Monday, April 21, 2008

Recession, recession, we told you so!

I've been reading recession predictions in the press and media for at least six months, together with the routine liquidity crisis commentaries and financial apocalypse scenarios (Side note: how many banks filed for bankruptcy in the US in 2007? Answer: 3). The one-month economists are always there to pound the medias in times of fear, always. They then quietly fade-out when the market unexplainable starts rising again. Oh well, we are in a bear rally is one of those sentences used by the last permabear standing. Well, this bear rally started 5 years ago and is now seeing a renewed batch of positive indicators: retails sales, production, technology and leading indicators were all up in March. Even real-estate is showing positive returns YTD.

Reality is, all recessions and major financial shocks occurred in times of economic euphorias and excess optimism. The major recessions starting in 1929 and 2000 developed in a climate of high speculative interest and widespread gains, in other words when demand was exhausted. Supply and demand, the basic mechanism regulating all markets, is still the most important indicator today if you believe in modern capitalism and the last 100 years of economic history. Other than that, nothing has changed in my view, except the ability of public financial authorities to regulate liquidity, thus affecting the currency markets. As per emerging economies, risk lowers, does not rises, when the economy expands by creating diversification.

I've been bullish on the economy for the last 5 years and I don't see signs of recession as of yet. My equity portfolios have been recovering the losses suffered during the liquidity crisis and I am looking to close another year with gains in excess of 10%. Money flows and sector trends (commodities in particular) have been very helpful in determining my model allocations, as I wrote in a January post.

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Thursday, April 3, 2008

Rydex alternative strategies fund (RYFOX)

Good article on describing the new Rydex Alternative Strategies Allocation Fund (RYFOX). According to Rydex, the offering is aimed at retail investors in search for assets and strategies diversification:

The fund invests in a diversified portfolio of hedge funds and futures funds spanning the universe of absolute return, commodities, currency arbitrage, global macro, managed futures and real estate strategies, according to the firm.

But, says, where is the limit between hedge fund "replication" and attempts to actually run a quant hedge fund?

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