The State Of Global Macro-And Other Random Stuff

We saw this headline-

August is another cruel month for hedge funds-(Reuters) – Most hedge funds lost money again in August as hundreds of managers, including some of the industry’s best-known names, stumbled when stock markets swooned anew.

-and then we laughed.

Hedge Funds are no more an asset class than mutual funds are. There are several “general” classes of funds investing in anything from stocks to bonds to art. Long, short, long and short, arbitrage, levered, etc. There are a gazillion different strategies that are employed so headlines like the above are not helpful for much more then a useless sound bite. But onto the part that we actually liked.

One line mentioned how Global Macro was up 2.16% for the month of August which would indicate something less then cruelty for hedge funds, including some of the industry’s best-known names, but hey that’s just us. Anyways how is Global Macro actually doing? Well depending upon which macro index you use the numbers will be a bit different but for the most part this specific corner of the market is flat give or take a percent or so. While we, we being our newsletter The Macro Trader, do not try and hug our benchmark it would appear as though this year we have. In the table and chart below we show how our newsletter had done against the HFRXM and SP500 indexes. The table has the raw numbers and the chart has the performance of $1,000 year to date. (Click on charts and tables to enlarge)


$1,000 Invested Year To Date

How do we explain our relatively high correlation to the HFRXM Macro Index? Well we think that the next chart probably does a good job of answering this question. But in case the chart is not clear enough the answer is risk management. Global macro as an asset class has long held up well in any market with a penchant for bad markets. In other words we tend to outperform in bad markets and do decent in good markets. In the chart below you can see how our drawdowns compare to the SP500. (Click on chart to enlarge)

Drawdowns Year To Date

A few other observations that may or may not have anything at all to do with the initial subject of this post-

-We have seen few opportunities this year that have warranted an oversize allocation

-The SP500 is way to risky for the returns that it generates

-If markets are efficient how was the SP500 above 1250 for almost a year and then at 1100 a few weeks later

-There is no reason that you need to do what everyone else is doing

-Bill Gross is smart but he too can be wrong

-Warren B is also smart and can also be wrong

-95% of news is noise but we read it all in hopes of recognizing the 5%

-Anyone with the nickname Helicopter Ben is just looking for reasons to drop money from the sky

-If you aren’t at least semi-comfortable in Excel there is a high likelihood that you do not even know what due diligence is

-It is clean looking but so far Google+ is not Facebook

-More Money Than God is a great book

-The New Market Wizard interview of Stanley Druckenmiller is read by this author at least once every month or two

-Major bottoms and tops take more then a few days to form

-Yellowstone is awesome and everyone in America should go at least once every five years

Have a great Labor Day Weekend!!!!!!!!!!!!!!

Happy Trading,

Disclaimer-We are long Friday both the day and the excellent song by Rebecca Black .

Take a $1 trial of The Macro Trader to receive unbiased actionable research

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