Asset Class Scoreboard- February 2012
All the numbers are finally in, so it’s time to update our asset class scoreboard for February. The new year jubilation does not appear to have worn off, as our scoreboard is showing higher year-to-date gains than in January for every category except for US Real Estate. (Disclaimer: Past performance is not necessarily indicative of future results.) The impressive 2012 rally in stocks has carried commodity prices higher, while hedge funds and managed futures have only managed to capture of portion of those gains. How long until this 2012 rally ends is anyone’s guess, but some sectors are definitely enjoying it more than others until then.
Rydex and Wisdom Tree Managed Futures Products- February 2012
The first Friday of every month is when the US employment report (non-farm payrolls) is released. As traders, we’ve all been told to fear the volatility of NFP days. Why? The idea is that this announcement moves markets when unemployment is high because there is a desire for more employment to spur the economy – with more people working there will be more consumption, higher GDP, higher taxes, etc…
On the flip side, when unemployment low, there is a desire for less employment so that demand-pull inflation doesn’t set in ala the Phillips curve (if everyone is making good money, they’ll bid up the prices for goods and services). So, 7:00 AM CST on these Fridays is usually expected to be a volatile time for bond markets (as well as Crude and other risk on/off assets at times) – the theory being that if employment is a canary in the coal mine for problems, Fed actions will follow shortly thereafter to correct imbalances. We wanted to see how this bears out in practice…
Say Hello to Sunrise Capital
It’s always nice to sit down and meet with CTAs face-to-face. It goes back to that qualitative element of due diligence in managed futures that Attain emphasizes. We’re not going to recommend a program that we can’t express faith in, and nothing can solidify (or decimate) faith in a program the way looking a manager in the eye does.
Such was the case in yesterday’s meeting with the folks from Sunrise Capital. A larger ($10 million minimum) program based in San Diego, Sunrise is no stranger to the managed futures space, with an extensive track record and attractive pedigree of staff. For us, though, the appeal is in the way they distinguish themselves from their peers. Their flagship program is, in some ways, a traditional trend following program that stems from manager Gary Davis’ and Rick Slaughter’s self-taught stylistics; in the case of Rick, since his college days. When it comes to industry reputation and reverence, they are in the Bill Eckhardt and Richard Dennis category, and were on the ground level as managed futures blossomed in the 1970’s. But that may be where the comparisons to industry stalwarts end, only because their risk management approach is so sophisticated and nuanced that it seems to put them in a category all their own.
What a Falling BDI Indicates (Hint: Maybe not much)
We’ve been keeping an eye on the Baltic Dry Index (BDI). By keeping an eye on it, we mean watching it plummet faster than Kim Kardashian’s heart after getting turned down by Tebow. The theory is that as goes the BDI, so go commodity prices. But is this always they case? We ran the numbers to find out.
MF Global Madness Catches Fire All Over Again
Riddle us this…
Let’s say you’re an insurance claims investigator. You’re looking into a case where a man’s home burnt down. Not only do you smell accelerant at the site of the fire, but you find out that the man took out a massive insurance policy on the residence just a few days before it burnt down. What’s your gut going to tell you?
On our side of it, we tend to believe that where there’s smoke, there’s fire, and since the futures industry watched Corzine torch the confidence of investors everywhere amidst scandalous claims of illegal-tasting (if not actually against the law) rehypothecation, we’ve been smelling gasoline. Turns out, it may have been with good reason.
Disclaimers
Managed futures, commodity trading, forex trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. You should not rely on any of the information as a substitute for the exercise of your own skill and judgment in making such a decision on the appropriateness of such investments.
The entries on this blog are intended to further subscribers understanding, education, and – at times – enjoyment of the world of alternative investments. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.
The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.
The performance data for various Commodity Trading Advisor (“CTA”) and Commodity Pools are compiled from various sources, including Barclay Hedge, RCM’s own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor’s disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor’s track record.
The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on RCM’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by RCM, and averaging of various indices designed to track said asset classes.
The mention of market based performance (i.e. Corn was up 5% today) reflects all available information as of the time and date of the publication.
The owner of this blog, RCM Alternatives, may receive various forms of compensation from certain investment managers highlighted and/or mentioned within the blog, including but not limited to retaining: a portion of trade commissions, a portion of the fees charged to investors by the investment managers, a portion of the fees for operating a fund for the investment managers via affiliate Attain Portfolio Advisors, or via direct payment for marketing services.
Managed Futures Disclaimer:
Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.
See the full terms of use and risk disclaimer here.
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