the MLF, that is not what you think it is, it is the medium term lending facility. My point is you do not cut interest rates when the world is increasing interest rates unless you have some major problems locally.

Before my chart storm, it is also worth mentioning that the Chinese birth rate of 7.52 per 1000 is the lowest rate since 1978. Mark my words the demographics in China are going to become a major drag on their economy in years to come. This is not something that can be fixed overnight. Xi will be working into his 100’s to address this major hurdle.

Ok now for the reasons why the Chinese economy is not so hot.

Crypto

As someone actively involved in trading Bitcoin options, implied volatility has completely collapsed. The good days of writing delicious premium with tasty 100%+ IV seem to be long gone. I find it hard to pull the trigger at 75% with the memory of more fertile days – gee we were spoilt. I wonder if we are going back to those elevated levels soon. Bitcoin support (40k) is on the cusp I am expecting this level to be broken for a further wash out.

That idiot from El Salvador has more than 90% of the population up in arms about Bitcoin preferring the peg to the USD. Trust me on this one I see a friggin economic disaster looming with this irresponsible dictator. I saw he tweeted today in response to a bond downgrade that they should go F.. themselves. Don’t quote me it was something to that effect. You cannot operate in a bubble forever.

Money Complex

I read an op ed in the New York Times today by that vile Noble prize winning economist Paul Krugman. Gee this guy must have a thick skin I have rarely seen someone get under so many people’s skin as this guy. He does it in that obnoxious way.

Anyway he was out patting Biden on the back for his policy response to the Covid pandemic and the amazingly successful bailouts. He feels they did an amazing job, even if there is a bit of inflation in the system. He is of the opinion that inflation will pass relatively quickly.

As the typical Keynesian that he is, he is not shy to announce victory a few months after a ~$3 trillion stimulus to the economy. I think it would be far more prudent to save judgement until the long term consequences of unprecedented stimulus has worked its way through the economy and we have a good look at the intended and unintended consequences.

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