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Caxton's Law reverses, goes long Treasurys

  • Short Treasurys for much of the year, Caxton went to neutral as soon as Larry Summers dropped out of the race for Fed chief, and is now long across the curve, says the hedge fund's chief Andrew Law. "For whatever reason," the U.S. economy has been unable to "reach escape velocity ... tapering is off the table for the foreseeable future." He notes GDP growth has averaged 2.2% over the last four quarters with zero rates and massive QE. Why would growth accelerate now? He believes the Fed looked at the same thing at its last meeting and realized it couldn't taper.
  • "There are no incentives for the corporate world to go out and spend – that, and housing, are critical ... The Fed is very clearly now seeking to lower interest rates."
  • On Europe, it's better, but he's not overly excited. He's keeping an eye on the euro (FXE) and expects $1.40 to be the line at which the ECB responds both verbally and maybe with a cut in rates. "The marketplace has spent the last 4 years trying to sell the euro and not quite understanding why it hasn’t collapsed to the teens… maybe now (longs) will have their moment."
  • Japan: Caxton cashed in on the yen devaluation and big stock rally earlier this year, and remains moderately bullish.
  • U.K.: There is no housing bubble. The country needs another 100K new homes per year. "My forecast would be that the BoE is not worrying too much about the housing market."
  • Law took over from Bruce Kovner at Caxton in 2008.
  • Treasury ETFs: TLH, TLT, IEF, DTYL, DLBL, ILTB, TENZ, ITE, TLO, EDV, VGIT, VGLT, TMF, TYD, LBND, UBT, UST, TMV, TYO, SBND, PST, TBT, DTYS, DLBS, TBF, TTT, TYNS, TYBS, TBXTRSY, PLW, GOVT.
  • Euro ETFs: FXE, ERO, ULE, URR, EUO, DRR, EUFX.
Comments (10)
  • SoldHigh
    , contributor
    Comments (1013) | Send Message
     
    "For whatever reason," the U.S. economy has been unable to "reach escape velocity ...

     

    We have an extreme anti-business (and thus, anti-growth) administration in DC. THAT'S the primary reason!
    21 Oct 2013, 02:38 PM Reply Like
  • sarichter
    , contributor
    Comments (303) | Send Message
     
    Blah blah blah blah... whine, whine, whine, whine... blah blah blah blah...
    21 Oct 2013, 03:21 PM Reply Like
  • Topcat
    , contributor
    Comments (426) | Send Message
     
    Of course, you are correct. No way Obama wants a good economy, and the jobs that would come with it. Monthly deficit has been steadily declining under Obama. But, due to Republican shutdown, I think the economy has been wounded and might pause now, which is of course is what the Republicans want. They perhaps used to be the party of "business" but they are now the party of social ideologies and winning the next election, no matter what. I think Obama and team have done a terrific job of moving us away from Great Depression II, despite strong partisan headwinds.
    21 Oct 2013, 03:50 PM Reply Like
  • Trade In Mexico
    , contributor
    Comments (573) | Send Message
     
    Topcat,

     

    Obama and his administration has done nothing more than borrow money to prop up this feeble economy, anyone can do that and make some short term pain go away, (it's not a "terrific job" as you describe it) but what happens when we actually have to face the debts? What happens if the Fed loses control of interest rates and US Govt debt rates go to 4%? Then we are Greece almost overnight and the chickens of Obama's "solution" to keep borrowing more money than any other President will come home to roost. It won't be pretty, and although Obama has repeatedly complained about what he "inherited", the next President will inherit the worst debt levels in the history of the United States.....

     

    I am equally disappointed in Republicans, our system is broken and all we get are politicians who wallpaper over the problems and Obama is one of them.
    21 Oct 2013, 05:15 PM Reply Like
  • sarichter
    , contributor
    Comments (303) | Send Message
     
    'Prop' it up from disaster, yes. That's what the government was supposed to do so it wouldn't completely fall apart and have the worst depression in all of human history. Remember where the financial crisis stemmed from. It was from deregulation of the banking industry from the two previous presidents.. (i.e. Bush and Clinton). If it wasn't for that, we wouldn't have had such a terrible crash. A correction for other issues in the economy could have occurred either way, but it wouldn't have been nearly as bad as it was. Obama's administration inherited a TON of debt from wars. It is quite amazing that it's 2013 and the people that are bitching about entitlement spending are the ones that still defend defense spending. Stop with the insanity. Any child can see that any change in spending on social security and medicare isn't going to fix the trillions the US spends in national defense.
    21 Oct 2013, 05:50 PM Reply Like
  • Trade In Mexico
    , contributor
    Comments (573) | Send Message
     
    Sarichter,

     

    Agreed, it has been propped up from disaster by taking on trillions more in debt, but that is the problem, we may be facing an even bigger depression or in other words may only have temporarily delayed what is coming.

     

    What happens when the next 9/11 hits us or recession occurs? The U.S. Government is so tapped out now that our nation's ability to do "its job" and prevent disasters in the future is not there anymore.

     

    Yes, our government in general (not just two Presidents) is what caused the financial crisis, it created extremely low interest rates after 9/11, it offered extremely low down payment loans and it supported very loose lending standards. Housing prices got out of hand and the bubble burst temporarily until the government stepped in once again to drive rates even lower than before. Here we are with the stock market and housing getting extremely inflated because of artificial government manipulation, and it will end badly.

     

    The problem is that when the bubble does end or when another terrorist attack or recession comes along, the U.S. Govt won't be in a position to backstop the economy. That's why we might only be delaying or creating an even worse depression in the future.

     

    The Govt can barely pay what it owes now at extremely low rates, that means it is like a family that has an adjustable rate mortgage and when that rate rises, they go broke.....

     

    Everything needs to be cut from defense spending to raising the age for Social Security.
    21 Oct 2013, 06:05 PM Reply Like
  • sarichter
    , contributor
    Comments (303) | Send Message
     
    One thing I can agree with you on is the home ownership accommodations that our country seems to push. Home ownership is not necessary and it's not a right. It's a privilege and apparently it should always be that way since many people are not responsible enough to do basic math... the math that equates to maintenance costs, savings versus mortgage, and everything else that goes into buying a large asset. Renting isn't evil and not everyone should own. I wish they would get rid of that historical false equivalence of 'the American dream' and 'owning a home'. That was a different time from now and there are way more people to house.

     

    I'm glad you agree about cutting national defense. Most people plug their ears when they hear anyone (especially in our current administration) talk about cutting medicare and social security because they follow that with cutting national defense. Those are the three largest issues that are racking up the debt. Headstart and food stamps are not!

     

    Social security is a touchy subject for most because it's mostly all they have. However, I can't sympathize. I don't make a lot of money, but I save every penny I can and have never expected that social security will fill my needs later in life. I expect society to subsidize education and healthcare but NOT my retirement. That is up to an individual.

     

    That brings me to another point. Healthcare insurance premiums are high, but so are Direct TV bills. With all of the cable, satellite, and other entertainment subscriptions being paid for why is there such a fuss over paying for healthcare?
    21 Oct 2013, 06:39 PM Reply Like
  • Trade In Mexico
    , contributor
    Comments (573) | Send Message
     
    Sarichter,

     

    Very well put, I agree with you on all those points. I am a couple decades away from Social Security and I am willing to see those benefits pushed out a few years or more to help get this country back in fiscal shape.

     

    I think the concern about healthcare is that the govt has screwed up so many major programs from Social Security, to Medicare, to student loans, to housing, to the post office. I am afraid that the gov't getting involved in administering our health insurance will be another case of overspending. I think some of the desired goals of Obamacare are great, but I think it will be another govt run disaster.
    21 Oct 2013, 06:52 PM Reply Like
  • bbro
    , contributor
    Comments (9735) | Send Message
     
    Does anybody know the performance of Caxton Associates in 2012??
    21 Oct 2013, 03:18 PM Reply Like
  • june1234
    , contributor
    Comments (2626) | Send Message
     
    Guy is just stating the obvious
    21 Oct 2013, 03:31 PM Reply Like
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