Monday, July 18, 2011

Hugh Hendry - Eclectica Fund May 2011

And today we got our hands on Hugh Hendry's Eclectica Fund May 2011 letter.
Again, short and straight to the point.
I guess he hasn't changed his broad view of "DM can't afford hiking rates", but this time market prices corroborated and his fund did well for the month: +4.6%, +3.0% for the year.

Mr. Hendry mentioned his liking for such macro idea before and now, expressed through options in USD, GBP and EUR rates, profitted from it.
We have, before, mentioned that we agreed with Mr. Hendry and talked about getting out of receivers/flatteners in Short Sterling and Euribor as the front-end futures of the spread (Jun11 - Dec12) were expiring in 2-3 weeks (here).

He goes one step further saying he added to some of these positions and is betting on longer durations.
The roll-down is very large and there's room for more profits. And static curves bring in results and steepening (in prices is my understanding) bring in even more profits.

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

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