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Daniel Moser  

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  • Hedge Funds Fail to Hedge – Again [View article]
    May was a liquidity driven sell off in which many institutions moved to reduce risk (whether it be in short positions or long positions accross all asset classes) in an effort to raise liquidity. Notice how LIBOR shot up during May as the European problems came into the headlines (including some Spanish bank failures). Concluding that hedge funds don't hedge on account of poor performance coinciding with poor equity market performance, at best, leaves a lot to be desired.
    Jun 2, 2010. 11:56 AM | Likes Like |Link to Comment
  • An Update on Copper Fundamentals [View article]
    First of all you are correct that I do not receive compensation from Barclays. Secondly, I tend to utilize Barclays research for several reasons...

    1. I have a lot of respect for Barclays Capital research. I just happen to have a bias towards their work.

    2. I find there research platform very easy to use and asthetically pleasing.

    3. I have access to their research platform (which naturally prevents me from using another organizations research in the event I don't have access to it)

    Next, with respect to arbitrage between the two exchanges...this is from the Barclays report I was using....

    "It is also important not to overlook the supply picture. Price action on the SHFE has been lagging behind that on the LME, keeping the import arbitrage window closed, reflecting a domestic market in excess supply. This could be due to weak demand from other end-use sectors and/or the pace of supply growth exceeding demand growth. The latter appears to be a plausible explanation. According to preliminary Chinese import data, China’s imports of unwrought copper and products increased by 14% y/y in Q1 10, despite the fading away of temporary factors boosting imports in 2009, including government stockpiling and consumer re-stocking. However, strong domestic demand has kept the oversupply under control and physical discounts at relatively moderate levels. If imports ease in the coming
    months alongside a closed import arbitrage window, strong domestic demand suggests that inventories could be drawn down quickly and imports could rise again before too long."

    So they did mention it, I just failed to include it in my posting. But since you specifically asked about it, I will be glad to share it.

    The fact that I tend to focus on Barclays research says nothing about alternative sources of information. I am sure there are tons of good additional sources for fundamental information on copper out there. Please share if you know of some particularly good ones.

    And finally, I try to post what I hope is helpful information/ideas as I see them - without regard to how complete the picture is. Over time, I try to cover the idea in a bit more comprehensive fashion-but given time contraints, I can rarely present a SOLID comprehensive case for my ideas in each posting (not that seeking alpha would publish 10+ page reports anyways...).

    Thank you for your comments.
    Apr 21, 2010. 05:25 PM | 1 Like Like |Link to Comment
  • The Bullish Case for Russia, Round II [View article]
    Before this gets out of hand with 20+ comments on the similar topic...

    "Privatization, particularly of Russia's oil, gas, and mineral resources, was a corrupt fiasco that created a small group of wildly rich and influential individuals. These oligarchs were clever businesspeople who took advantage of the weak state and lived above the laws they paid the politicians to write. Without effective laws and courts, companies resolved disputes by turning to what Russian sociologist Vadim Volkov calls 'violent entrepreneurial agencies,' or private legal enforcers....When Putin Won the presidential contest in March 2000, the previous decade of anguish had left him in no doubt that Russia's problems stemmed from the state's weakness." (courtesy of HBR article)

    So yes...of course...Putin made Russia Moscow centric to a much greater extent than it had previously been in the past decade. Hence previously there was hardly any rule of law at all (which a whole group of commenters seemed very quick to point out). How does one go about establishing a rule of law? Making a stronger central government with rules that are increasingly enforced. Yes, there is a long ways to go...but I think arguing that there have been no improvements is somewhat niave-and perhaps ill-informed. Granted maybe I am wrong.
    Mar 12, 2010. 09:00 AM | Likes Like |Link to Comment
  • The World's Largest Hedge Funds [View article]
    I just happen to be glancing at Bridgewater's website today and noticed on their "About Us" section of their website...

    "Bridgewater manages approximately $73 billion* in global investments for a wide array of institutional clients, including foreign governments and central banks, corporate and public pension funds, university endowments and charitable foundations. Bridgewater has 800 employees and is based in Westport, Connecticut."

    Mar 9, 2010. 08:46 AM | Likes Like |Link to Comment
  • Who Said Hedge Funds Don't Like Chaos? [View article]
    It might also be important to consider other strategies that could potentially exhibit strong inverse correlation to increasingly volatility. Any strategy that relies on mean reversion such as relative value or convergence trading strategies immediately come to my mind. Hedge funds may not be outright selling volatility and subsequently crossing everything they have two of in prayer that nothing blows up on them. It could simply be that a significant portion of hedge fund strategies have statistical properties that exhibit an inverse relationship to rising volatility. In my opinion, this subtle difference is the difference between an individual making a calculated bet based on probability and research versus the slot machines in Vegas. Any one can outright short volatility, and if that is all that hedge funds as a group do, then investors in hedge funds have problems. Not everyone has the discipline to carefully analyze the capital structure of two companies and make a relative value bond bet that will payoff.
    Feb 22, 2010. 09:00 AM | 1 Like Like |Link to Comment
  • Do Investors and Policy Makers Misunderstand Asia? [View article]
    Thanks for reading and for the comment. I did some dirty calculations using data from the OECD website. In 1970 gross fixed investment as a percent of GDP was 36.2%. In 2007, gross fixed investment as a percent of GDP was 23.2%. Using the time series from 1971 through 2007, the correlation between gross fixed investment as a percent of GDP and Real GDP growth was 53.1%. I used 1971 as the starting point because the OECD data only went back to 1971 for Real GDP growth. Thanks again for reading.
    Feb 3, 2010. 03:16 PM | Likes Like |Link to Comment
  • What Is the Yield Spread Telling Us? [View article]
    This is an excellent example of someone relying on models without asking why they work in the first place. In pretty much all previous cases in which a steep yield curve predicted relatively strong growth, the easy monetary policy (which gave rise to the steep yield curve in the first place) led to a strong recovery. In this instance the credit bubble that has come undone was so massively deflationary that incredibly easy monetary policy coupled with new measures by the Fed to make monetary policy even easier might not have the same effect as it did in all of the other cases. I am certainly not suggesting that another recession is in store during 2010...I am merely suggesting that just because a model that is by its very nature "curve fitted" fails to capture any differences in magnitude of the underlying weakness in the economy thus...we could see a steep yield curve for quite some time with very limited growth.
    Jan 19, 2010. 02:18 PM | 3 Likes Like |Link to Comment
  • Outlook for Oil: When Contango Trade Unwinds [View article]
    I have a rough time believing oil prices will tumble too far as people offload their vessels filled with crude and products. If I concede that dumping physical crude oil into the market place will take a downward toll on flat price for some period of time...I must naturally focus on the implications for the contango itself. As flat price moves downward the contango widens...thereby naturally creating incentives for the next investor/trader to bid for the crude and storage, hedge it, and store for 6 months and earn a 4-10% return risk free. Seems to me this process will add a tremendous amount of stability that is failed to be taken into account when you suggest that oil prices could crash when traders begin to unwind their contango trades. If anything, I could buy the argument that vast amounts of storage will keep a lid on oil prices but I cannot stretch far enough to think that suddenly all of the trading companies who were diligent enough to lock up risk free returns north of 20% will just sit there and not rush to lock up 7-10% in the event of front month weakness. Obviously there is some give and take and it all depends on the required rate of return for trading companies but the point is clear: there is a balance that will maintain relatively stable oil prices due to the temptation risk free profits provide.
    Jan 18, 2010. 05:56 PM | 3 Likes Like |Link to Comment
  • How to Select Assets for Inflation [View article]
    I can't help but think TIPS are a pretty foolish investment for most people in the wealth building phase of their lives. Unless the individual thinking about TIPS is suddenly endowed with enough money that the realized interest rate differential between TIPS and the comparable plain vanilla note is enough to offset all of the increases in his/her living expenses, TIPS make little sense. TIPS are a wealth protection instrument not a wealth building instrument. Logical reasoning suggests that it make more sense for investors to put capital into the companies that produce/mine/refine or sell the components which make up the CPI. By definition if the CPI is rising then their profit margins should be expanding...if not even more so because companies can have substantial operating leverage. Quite simply, TIPS are a hedge against inflation for those already financially independent. TIPS appear to be terrific at locking up an extremely low return thus they serve as a superb hedge against one's ability to earn compelling returns for those in a wealth building phase of life.
    Jan 12, 2010. 06:26 PM | 4 Likes Like |Link to Comment
  • The Relationship Between Monetary Policy and Commodity Prices [View article]
    My apology for spelling/grammatical errors. I had some technical difficulties with the spell check on SA.
    Jan 7, 2010. 03:21 PM | 2 Likes Like |Link to Comment
  • The Relationship Between Monetary Policy and Commodity Prices [View article]
    For some reason I don't think this logic is sound. People need to ask what the economic reasoning is underlying the relationship between the federal funds rate and industrial metals before they accept this argument.

    In my opinion easy monetary policy enables economic expansion-obviously. What the above analysis fails to capture is that during a robust expansion the global supply chain becomes very constrained. Additionally within the industrial metals complex, there were significant supply constraints. Finally, Non-OECD growth led to subtantial increases in demand at the margin. Add those three things together...and BAM...you have signficant volatility and upward moving prices. So, I can agree with the overall conclusions that easy monetary policy promotes commodity price increases...however the logical path of the argument should emphasize the supply and demand of the underlying commodity rather than some sort of inflationary phenomena in which a low federal funds rate directly leads to increases the price of commodities.
    Jan 7, 2010. 03:16 PM | 1 Like Like |Link to Comment
  • Bill Gross: Questioning the 'Go to Germany' Strategy [View article]
    In some sense you make a valid point, investment instruments denominated in a foreign currency have a direct impact on the returns of those instruments. However, Germany has a strong production based economy and, as such, they could actually gain even additional competitive advantages as the Euro declines thereby making there export goods relatively cheaper to export. So in the short run, investing in Germany could have some added headwinds because of Euro risks...but in the medium term a 10-15% decline in the Euro could very well serve to further boost the German economy.
    Jan 7, 2010. 10:46 AM | 2 Likes Like |Link to Comment
  • Why Airline Stocks Are a Prime Candidate for the Short Side of a Clean Energy Portfolio [View article]
    There are a couple things that I feel should be added to the discussion. First, airlines are not a "major" source for the marginal demand of oil. If you take the time to observe via data from the eia roughly how much distillate fuel is converted into jet fuel for consumption, you are going to be grossly disappointed in how "not important" jet fuel is in the scheme of things. Secondly in terms of cost. You appear to have just about no idea whatsoever what the cost of jet fuel is. Jet fuel is not cheaper than conventional gasoline even factoring in any tax differentials.

    These might seem like minor points in the scheme of your overall article...and that is rightfully so. But your logic in how you arrive at your conclusion is off base a chunk, in my opinion, even if I agree with the outcome of your decision.
    Dec 22, 2009. 02:53 PM | Likes Like |Link to Comment
  • Economic Indicators: The Good, The Bad and the Ugly [View article]
    Mr. Davewmart,

    After reading your criticism of my rhetoric followed by re-reading the relevant section, perhaps I could have worded that a bit better. I wasn't try to claim that anyone who thinks this recession is likely to take a turn for the worst is a illogical. Nor was I even trying to say that the people who think fiat currencies like the Euro will collapse are "crazies". My goal was to portray the people I have encountered who quite simply seem so stuck on the negatives that they forgo any uplifting fundamental data whatsoever...thus they seem to feel the world is going to come to an end in a massive societal meltdown that can only be dreamed about by anarchists. Nonetheless, as you put it, each argument is worth considering on its on merits before being evaluated. Thanks for reading.
    Dec 11, 2009. 08:28 AM | 3 Likes Like |Link to Comment
  • Copper Demand: Not as Weak as You Think [View article]
    Definitely a stupid mistake on my part. Thanks for the correction.
    Nov 20, 2009. 09:03 AM | Likes Like |Link to Comment
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