Global Macro has been called the father of hedge fund strategies. David Gerstenhaber of Argonaut Capital Management is a "Tiger Cub", and one of the foremost asset managers in the Global Macro space. In this interview he speaks about his firm and its investment process.
The Canadian Hedge Fund manager, head of Sprott Asset Management, lays out his thesis on Gold and Silver in this interview:
I think gold is the reserve currency today. There is not a currency in the world that it hasn’t appreciated against by at least 300 per cent. And it has beaten every stock market. You can’t even rent a safety deposit box in Germany because they are all full of gold and silver … I am pretty convinced that gold will go a lot higher because it is under-owned as only 1 per cent of people’s money is in it. It could go to $2,000 an ounce. I could imagine it at $5,000. I am not giving a time frame on that, but I could certainly see that happening. But the real story now is silver.
Why are you more bullish on that metal?
Gold has traded at a ratio of 16-to-1 to silver in terms of price, but today it trades in the range of 50 to 1. I think the gold-to-silver ratio is going to go back to 16 to 1 given the passage of time, say three to five years. And I bet you that silver overshoots. The gold-to-silver ratio may even get down to 10 to 1. I believe that the price of silver has been suppressed.
One of my favorite articles is "Blowing Up" by Malcolm Gladwell. It contrasts the investment styles of Victor Niederhoffer, who is known as the father of statistical arbitrage, with Nassim Taleb author of The Black Swan and Fooled by Randomness.
This article gets to the heart of many investment strategies. Do you want to wager on reversion to the mean, or do you want to wager on "unexpected" outcomes?
Niederhoffer's leveraged mean reversion strategy produced consistently strong returns, until one very bad day or two, where he lost almost everything. Taleb is on the other side of that trade. Using no leverage, he will consistently lose a small amount money, until a very good day or two, which will pay off immensely. Taleb stated that the crash of 1987 earned him " **** you money".
It may seem obvious that one would like to be on the side of the winner. However, the psychology of investing is complicated. Ask yourself this question: Can you withstand being on the wrong side of the market every day for years?
A tongue-in-cheek article on the insider trading FBI investigation:
Bloomberg: What does this crisis mean for the industry? We already can guess the first question that must have leaped to the mind of every self-respecting wealth maximizer: “How can I use this information to make enough money to buy myself a jet?” The answer, of course, is that it pays to be on the inside.
Bloomberg: Pictet & Cie, Switzerland’s biggest closely held private bank, is shifting more of its $10 billion hedge fund investments to newer, lesser-known managers from the largest, most established houses to boost returns.
Reuters Hedge World:
Quantitative studies on the impact of expansions of the U.S. Fed Balance Sheet on various equities confirm this observation: most stocks that predictably respond to increases and decreases in the U.S. Fed Balance Sheet, do so prior to the announcement of actual changes to the Balance Sheet, supporting the “buy on rumor, sell on fact” investing styles. Yet, investors wanting more certainty can hold off until after a balance sheet announcement is made: a selected group of equities tends to respond with a 99.9% probability to expansions and contractions of the Fed’s Balance Sheet AFTER the changes to the Balance Sheet are announced.
In particular, healthcare stocks tend to rise following quantitative easing decisions. Companies like Aetna Inc. (AET), Cigna Corporation (CI), Covidienplc (COV), Quest Diagnostics Incorporated (DGX), United Healthcare Group (UNH), Wellpoint (WLP), and the healthcare sector ETF (XLV) consistently rise after the announcement of the Balance Sheet expansion is made, as do selected technology companies like IBM (IBM), Microsoft (MSFT), and Rambus Inc. (RMBS). Retailers and grocers also appreciate in response to increases in the Balance Sheet (notable examples include The Kroger Co.: KR, Supervalu Inc.: SVU, and Safeway Inc.: SWY).
Anecdotal evidence of a gold bubble: Bloomberg interviews Mr. T on gold
Why should you care what Chris Levett of Clive Capital has to say about China? Because its the world largest commodity fund.
The Fed’s decision to further ease financial conditions, the potential that Japan and the UK may eventually follow suit, and the resultant de facto easing of financial conditions in much of the emerging world is set to support the continuation of the firming growth path of the global macro economy. While activity momentum in many parts of the developed world remains sluggish at this stage, it now seems clear that the global economy has troughed. Into year-end the US looks set to settle into a period of sub-trend but stable growth and thereby avoid a double dip, the Eurozone increasingly seems likely to outperform expectations from earlier this year and, most importantly, EM growth is becoming increasingly supportive. China has now passed through its (policy-induced) soft patch and looks set to accelerate into 4Q10 and further beyond with the October manufacturing PMI showing activity is now expanding at a rate last seen in April. Policymakers' confidence in the prospects for the Chinese economy was clearly demonstrated by the PBoC's decision to hike the reference interest rate by 25bps this month, the first rise since December 2007. This therefore also implies that global growth will begin to pick up in the near-term, led by the dynamic EM world.
Read more: http://www.businessinsider.com/chris-levett-clive-on-china-2010-11#ixzz15fwf0eva