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rigger

Political events and the markets...'there's money in them thar hills'

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Just a short OP.

 

http://www.wsj.com/articles/in-brexit-trading-machine-beats-man-1467158146

'Wall Street is tallying up the winners and losers after the severe market reaction to last week’s Brexit vote. One theme has emerged early—the computers got it right and the humans got it wrong.

Part of the reason: Too many investors bet on the outcome they preferred, economists and analysts say, a powerful example of “projection bias” in the markets.'

 

http://www.standard.co.uk/business/business-focus-the-billionaire-hedge-fund-winners-who-braved-the-brexit-rollercoaster-a3284101.html

'As the sun came up on Friday, billionaire tycoon Crispin Odey was in ebullient mood.

“I feel fantastic. It’s a fantastic decision by the electorate,” he said after learning that Britain had voted to exit Europe.

Odey, a vocal backer of the Leave campaign, had days earlier described himself as a “lonely” Brexiteer in London. Now it was time to celebrate.

The Mayfair grandee had placed a big-stakes bet on the outcome of the referendum, which paid off handsomely as markets went into a tailspin.

His major shorts, including intu Properties and Berkeley Group, fell 11% and 27% respectively on the day, helping reap profits of £220 million for Odey — and halving a 30% decline in his fund leading up to the vote.

His strategy was clear; he sank about 65% of his fund into gold, which rallied after the vote as investors fled to safer investments, and piled the remainder into shorting sterling and Japanese bonds.'

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A smart guy.

I met him years ago, and he offered my a job, conditional on my coming interview with his wife.

 

That second interview never happened, because one of his trades imploded suddenly.

 

I was going to help him to trade commodities.

That was one of those great "path not taken" moments in my life

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For Crispin Odey This Is The Engame: Hedge Fund Billionaire Goes All In Betting On "Violent Unwind" Of QE Bubble

 

In mid-August, when the market was enjoying its low-volatility grind higher, we observed that one of the biggest bears in the hedge fund industry, Crispin Odey, was having a bad year, with his hedge fund sinking some 30% through the end of July. Since then, conditions have only gotten more precarious for the billionaire hedge fund manager, and as the FT writes, for Odey, who is betting it all "on a violent unwind of a QE bubble", the endgame may have arrived.

As Miles Johnson writes, "many financial commentators have warned that current monetary policy has inflated a bubble that will one day violently pop. Few of them have risked money betting on the precise manner in which a chaotic unwinding of quantitative easing will play out through financial markets. This makes the portfolio of Crispin Odey, a London-based hedge fund manager, an interesting outlier. Mr Odey is one of only a handful of investors who has backed up his dire prognosis for the global economy with a series of large, leveraged trades designed to pay off in the event of a crash."

To be sure, as we noted two months ago, Odey's bets are predicated on a collapse of Japanese bond prices, a surge in the price of gold and immolation of equities. Or as the FT puts, it, "If it works he may make hundreds of millions of dollars for his clients. If wrong his fund may not survive."

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For Crispin Odey This Is The Engame: Hedge Fund Billionaire Goes All In Betting On "Violent Unwind" Of QE Bubble

 

In mid-August, when the market was enjoying its low-volatility grind higher, we observed that one of the biggest bears in the hedge fund industry, Crispin Odey, was having a bad year, with his hedge fund sinking some 30% through the end of July. Since then, conditions have only gotten more precarious for the billionaire hedge fund manager, and as the FT writes, for Odey, who is betting it all "on a violent unwind of a QE bubble", the endgame may have arrived.

As Miles Johnson writes, "many financial commentators have warned that current monetary policy has inflated a bubble that will one day violently pop. Few of them have risked money betting on the precise manner in which a chaotic unwinding of quantitative easing will play out through financial markets. This makes the portfolio of Crispin Odey, a London-based hedge fund manager, an interesting outlier. Mr Odey is one of only a handful of investors who has backed up his dire prognosis for the global economy with a series of large, leveraged trades designed to pay off in the event of a crash."

To be sure, as we noted two months ago, Odey's bets are predicated on a collapse of Japanese bond prices, a surge in the price of gold and immolation of equities. Or as the FT puts, it, "If it works he may make hundreds of millions of dollars for his clients. If wrong his fund may not survive."

 

Odey called Brexit against the rest of the market.I suspect he had polling done on a substantial scale.The Brexit market was £85 million in the end,which is nothing compared to the funds at the disposal of hedge funds.Many pundits were taking their lead from the bookies and I suspect whoever kept pushing out the Brexit odds(someone was-there were polls with Leave in the lead and the markets barely moved),made a fortune when markets opened on the 24th.

 

Trump has talked a lot about the Fed and raising rates.Paul Hodges posted this comment yesterday.

http://www.icis.com/blogs/chemicals-and-the-economy/2016/10/markets-struggle-with-political-risk-as-populist-momentum-gains/

'The key conclusion is that we are living in very uncertain times.

Companies and investors therefore need to prepare very carefully for every possible outcome – even if these seem unlikely today. For example, most investors today assume that the Federal Reserve will always support US stock markets. But if Trump were to win next month, it is likely that this policy would change very quickly. '

 

 

Whoever did well on Brexit may looking stateside for round two given there's an even bigger chance of substantial underpolling of one side-Trump.

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