Showing posts from October, 2011

Bunga Bunga! La Dolce Beta?

Debt relief celebrations have commenced in a spectacular fashion as a liquidity tsunami was unleashed on global capital markets on Thursday, driving up all risk assets. Stocks surged, extending the biggest monthly rally for the Standard & Poor’s 500 Index since 1974, and the euro strengthened as European leaders agreed to expand a bailout fund to stem the region’s debt crisis. Treasuries sank, while metals and oil led a rally in commodities. Emerging-market stocks which got clobbered in Q3 are now approaching a bull market, with the benchmark index up 20 percent from Oct. 4.

Thursday's price action might have caught some off-guard but it didn't surprise me one bit. I was well positioned to capitalize as I knew that European leaders would finally hammer out some deal or risk global depression or worse. There is only one trade you should all be positioned for in the next few months, the "RISK ON" trade.

Why am I so confident? You can keep reading the glo…

Let the 'Debt Relief' Celebrations Begin?

James G. Neuger and Stephanie Bodoni of Bloomberg report, EU Sets 50% Greek Writedown, $1.4T in Rescue Fund:
European leaders cajoled bondholders into accepting 50 percent writedowns on Greek debt and boosted their rescue fund’s capacity to 1 trillion euros ($1.4 trillion) in a crisis-fighting package intended to shield the euro area. The 17-nation euro and stocks climbed while bond spreads narrowed after leaders emerged early today from a 10-hour summit in Brussels armed with a plan they said points the way out of the quagmire, albeit with some details still to be ironed out. “Overall the outcome is better than we anticipated one week ago,” Laurent Bilke, global head of inflation strategy at Nomura International Plc in London, said in an interview. “There are several issues left open, but I do believe that getting a more necessary debt relief for Greece is a pretty important step.” Last-ditch talks with bank representatives led to the debt- relief accord, in an effort to quarantine Gr…

Violent 'Blow-Up' in the Periphery?

Euro 'drama' continues. Ekathimerini reports that German Chancellor Angela Merkel said on Wednesday she was committed to achieving sustainable decisions at a summit of European leaders later to tackle the eurozone debt crisis but that no one should expect solutions that work overnight:
"I will work toward reaching sustainable decisions this evening,» Merkel told parliament shortly before a vote by German lawmakers on plans to leverage the euro zone bailout fund.Merkel also said that she wanted to get Greece back on its feet as quickly as possible but that it would be a long path and a debt write-down alone would not solve Greece's problems."We must certainly accompany Greece for quite some time to come,» she said.If, as expected, German lawmakers pass the motion, Merkel's negotiating hand will be strengthened in the Brussels talks.Greek television stated that in a speech Merkel referred to 2020 and didn't give specific details on the haircut but …

State of Injustice?

Ekathimerini reports, EU deal will need a big majority:
A new bailout for Greece, currently being hammered out by European Union leaders as part of a broader rescue package for the bloc, will need a qualified majority of at least 180 in Greece’s 300-seat Parliament, Finance Minister Evangelos Venizelos suggested on Monday after telephoning opposition party leaders from Brussels to brief them on the progress of talks at an EU summit.Asked by reporters late on Monday whether the government would seek a qualified majority when the rescue package reached in Brussels is put to a vote in Greece’s Parliament, Venizelos said that “such matters must be addressed with a heightened sense of responsibility and if possible voted through Parliament with a broad majority, not because this is a legal requirement but because it is a national imperative and political responsibility.”The minister added that he had briefed party leaders on “the framework of negotiations, the basic figures, th…

PSP Investment's Annual Public Meeting 2011

On Thursday October 20th, PSP Investments (PSP) held its Annual Public Meeting 2011. You can download the Annual Public Meeting presentation for FY2011 and listen to the audio in English or if you prefer, the bilingual version.

Paul Cantor, the Chair of the Board spoke first. He discussed the shift into private markets and the Auditor General of Canada Special Examination Report. Paul was satisfied with the report and said that PSP has the "best nomination process among public and private funds." He commended PSP's past and present board of directors, making a special mention of Bob Baldwin who recently retired from the Board. He also praised PSP's senior management and PSP's 350 employees and PSP's "risk management." Finally, he announced he will be stepping down as Chair of the Board at the end of the current fiscal year (March 31st, 2012).

PSP's President and CEO, Gordon Fyfe, then spoke and went over PSP's Policy Portfolio. The strategy i…

Real Estate Isn't a `Sacred Chalice'?

Going to watch the Habs vs. Leafs tonight but wanted to post a couple of excellent Bloomberg interviews with Tom Barrack, Chairman of Colony Capital, who discusses the European debt crisis and warns investors that real estate isn't a 'sacred chalice'.

I first discovered Barrack exactly six years ago when I circulated an article among PSP Investment's senior managers, The king of real estate's cashing out:
Tom Barrack, arguably the world's greatest real estate investor, is methodically selling off his U.S. real estate holdings as prices drive the market to nosebleed levels. He likens the current real estate market to a game of polo. "I feel totally safe playing polo on a field full of pros," says the bronzed 58-year old. "But when amateurs are all over the field, someone can get killed. They have more guts than brains. They charge after every ball and don't know when to hold back." It's the same with U.S. real estate ri…

SEC Clamping Down on Large Hedge Funds?

Jesse Hamilton of Bloomberg Businessweek reports, SEC to Weigh Hedge Fund Rule on Systemic Risk Data Analysis:
Hedge funds and private-equity funds will be asked to deliver “extraordinary amounts” of new data to the U.S. Securities and Exchange Commission under a rule set for a vote next week, said SEC Chairman Mary Schapiro. Under the version of the rule proposed by the SEC on Jan. 26, firms managing more than $1 billion would have to file quarterly information on fund assets, leverage, investment positions, valuation and trading practices on a new Form PF. That added oversight would also come with routine inspections. “We have high hopes for the Form PF data,” Schapiro said today at a Managed Funds Association meeting in New York. The form was a requirement in last year’s Dodd-Frank Act, and Schapiro said the information will help her agency and the Financial Stability Oversight Council “understand where the risks are in the financial system.”The January proposal desc…

Options for the Upcoming EU Council?

Andreas Koutras was kind enough to send me his latest InTouch Capital Markets' report,Options for the upcoming EU council:
Another Eurogroup- another opportunity for rumours scaremongering and good volatility. Merkozy initially said that by the 23rd of October a comprehensive solution would be presented that includes Greece and the rest of Europe. Later the Germans dampened the optimism and suggested a more sober approach. Lets see then what is on the table and what solutions the market participants are discussing.
Bazooka option for Europe The agreement signed on the 21st July with Greece. PSI, etc.Recapitalization of European BanksEFSF leverageFaster implementation of ESMEurobonds or measures towards fiscal Union.The ECB Bazooka Option

The original idea of the Bazooka option was for the ECB to start buying bonds of the European periphery once they hit a certain yield (say 5%). There are many reasons why the ECB refused to go down such a road and here at ITC we have written on i…