Go Fish

Although tomorrow's Fed minutes will likely attempt to elucidate some semblance of a revamped exit strategy, what's the point of wasting time thinking?  Many hedge funds, particularly in macro, are languishing this year because, well, it's been pretty difficult.   Meanwhile, the risk parity "own a bit of everything" crowd, whose travails attracted broad scrutiny last year, have performed very nicely indeed, thank you very much.



But hey- picking the right risk parity strategy might require some thinking as well.    Even better is an equally weighted "Spooz and Blues" portfolio, as popularized by Jefferies' David Zervos.  An equally vol-weighted portfolio of E-mini S&P futures and the 14th eurodollar contract has generated cumulative profits of $90 million per 1000 Spooz, including carry, since the beginning of 2009.  Moreover, the returns have been pretty consistent, with the "trade once a quarter" strategy delivering an information ratio (i.e., annualized return to risk) of 1.20 over that time period.




Macro Man has struggled a bit for inspiration on occasion and judging by how quiet the comments have been, so has the readership of this space.   Given that Ben Bernanke will tell you that Fed rates will stay low for a long, long time for the bargain price of $250k, maybe the best thing to do is slap on some Spooz and blues and go fishing?

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Anonymous
admin
May 20, 2014 at 8:38 AM ×

that only tells us correl across asset classes is high and positive and any liquidity shake, would cause a knee jerk reaction on every instrument.

the trade couls be

LONG RISK PARITY + LONG VOL

Ciao f

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Hotairmail
admin
May 20, 2014 at 9:44 AM ×

According to my scientific seasonality analysis, they've gone away (be back after a gee gee race in Doncaster).

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abee crombie
admin
May 20, 2014 at 1:08 PM ×

Give it to Zervos, that Blues & Spooz trade call was killer, I guess you can make money listening to some beards...

Nikkei/Yen move waiting to happen. Erring to upside still but I guess markets are tepid to see how post Tax data reports and official response.

Short China housing! (easier said that done)

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Nico G
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May 20, 2014 at 3:16 PM ×

"maybe the best thing to do is slap on some Spooz and blues and go fishing?"

no wonder the comments are quiet

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Leftback
admin
May 20, 2014 at 3:36 PM ×

Once USDJPY breaks below 100¥, none of this is going to look so clever. Until that happens, sure, I'll be happy to go fishing.

BTPs are out another 10bps today, better watch that in case peripheral credit really starts to go pear-shaped, and hope that Dr Aghi has already ordered more bazookas.

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May 20, 2014 at 6:35 PM ×

Now Now Nico, easy!

LB if I was to pretend to be interested in Elliot Wave forecasting, which I am not...I would expect a bounce off 100 followed by a new high which would make a 5th of a 5th wave on the $YEN. Again I know nothing about this market panacea.

Goodluck

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Anonymous
admin
May 20, 2014 at 7:08 PM ×

Treasury bonds up again. any shallow pullback lures fresh buying. low yields are here to stay

Dudley suggesting no asset sales ever?

Dudley says the reverse repo program may have an impact on financial stability

Seems they have no idea what to do.

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Macro Man
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May 20, 2014 at 9:04 PM ×

@ Heaven's Gate: Re USDJPY, I think the year end high was wave 5, and we are now mucking about in a lengthy ABC correction, wherein we are in an irregular B at the moment.

Oh, and if friend Nico is dissatisfied with the commentary, he is entitled to apply to the contact email address for a full refund!

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