The document discusses the outlook and three-phase market view of Fasanara Capital. In Phase I, the market is expected to drift lower due to risks in Spain, Italy, and Greece, potentially seeing new lows. In Phase II, this market weakness will trigger a fresh intervention by policymakers, likely direct purchases of government bonds by the ECB or providing the ESM a banking license. In the long run, under their market theory, the bubble could potentially burst in inflationary or default scenarios.
Central banks have engaged in unprecedented monetary stimulus to support financial markets in the short term. However, this risks fueling opposition in both Germany and peripheral European countries in the medium term that could undermine monetary expansion. The greatest investment opportunities currently are contingency arrangements that benefit from very low prices due to central bank actions.
Fasanara Capital | Investment Outlook June 2012 (published May 25th)Fasanara Capital ltd
1) The document provides an investment outlook from Fasanara Capital discussing recent market movements and their views on the European sovereign debt crisis.
2) They expect further market declines are needed to motivate coordinated policy intervention, but maintain shorts as catalysts like political tensions could accelerate declines and trigger action.
3) Long-term structural issues in Europe like high unemployment and economic imbalances remain unresolved and increase the risks of scenarios like inflation, defaults or countries leaving the Euro.
Fasanara Capital | Weekly Investment Outlook | December 17th 2011Fasanara Capital ltd
The document provides an investment outlook and analysis of the European sovereign debt crisis and financial markets. It discusses the failure of recent ECB actions to restore confidence, predicts a confidence collapse scenario. It examines debt flows and stock levels facing European countries in 2012, risks to bank deposits and consumer spending. It argues that Germany will be left alone to handle the crisis but faces opposition from struggling countries and its own economic problems, making large-scale solutions difficult to achieve.
The document provides a bi-weekly market summary and analysis by Fasanara Capital. It discusses the ECB's recent policies to manually remove catalysts from the markets. It argues these policies delay necessary restructuring and add new debt on old debt. The next 6 months will be key to assess outcomes. Fasanara expects continued market resilience but is positioning portfolios with hedges for potential fat tail risks in the coming years from failing European policies.
Greece eurozone and the euro the body is getting really rottenMarkets Beyond
Greece debt trap is inextricable: there is no way out of a default/restructing - debt "reprofiling" is just a joke since it would require 21% compound annual growth for 10 years to go back to 60% debt/GDP ratio.
Citibank - Market Outlook September 2012Denny Setiady
Possible Grexit looming in the next 6-12 months with a 90% probability. Key upcoming meetings and events in September could impact the outcome, including a German court ruling on bailout funds and a Dutch election. If Grexit occurs, it would likely involve capital controls and currency adjustments in Greece, but the response from other countries and institutions would be substantial to prevent contagion. However, Grexit may not solve the underlying issues in the Eurozone and further restructurings are still expected.
As the global financial crisis entered its most dramatic phase, in the second half of 2008, the International Monetary Fund (IMF), many governments and several distinguished scholars advocated expansionary fiscal olicy as the second most effective tool (after monetary stimulus) to fight deep recession and deflation. Now, more than a year later, the previous excitement surrounding the supposed power of fiscal stimulus largely disappeared and instead has been replaced by ising concerns over the sustainability of public finances in many countries. Unfortunately, the previous enthusiasts of the active counter‐cyclical fiscal policy have not always realized the causality between the two.
Authored by: Marek Dąbrowski
Published in 2009
Central banks have engaged in unprecedented monetary stimulus to support financial markets in the short term. However, this risks fueling opposition in both Germany and peripheral European countries in the medium term that could undermine monetary expansion. The greatest investment opportunities currently are contingency arrangements that benefit from very low prices due to central bank actions.
Fasanara Capital | Investment Outlook June 2012 (published May 25th)Fasanara Capital ltd
1) The document provides an investment outlook from Fasanara Capital discussing recent market movements and their views on the European sovereign debt crisis.
2) They expect further market declines are needed to motivate coordinated policy intervention, but maintain shorts as catalysts like political tensions could accelerate declines and trigger action.
3) Long-term structural issues in Europe like high unemployment and economic imbalances remain unresolved and increase the risks of scenarios like inflation, defaults or countries leaving the Euro.
Fasanara Capital | Weekly Investment Outlook | December 17th 2011Fasanara Capital ltd
The document provides an investment outlook and analysis of the European sovereign debt crisis and financial markets. It discusses the failure of recent ECB actions to restore confidence, predicts a confidence collapse scenario. It examines debt flows and stock levels facing European countries in 2012, risks to bank deposits and consumer spending. It argues that Germany will be left alone to handle the crisis but faces opposition from struggling countries and its own economic problems, making large-scale solutions difficult to achieve.
The document provides a bi-weekly market summary and analysis by Fasanara Capital. It discusses the ECB's recent policies to manually remove catalysts from the markets. It argues these policies delay necessary restructuring and add new debt on old debt. The next 6 months will be key to assess outcomes. Fasanara expects continued market resilience but is positioning portfolios with hedges for potential fat tail risks in the coming years from failing European policies.
Greece eurozone and the euro the body is getting really rottenMarkets Beyond
Greece debt trap is inextricable: there is no way out of a default/restructing - debt "reprofiling" is just a joke since it would require 21% compound annual growth for 10 years to go back to 60% debt/GDP ratio.
Citibank - Market Outlook September 2012Denny Setiady
Possible Grexit looming in the next 6-12 months with a 90% probability. Key upcoming meetings and events in September could impact the outcome, including a German court ruling on bailout funds and a Dutch election. If Grexit occurs, it would likely involve capital controls and currency adjustments in Greece, but the response from other countries and institutions would be substantial to prevent contagion. However, Grexit may not solve the underlying issues in the Eurozone and further restructurings are still expected.
As the global financial crisis entered its most dramatic phase, in the second half of 2008, the International Monetary Fund (IMF), many governments and several distinguished scholars advocated expansionary fiscal olicy as the second most effective tool (after monetary stimulus) to fight deep recession and deflation. Now, more than a year later, the previous excitement surrounding the supposed power of fiscal stimulus largely disappeared and instead has been replaced by ising concerns over the sustainability of public finances in many countries. Unfortunately, the previous enthusiasts of the active counter‐cyclical fiscal policy have not always realized the causality between the two.
Authored by: Marek Dąbrowski
Published in 2009
The document discusses the background and state of play regarding the financial transaction tax (FTT) in the European Union. It describes how the FTT could benefit participating eurozone countries by providing more fiscal flexibility. Eleven eurozone countries have proposed implementing a harmonized FTT through an enhanced cooperation procedure. The tax is estimated to generate 30-35 billion euros annually from the financial sector to contribute to public finances and address issues like youth unemployment. However, some oppose the FTT due to concerns it could reduce market liquidity and cause transactions costs to be passed on to retail investors and businesses. Supporters counter that the tax targets harmful short-term speculation rather than necessary risk hedging and liquidity.
Are fiscal/monetary conditions affecting the macro thesis for Canadian farmland investments? Do publicly traded equity investments hedge all inflation regimes? Canada's debt to GDP - looming threat or irrelevancy?
This newsletter discusses recent economic and monetary policies that have led to rising government debt and money printing. It summarizes the history of past currency failures in France and Germany when governments excessively issued paper currencies. The author argues that current policies of unlimited deficit spending and money printing will not lead to lasting prosperity and will end in economic problems. The newsletter recommends investing in assets that benefit from emerging market growth, reduce counterparty risk, hedge inflation, and have inelastic demand to improve portfolio returns in this environment.
The volatile domain of financial wealthGRAZIA TANTA
0 - Introduction
1 - How financial wealth is built
2 - The (ir) relevance of financial wealth per adult
3 - Where does financial wealth accumulate?
4 - Inequalities in the distribution of financial wealth
- A report prepared for an upcoming EU summit proposes creating a closer fiscal and banking union that would give Brussels powers over countries' budgets if they breach debt rules.
- Finance ministers from France, Germany, Italy and Spain will meet on Tuesday to try to narrow differences on the eurozone's future.
- Spain saw its short-term borrowing costs almost triple at an auction as concerns remain over its request for a €100bn bank rescue package.
The document discusses recent market trends and the relationship between two opposing forces - the "Bubble Chain" and the "Deleveraging Chain".
The Bubble Chain refers to rising asset prices driven by central bank liquidity, moving from government bonds to corporate credit to equities. However, a Deleveraging Chain is also occurring, shown through weakness in commodities, emerging markets, and gold. These two chains send inconsistent signals about the economy.
The document argues one chain will have to give way at some point, allowing for a realignment. It also analyzes gold's recent sharp decline, putting forward several hypotheses for what triggered it and what implications it could have. The author remains uncertain about which
The document discusses recent political events in Italy and Cyprus and their implications. It says that irrational political behavior has increased the potential for policy mistakes in Europe. Both Italy and Cyprus saw illogical decision making in their handling of political and financial issues. This raises concerns that volatility in politics and markets will increase going forward. The document recommends hedging against the risk of a break up of the eurozone given the rising divisions within Europe and potential for more countries to rebel against austerity.
The document discusses several economic and political issues:
1) European authorities have struggled to effectively address the escalating sovereign debt crisis, providing only temporary solutions while the problems get worse.
2) The US debt level has risen significantly due to tax cuts, spending increases, and the financial crisis, reaching nearly 100% of GDP.
3) Emerging markets saw large declines as investors fled to safe havens like US treasuries, though some emerging countries remain attractive long-term investments due to growth and demographics.
4) South Africa faces economic challenges including slowing growth compared to other emerging markets, while political risks also loom over policy and foreign investment.
This document is a research proposal examining the impact of debt crisis on the economies of countries in the European Monetary Union. The proposal outlines the rationale, objectives, research questions, methodology and timeline for the study. Specifically, it will analyze how low interest rates and foreign capital inflows affected public and private borrowing in certain EU countries. It will also assess the challenges these countries now face with reduced access to foreign capital. The methodology section describes plans to conduct a literature review, quantitative and qualitative analysis of data from various sources to address the objectives and questions of the study.
This document provides a summary of market risks in Portugal as of November 2011. It finds:
1) Volatility in European and Portuguese markets remains high, requiring close monitoring.
2) The Portuguese economy is in recession, government debt is increasing, and credit costs have risen substantially.
3) Sovereign credit risk is increasing in the euro area, as evidenced by widening sovereign CDS spreads and inverted yield curves in Portugal, Ireland, and Greece. Stock markets declined sharply in 2011, especially in Portugal.
Despite all the artifices to neutralize the trend of decline of profit rates in the world capitalist system as predicted by Karl Marx in his great work The Capital, will not prevent its collapse over time because the political and social cost would be immense for humanity with its maintenance. Before the collapse, the world capitalist system will be ruined by the economic depression for many years resulting in his climbing the bankruptcy of many companies, the economic unfeasibility of the highly indebted nation states and mass unemployment on a global scale. Given the existence of the chaos that already dominates the world economy that is getting worse, it is time for each country and humanity provide themselves as urgently as possible tools necessary to take control of their destiny. To take control of his destiny humanity must take to end the world capitalist system to exercise governance of the world economy. This is the only means of survival of the human species.
Ireland, PIGS and the eurozone here we areMarkets Beyond
After Greece, Ireland; this now going beyond the means of Europe if Spain and Portugal need to be bailed out. Loans extended to these countries do not solve the root of the problems and the sooner organized negotiations are triggered with creditors rescheduled sovereign debt an,d take an haircut, the better: there is not other way out.
Quarterly report for our investors - Second quarter 2020BESTINVER
- The international portfolio increased 17.48% in Q2 2020, outperforming the European market which rose 12.60%. Long-term returns have been strong, with gains of 5.78% and 102.27% over 5 and 10 years.
- The Iberian portfolio grew 8.90% in Q2 2020 while the market rose 8.60%. However, returns have lagged the market over the last 5 years, with losses of -9.24% versus the market. Long-term 10 year returns have been positive at 47.03%.
- Bestinver made portfolio changes across strategies to take advantage of opportunities from market volatility, increasing quality companies they believe will benefit from accelerating
Greece: Ex Post Evaluation of Exceptional Access under the 2010 Stand-By Arra...FactaMedia
The IMF conducted an ex post evaluation of Greece's 2010 Stand-By Arrangement (SBA), which provided exceptional access of €30 billion to support Greece amid its debt crisis. While the SBA achieved strong fiscal consolidation and pension reform, it failed to restore market confidence or curb high unemployment. Debt remained too high and had to be restructured. The evaluation found that rapid fiscal adjustment was necessary but the program overestimated Greece's ability to implement structural reforms. The SBA highlighted lessons for the IMF in accommodating currency unions and ensuring sufficient program ownership.
The document summarizes a report by The Economist Intelligence Unit on the global economic outlook for Q4 2020. It finds that advanced economies will enter a "new normal" characterized by slow growth, low inflation, and high debt due to the fiscal stimulus measures enacted during the COVID-19 pandemic. Central banks have taken on the new role of directly financing government spending, and low interest rates mean debt servicing costs are negligible. As a result, debt piles may simply disappear over time if growth outpaces interest rates. However, this situation also carries long-term risks for productivity, inflation, and financial stability.
The document provides an investment outlook from Fasanara Capital. It expects the ECB and Germany to find a short-term solution to avoid a disorderly Greek default, despite remaining bearish long-term. It anticipates using massive ECB liquidity to hedge against negative scenarios through selective shorts and hedging programs. Opportunities also exist in industries vulnerable to banking retrenchment and slowing Chinese imports.
POSITION PAPER: Euro Zone Crisis. Diagnosis and Likely Solutions (ESADEgeo)ESADE
Author: Fernando Ballabriga
ESADEgeo - February 2014
Southern euro countries are in a situation of vulnerability due to three factors: their high debt levels, their eroded competitiveness and their difficulties to restart growth. Together, these factors generate a vicious circle which is difficult to exit and which can even degenerate into a self-fulfilling economic downward spiral. This policy brief provides a short guiding tour to the euro zone crisis. It looks at the current situation, the full context conditioning the solutions to the situation, how we got here, and the possible way out. The latter section outlines a set of minimum steps required to make the euro sustainable.
This document summarizes and analyzes a policy paper that proposes a two-step market-based approach to debt reduction in the eurozone without default.
Step 1 involves the EFSF exchanging existing Greek, Irish, and Portuguese government debt for EFSF bonds at market prices over 90 days. Step 2 assesses debt sustainability and either writes down debt to market levels if sufficient, or agrees to lower interest rates with GDP warrants. The goal is to restore private market access without seniority over remaining private claims. The ECB would stop bond market interventions, and the IMF could provide bridge financing until fiscal adjustments are complete.
This document discusses the four phases of capital market integration in the EU. The first phase focused exclusively on banking integration. The second phase began deregulating capital markets inspired by US markets. The third phase after the crisis established more regulation and supervision at the EU level. The current fourth phase aims to build the Capital Markets Union to boost investment, but faces challenges due to the lack of high quality securities resulting from fiscal constraints and the relegation of weaker economies.
The document provides an investment outlook from Fasanara Capital for May 2012. It anticipates three phases in the markets: (1) short-term weakness, (2) medium-term intervention and credit expansion following a more pronounced sell-off, and (3) long-term "bursting of the bubble" leading to defaults or inflation. It argues the recent ECB liquidity is already evaporating and fresh intervention will be needed. It also discusses factors that could trigger a larger market move and the opportunities in hedging tail risks.
The document provides an investment outlook and analysis of the European markets and economy. It discusses three main points:
1) In the short-term, valuations in Europe are expected to remain supported through the end of the year due to central bank intervention, with the possibility of further gains if sovereign bond spreads compress further.
2) In the medium-term, the author believes the European crisis is likely to flare up again in early 2013 due to austerity measures negatively impacting economies or a rejection of bailouts by Germany.
3) Long-term, central bank attempts to reduce risks may have unintended consequences of creating larger potential impacts in the future through more extreme outcomes. The author discusses several scenarios that
The document provides an investment outlook from Fasanara Capital for April 2012. It summarizes that in the short term, markets are expected to drift lower due to economic pressures. In the medium term, the author expects policymakers to intervene with more liquidity injections, pushing markets higher again. In the long term, continued monetary expansion is seen backfiring and exposing the financial system to tail risks within a few years.
The document discusses the background and state of play regarding the financial transaction tax (FTT) in the European Union. It describes how the FTT could benefit participating eurozone countries by providing more fiscal flexibility. Eleven eurozone countries have proposed implementing a harmonized FTT through an enhanced cooperation procedure. The tax is estimated to generate 30-35 billion euros annually from the financial sector to contribute to public finances and address issues like youth unemployment. However, some oppose the FTT due to concerns it could reduce market liquidity and cause transactions costs to be passed on to retail investors and businesses. Supporters counter that the tax targets harmful short-term speculation rather than necessary risk hedging and liquidity.
Are fiscal/monetary conditions affecting the macro thesis for Canadian farmland investments? Do publicly traded equity investments hedge all inflation regimes? Canada's debt to GDP - looming threat or irrelevancy?
This newsletter discusses recent economic and monetary policies that have led to rising government debt and money printing. It summarizes the history of past currency failures in France and Germany when governments excessively issued paper currencies. The author argues that current policies of unlimited deficit spending and money printing will not lead to lasting prosperity and will end in economic problems. The newsletter recommends investing in assets that benefit from emerging market growth, reduce counterparty risk, hedge inflation, and have inelastic demand to improve portfolio returns in this environment.
The volatile domain of financial wealthGRAZIA TANTA
0 - Introduction
1 - How financial wealth is built
2 - The (ir) relevance of financial wealth per adult
3 - Where does financial wealth accumulate?
4 - Inequalities in the distribution of financial wealth
- A report prepared for an upcoming EU summit proposes creating a closer fiscal and banking union that would give Brussels powers over countries' budgets if they breach debt rules.
- Finance ministers from France, Germany, Italy and Spain will meet on Tuesday to try to narrow differences on the eurozone's future.
- Spain saw its short-term borrowing costs almost triple at an auction as concerns remain over its request for a €100bn bank rescue package.
The document discusses recent market trends and the relationship between two opposing forces - the "Bubble Chain" and the "Deleveraging Chain".
The Bubble Chain refers to rising asset prices driven by central bank liquidity, moving from government bonds to corporate credit to equities. However, a Deleveraging Chain is also occurring, shown through weakness in commodities, emerging markets, and gold. These two chains send inconsistent signals about the economy.
The document argues one chain will have to give way at some point, allowing for a realignment. It also analyzes gold's recent sharp decline, putting forward several hypotheses for what triggered it and what implications it could have. The author remains uncertain about which
The document discusses recent political events in Italy and Cyprus and their implications. It says that irrational political behavior has increased the potential for policy mistakes in Europe. Both Italy and Cyprus saw illogical decision making in their handling of political and financial issues. This raises concerns that volatility in politics and markets will increase going forward. The document recommends hedging against the risk of a break up of the eurozone given the rising divisions within Europe and potential for more countries to rebel against austerity.
The document discusses several economic and political issues:
1) European authorities have struggled to effectively address the escalating sovereign debt crisis, providing only temporary solutions while the problems get worse.
2) The US debt level has risen significantly due to tax cuts, spending increases, and the financial crisis, reaching nearly 100% of GDP.
3) Emerging markets saw large declines as investors fled to safe havens like US treasuries, though some emerging countries remain attractive long-term investments due to growth and demographics.
4) South Africa faces economic challenges including slowing growth compared to other emerging markets, while political risks also loom over policy and foreign investment.
This document is a research proposal examining the impact of debt crisis on the economies of countries in the European Monetary Union. The proposal outlines the rationale, objectives, research questions, methodology and timeline for the study. Specifically, it will analyze how low interest rates and foreign capital inflows affected public and private borrowing in certain EU countries. It will also assess the challenges these countries now face with reduced access to foreign capital. The methodology section describes plans to conduct a literature review, quantitative and qualitative analysis of data from various sources to address the objectives and questions of the study.
This document provides a summary of market risks in Portugal as of November 2011. It finds:
1) Volatility in European and Portuguese markets remains high, requiring close monitoring.
2) The Portuguese economy is in recession, government debt is increasing, and credit costs have risen substantially.
3) Sovereign credit risk is increasing in the euro area, as evidenced by widening sovereign CDS spreads and inverted yield curves in Portugal, Ireland, and Greece. Stock markets declined sharply in 2011, especially in Portugal.
Despite all the artifices to neutralize the trend of decline of profit rates in the world capitalist system as predicted by Karl Marx in his great work The Capital, will not prevent its collapse over time because the political and social cost would be immense for humanity with its maintenance. Before the collapse, the world capitalist system will be ruined by the economic depression for many years resulting in his climbing the bankruptcy of many companies, the economic unfeasibility of the highly indebted nation states and mass unemployment on a global scale. Given the existence of the chaos that already dominates the world economy that is getting worse, it is time for each country and humanity provide themselves as urgently as possible tools necessary to take control of their destiny. To take control of his destiny humanity must take to end the world capitalist system to exercise governance of the world economy. This is the only means of survival of the human species.
Ireland, PIGS and the eurozone here we areMarkets Beyond
After Greece, Ireland; this now going beyond the means of Europe if Spain and Portugal need to be bailed out. Loans extended to these countries do not solve the root of the problems and the sooner organized negotiations are triggered with creditors rescheduled sovereign debt an,d take an haircut, the better: there is not other way out.
Quarterly report for our investors - Second quarter 2020BESTINVER
- The international portfolio increased 17.48% in Q2 2020, outperforming the European market which rose 12.60%. Long-term returns have been strong, with gains of 5.78% and 102.27% over 5 and 10 years.
- The Iberian portfolio grew 8.90% in Q2 2020 while the market rose 8.60%. However, returns have lagged the market over the last 5 years, with losses of -9.24% versus the market. Long-term 10 year returns have been positive at 47.03%.
- Bestinver made portfolio changes across strategies to take advantage of opportunities from market volatility, increasing quality companies they believe will benefit from accelerating
Greece: Ex Post Evaluation of Exceptional Access under the 2010 Stand-By Arra...FactaMedia
The IMF conducted an ex post evaluation of Greece's 2010 Stand-By Arrangement (SBA), which provided exceptional access of €30 billion to support Greece amid its debt crisis. While the SBA achieved strong fiscal consolidation and pension reform, it failed to restore market confidence or curb high unemployment. Debt remained too high and had to be restructured. The evaluation found that rapid fiscal adjustment was necessary but the program overestimated Greece's ability to implement structural reforms. The SBA highlighted lessons for the IMF in accommodating currency unions and ensuring sufficient program ownership.
The document summarizes a report by The Economist Intelligence Unit on the global economic outlook for Q4 2020. It finds that advanced economies will enter a "new normal" characterized by slow growth, low inflation, and high debt due to the fiscal stimulus measures enacted during the COVID-19 pandemic. Central banks have taken on the new role of directly financing government spending, and low interest rates mean debt servicing costs are negligible. As a result, debt piles may simply disappear over time if growth outpaces interest rates. However, this situation also carries long-term risks for productivity, inflation, and financial stability.
The document provides an investment outlook from Fasanara Capital. It expects the ECB and Germany to find a short-term solution to avoid a disorderly Greek default, despite remaining bearish long-term. It anticipates using massive ECB liquidity to hedge against negative scenarios through selective shorts and hedging programs. Opportunities also exist in industries vulnerable to banking retrenchment and slowing Chinese imports.
POSITION PAPER: Euro Zone Crisis. Diagnosis and Likely Solutions (ESADEgeo)ESADE
Author: Fernando Ballabriga
ESADEgeo - February 2014
Southern euro countries are in a situation of vulnerability due to three factors: their high debt levels, their eroded competitiveness and their difficulties to restart growth. Together, these factors generate a vicious circle which is difficult to exit and which can even degenerate into a self-fulfilling economic downward spiral. This policy brief provides a short guiding tour to the euro zone crisis. It looks at the current situation, the full context conditioning the solutions to the situation, how we got here, and the possible way out. The latter section outlines a set of minimum steps required to make the euro sustainable.
This document summarizes and analyzes a policy paper that proposes a two-step market-based approach to debt reduction in the eurozone without default.
Step 1 involves the EFSF exchanging existing Greek, Irish, and Portuguese government debt for EFSF bonds at market prices over 90 days. Step 2 assesses debt sustainability and either writes down debt to market levels if sufficient, or agrees to lower interest rates with GDP warrants. The goal is to restore private market access without seniority over remaining private claims. The ECB would stop bond market interventions, and the IMF could provide bridge financing until fiscal adjustments are complete.
This document discusses the four phases of capital market integration in the EU. The first phase focused exclusively on banking integration. The second phase began deregulating capital markets inspired by US markets. The third phase after the crisis established more regulation and supervision at the EU level. The current fourth phase aims to build the Capital Markets Union to boost investment, but faces challenges due to the lack of high quality securities resulting from fiscal constraints and the relegation of weaker economies.
The document provides an investment outlook from Fasanara Capital for May 2012. It anticipates three phases in the markets: (1) short-term weakness, (2) medium-term intervention and credit expansion following a more pronounced sell-off, and (3) long-term "bursting of the bubble" leading to defaults or inflation. It argues the recent ECB liquidity is already evaporating and fresh intervention will be needed. It also discusses factors that could trigger a larger market move and the opportunities in hedging tail risks.
The document provides an investment outlook and analysis of the European markets and economy. It discusses three main points:
1) In the short-term, valuations in Europe are expected to remain supported through the end of the year due to central bank intervention, with the possibility of further gains if sovereign bond spreads compress further.
2) In the medium-term, the author believes the European crisis is likely to flare up again in early 2013 due to austerity measures negatively impacting economies or a rejection of bailouts by Germany.
3) Long-term, central bank attempts to reduce risks may have unintended consequences of creating larger potential impacts in the future through more extreme outcomes. The author discusses several scenarios that
The document provides an investment outlook from Fasanara Capital for April 2012. It summarizes that in the short term, markets are expected to drift lower due to economic pressures. In the medium term, the author expects policymakers to intervene with more liquidity injections, pushing markets higher again. In the long term, continued monetary expansion is seen backfiring and exposing the financial system to tail risks within a few years.
The document provides an investment outlook and analysis from Fasanara Capital. It summarizes that:
1) Markets are expected to continue rallying in the short term but correct markedly in the next few months once the EMU crisis flares up again.
2) Positions in Europe will be held with incremental hedging, as the rally is based on false assumptions and will be terminated prematurely.
3) Italy may provide opportunities around national elections in late February as volatility is expected to rise.
Greece's race to default and european banks' recapitalizationMarkets Beyond
Greece will default by end of October and the ECB will dramatically expand its balance sheet to provide liquidity to banks and buy Spanish and Italian sovereign debt in the secondary market to maintain financing costs at acceptable levels.
The document provides an investment outlook from Fasanara Capital. It discusses cutting directional risks in the short term and maintaining a neutral beta portfolio while keeping relative value plays across markets. It maintains the view that risks in Spain, Greece, and the US fiscal cliff are overdone and sees a better chance of a 20% rally than drop in the next 3-4 months. It also discusses maintaining hedges given rock bottom risk premia and accumulating optionality against potential tail risks in the coming years.
The document provides an investment outlook and analysis from Fasanara Capital for March 2012. It summarizes that the ECB's LTRO2 liquidity injection was larger than expected and has fueled a risk rally in markets. However, the author believes this rally will be tested in the coming weeks. The outlook discusses the ECB's strategy of using monetary policy to buy time for banks and sovereigns, but notes this comes at a high price tag and risks inflation or defaults if the strategy fails. The author argues for defensive positions, hedges against negative scenarios, and opportunities to cheaply hedge risks.
The document provides an investment outlook from Fasanara Capital. It argues that markets remain in a fragile state with multiple potential outcomes, including inflation, defaults, or stagnation. Due to widespread risks, the base case scenario for 2012 is a stagnant market environment with volatile trading and potential shocks. Given embedded risks, current valuations do not adequately compensate investors. The outlook advocates maintaining short positions and hedges to manage fat tail risks in these dysfunctional markets.
- Investors are chasing yield due to record-low interest rates, taking on more risk and moving into corporate bonds.
- The European sovereign debt crisis continues as the political economies of France and Germany diverge in their approaches, with Germany insisting on austerity and France favoring stimulus. This split threatens the coherence of the EU.
- Capital markets results were mixed in the second quarter, with debt capital markets holding up better than equity markets, though margins declined across many business lines like loans.
The document discusses several scenarios that could play out in the global economy and financial markets over the next few years. The base case scenario remains one of slow deleveraging similar to Japan, but the system is vulnerable to shocks that could flip the equilibrium. Six potential scenarios are outlined: inflation, defaults, renewed credit crunch, EU breakup, China hard landing, USD devaluation. The strategy positions the portfolio to withstand most potential outcomes and benefit from "fat tail events" that are currently mispriced. Concerns are raised about high valuations in credit markets and underestimation of risks like rising interest rates.
- The document provides an investment outlook and analysis of global markets from Fasanara Capital.
- It warns that markets have become too optimistic in the face of political and economic risks, making them fragile, and advocates maintaining hedges against a potential downturn.
- While near-term risks in Europe and the US have been postponed, the author believes volatility will increase and markets will experience a steep 10-20% correction when risks materialize.
Sep 2011 Quarterly Report - WIOF Global Utilities FundKen Teale
- Performance is calculated before management fees of between 1.50% and 2.25% per annum. The fund's inception date is July 31, 2009. The benchmark is the UBS Developed Infrastructure & Utilities Index, which is USD hedged and total return.
- The fund's share price decreased 0.3% in the quarter compared to a 6.0% decrease in the benchmark index, due to avoiding large Italian, Spanish and French utilities and geographic allocation.
- The portfolio holds positions in regulated utilities (41%), semi-regulated utilities (38%), generation (2%), communications infrastructure (7%), rail (3%) and airports (1%). The largest geographic exposures are the US (46%),
The document discusses several issues impacting investment decisions including increased market correlations, eurozone debt problems, and economic growth concerns. It also describes Xenfin Capital's foreign exchange trading strategy and how the weakening euro could present opportunities in 2011, though this depends on actions by European authorities and maintaining political coordination.
‘Deflationary Boom Markets’
‘Deflationary Boom Markets’ is the name of the game. Deflation forces Central Banks into action. Central banks to push Bonds and Equities higher, inflating the bubble some more, although on a rougher path and with higher volatility than we got accustomed to in recent years.
The document summarizes concerns investors have about Greece, the Federal Reserve's monetary policy, and China's economic slowdown. Regarding Greece, the author argues that while a default would be embarrassing, it would likely not trigger a global financial crisis. On the Federal Reserve, the author claims fears of an asset bubble are overblown and low rates remain warranted. Finally, the author asserts that while China's economy is slowing, it is transitioning in a managed way and is not a threat to cause a global financial crisis through its debt problems.
The document summarizes the financial crisis of 2008 and its aftermath. It discusses how excess leverage and easy credit led to the crisis. It then describes the massive fiscal and monetary responses by governments to counter the recession. Finally, it outlines a new investment strategy focused on bonds, hedging risks, and adapting to long-term volatility in a more regulated post-crisis economic environment.
This document discusses the background and state of play regarding the introduction of a Financial Transaction Tax (FTT) in the European Union. It notes that while the Banking Union aims to prevent future crises, an FTT could provide EU countries more fiscal flexibility in the short-term by generating estimated annual revenues of 30-35 billion euros. Eleven eurozone countries have proposed introducing harmonized FTT regimes through an enhanced cooperation procedure. The tax is intended to discourage harmful financial transactions and have the financial sector help address the crisis burden. However, some oppose an FTT due to concerns around reduced liquidity and its potential effects.
The global economy is expanding more slowly than expected, with problems including slumping markets, high sovereign debt, and public bond defaults. While Europe's recovery is also facing headwinds, the region has seen unexpectedly strong earnings growth from companies. Momentum in Europe is being driven by a declining euro boosting exports, lower oil prices fueling consumer spending, and stimulus from the European Central Bank. However, structural issues like high unemployment and debt levels remain challenges. The document examines opportunities in specific European companies and warns that some municipal bonds like Puerto Rico's appropriation bonds are riskier than others due to their repayment structure being subject to political discretion over funding.
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Fasanara Capital | Investment Outlook
1. Fake Markets: How Artificial Money Flows Kill Data Dependency, Affect Market Functioning and Change the Structure of the Market
Hard data ceased to be a driver for markets, valuation metrics for bonds and equities which held valid for over a century are now deemed secondary. Narratives and money flows trump hard data, overwhelmingly.
‘Fake Markets’ are defined as markets where the magnitude and duration of artificial flows from global Central Banks or passive investment vehicles have managed to overwhelm and narcotize data-dependency and macro factors. A stuporous state of durable, un-volatile over-valuation, arrested activity, unconsciousness produced by the influence of artificial money flows.
- Passive Flows: The Prehistoric Elephant In The Room
- ETFs Are Taking Over Markets
- The Impact of Passive Investors on Active Investors: the Induction Trap
- How Narratives Evolve To Cover For Fake Markets
- Defendit Numerus: There is Safety in Numbers
- What Could We Get Wrong
2. Be Short, Be Patient, Be Ready
Markets driven by Central Banks, passive investment vehicles and retail investors are unfit to price any premium for any risk. If we are right and this is indeed a bubble (both in equity and in bonds), it will eventually bust; it is only a matter of time. The higher it goes, the higher it can go, as more swathes of private investors are pulled in. The more violently it can subsequently bust.
The risk of a combined bust of equity and bonds is a plausible one. It matters all the more as 90%+ of investors still work under the basic framework of a balanced portfolio, exposed in different proportions to equity and bonds, both long. That includes risk parity funds, a leveraged version of balanced portfolio. That includes alternative risk premia funds, a nice commercial disguise for a mostly long-only beta risk, where premia is extracted from record rich markets that made those premia tautologically minuscule.
Fasanara Capital | Investment Outlook
1. The Future Is Wide Open: Avoid The ‘Illusion Of Knowledge’ Trap
The single most dangerous thinking trap / optical illusion for investors today is to look at Trump, Brexit and Italy Referendum as non-events, buried in the past. We believe that 2017 may likely be driven by the same factors that failed to shape 2016. The non-events of 2016 are likely to be the drivers of 2017. Finally, we will get to find out if Brexit means Brexit, if Trump means Trump, if a failed Italian referendum means early elections and a membership of the EMU in jeopardy down the line.
2. Structural Shift: These Are Transformational Times
The macro outlook of the next years will be influenced the most by these structural trends:
› Protectionism, De-Globalization & De-Dollarization. In Pursuit of Inclusive Growth
› End of ‘Pax Americana’. The ascent of China. Geopolitical risks on the rise
› End of ‘Pax QE’. Markets without steroids, but still delusional.
› 4th Industrial Revolution: labor participation rate falling from 63% to 40% in 10 years?
3. Our Baseline Scenario: Bubble Unwind, Equities and Bonds Down
Starting this 2017, our major macro convictions are as follows:
› Global Tapering to progress
› US Dollar to keep grinding higher
› European Political Instability to worsen
› US Equities to weaken
1. Reflation Phase To Be Temporary, More Downside Ahead
Earlier on in 2016, ‘random and violent markets’ went off to panic mode out of (i) fears over China’s messy stock market and devaluing currency, (ii) plummeting oil price, (iii) strong US Dollar. Today, we believe complacent markets are similarly illogical and over-shooting, this time on the way up. As we re-assess the validity of the underlying risks, we expect a shift in narrative in the few months ahead and a sizeable sell-off for risk assets.
2. Four Key Conviction Ideas
We analyze below our key ideas for the next 12 months:
Short Chinese Renminbi Thesis. In Q1, China only managed to keep GDP in shape by means of graciously expanding credit by a monumental 1 trn $. Unsurprisingly, at 250% total debt on GDP, you cannot borrow 10% of GDP per quarter for long, without a currency adjustment, whether desired or not.
Short Oil Thesis. Long-term, we believe Oil will follow a volatile path around a declining trend-line, which will take it one day to sub-10$. Within 2016, we expect global aggregate demand to stay anemic and supply to surprise on the upside, inventories to grow, primarily due to the accelerating speed of technological progress.
Short S&P Thesis. To us, the S&P is priced to perfection, despite a most cloudy environment for growth and risk assets, thus representing a good value short, for limited upside is combined with the risk of a sizeable sell-off in the months ahead.
Short European Banks Thesis. We believe that micro policies at the local level, while valid, are impotent against heavy structural macro headwinds, and only the macro environment can save the banking sector in its current form in the longer-term. Macro structural headwinds for banks these days are too heavy a burden (negative sloped interest rate curves, deeply negative interest rates, deflationary economy, depressed GDP growth, over-regulation, Fintech), and will likely push valuations to new lows in the months/years ahead.
This document provides an investment outlook and analysis from Fasanara Capital. It discusses recent volatility in the bond markets, particularly the German bund market, and provides Fasanara Capital's medium and long-term views. In the medium term, they expect bund yields to fall further, European government bond spreads to tighten, and European equities to rise. In the long term, they believe deflationary trends will continue in Europe and central banks will need to continue monetary stimulus to prevent economic deterioration, which could eventually lead to a break in the euro currency peg.
Fasanara Capital Investment Outlook | February 1st 2015
1. Seismic Activity On The Rise
2. No Volatility No Gain
3. The Role Of Optionality
4. Crystal Ball
5. Deflation Is A Multi-Year Process
6. Three Big Trades for 2015
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- Three top investment opportunities are seen in European deflation trades benefiting from ECB action, peripheral European equity with upside from an inflated bubble, and Japanese equity benefiting from further stimulus.
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This document provides an investment outlook and analysis from Fasanara Capital. Some key points:
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2) Interest rate increases pose a major risk to equities. Correlations between equities and bonds may shift to be positive rather than the current negative correlation.
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3) The potential failure of OMT interventions in Italy could trigger a disastrous market reaction and move the region closer to a disorderly break up of the Eurozone, one of the author's tail risk scenarios. Overall the author sees more volatility ahead due to Italy but remains positive in the medium term.
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Biotech valuations have reached levels comparable to the tech bubble of the late 1990s according to an analysis of biotech equity valuations against broader market indexes. Biotech companies now comprise over 20% of the NASDAQ index, representing hundreds of billions in total market value. Concerns were raised that some biotech firms have promising science but their current valuations far exceed anything justified by their actual business fundamentals.
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Misery Index in Europe: Unemployment Rate plus Inflation RateFasanara Capital ltd
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Fasanara Capital Bi-Weekly Notes - July 27th 2012
1. July 27th 2012
Fasanara
Capital
|
Investment
Outlook
We
hold
onto
the
contents
of
our
three-‐phased
market
view,
as
we
position
for
the
market
to
(i)
remain
into
volatile
range
trading,
before
(ii)
drifting
lower
on
renewed
market
pressures,
possibly
seeing
new
lows,
and
(iii)
being
then
re-‐flated
back
by
policymakers’
fresh
intervention.
In
the
long
run,
under
our
Multi-‐Equilibria
market
theory,
we
give
it
a
decent
chance
for
the
bubble
to
bust
in
one
of
several
possible
ways,
potentially
leading
to
an
Inflation
Scenario
(Nominal
Defaults)
or
a
Default
Scenario
(Real
Defaults)
and
their
various
possible
declinations.
Phase
I:
‘Deflating
Further’
In
the
near
term,
on
Phase
I,
we
expect
the
market
to
give
in
to
its
downside
risks.
The
catalyst
could
be
Spain,
its
banks’
recapitalization
needs
(as
the
EU
has
deliberately
delayed
to
assess),
it
may
be
its
illiquid
and
insolvent
Regions,
its
tumbling
Real
Estate,
its
capital
flights
or
its
street
riots.
As
we
monitor
capital
flows
closely,
for
example,
in
the
last
fortnight
we
sensed
the
first
serious
capital
outflows
away
from
Spain
by
some
of
the
large
Corporates
in
the
country.
Up
until
very
recently,
no
real
outflows
had
really
been
triggered
by
local
household,
local
banks
and
local
corporates.
To
the
end
of
June,
most
of
the
350bn
rise
in
Target2
liabilities
held
by
the
Bank
of
Spain
with
the
Eurosystem
would
account
for
foreigners
only,
leaving
Spain
through
either
repatriating
deposits,
selling
Spanish
equities/bonds
or
foreign
banks
redeeming
loans.
No
more
than
10%
of
it
was
driven
by
local
players
rundowns
(to
be
precise,
in
the
previous
12
months,
Spanish
Corporates’
deposits
fell
by
just
16%,
Spanish
Household
by
tiny
4%).
It
will
be
interesting
to
read
through
July
data
for
Target
2
exposure,
as
soon
as
they
are
available.
However,
it
seems
the
case
that
locals
have
proven
quite
resilient
up
until
now,
keeping
the
systemic
risk
on
their
books
unabated.
The
rising
risk
of
bank
runs
in
Spain
is
therefore
not
priced
in,
and
one
of
the
key
vulnerabilities,
as
data
shows
that
it
has
not
even
began
as
yet.
2. Likewise,
Italy
and
Greece
are
dangling
on
a
string,
for
some
of
the
same
reasons.
This
week,
we
record
a
most
concerning
bearish
flattening
of
the
government
bond
curve,
one
of
the
indicators
we
had
on
our
checklist
for
spotting
dangerous
market
momentum:
2yr
yield
in
Spain
(and
Italy
to
a
lesser
extent)
closed
much
of
the
gap
to
10yr
yield,
with
both
reaching
to
new
highs.
Not
surprisingly,
yesterday
Mr
Draghi
deemed
it
opportune
to
come
out
with
an
unusually
bullish
statement,
for
he
would
’do
whatever
it
takes
to
save
the
Euro’.
Maliciously,
yesterday
was
also
the
first
day
of
holiday
for
Ms
Merkel,
as
Draghi
may
have
timed
his
outing
wisely,
capitalizing
un-‐disturbed
on
his
window
of
opportunity..
Phase
II:
‘Reflating
Back,
following
new
intervention’
We
believe
that
such
market
capitulation
will
lead
into
a
fresh
new
intervention,
on
Phase
II,
as
it
will
manage
to
build
enough
political
consensus
around
such
policy
move.
In
other
words,
we
believe
that
further
market
weakness
and
street
riots
are
needed
to
trigger
the
intervention.
Such
intervention
is
likely
to
be
shaped
in
one
of
two
different
ways:
(i)
SMP
direct
purchases
of
government
paper
by
the
ECB
(possibly
leading
to
a
more
widespread
TARP-‐like
program
of
asset
purchases
in
the
next
12
months,
despite
Draghi’s
current
reluctance),
or
(ii)
providing
the
ESM
with
a
banking
license
(despite
Germany’s
current
reluctance),
so
that
it
can
increment
its
firepower
from
Eur
500bn
to
infinity,
having
access
to
ECB’s
liquidity
operations.
Such
bimodal
outcomes
are
the
two
faces
of
the
same
coin:
the
ECB
is
prevented
from
giving
unlimited
financing
to
governments,
under
the
limitations
of
its
founding
treaty,
but
it
can
give
unlimited
financing
to
a
bank
(and
so
it
has
done
with
LTROs
and
MROs).
ESM
would
therefore
become
the
Trojan
horse
of
the
ECM’s
SMP
operations,
with
yet
another
layer
of
complex
financial
engineering
thrown
in.
On
the
other
hand,
we
believe
that
alternative
interventions
are
not
realistic:
(i)
Eurobond
would
take
ages
to
implement,
as
multiple
treaty
changes
are
required,
and
the
necessary
referendums
that
go
with
it;
(ii)
LTROs
would
be
ineffective,
as
the
lack
of
eligible
collateral
is
a
major
constraint,
let
alone
the
concentration
of
local
risks
it
has
morphed
into
(exacerbating
the
negative
feedback
loop
between
Sovereigns
and
Banks).
Both
interventions
deliver
some
sort
of
Debt
Mutualisation
across
the
Euro-‐area,
filling
the
void
of
unsustainable
imbalances
across
the
region,
buying
some
more
time
to
the
Euro,
delaying
the
day
of
reckoning
for
‘debt
saturation
without
growth’
in
peripheral
Europe,
3. effectively
inflating
the
bubble
even
further,
adding
new
debt
and
new
leverage
to
the
existing
unsustainable
debt
overhang,
so
as
to
attempt
to
keep
the
whole
system
afloat.
Debt
Mutualisation,
if
properly
and
timely
implemented,
could
potentially
set
the
basis
for
a
more
sustainable
Europe.
We
hold
doubts,
but
definitively
quite
a
bit
of
time
can
be
bought
through
that.
Germany
is
key,
as
it
has
the
most
to
lose
in
that
framework.
The
next
six
months
are
key
in
assessing
this
probability.
On
our
count,
even
if
such
forms
of
Debt
Mutualisation
were
to
occur,
their
chances
of
success
are
nowhere
near
par.
We
rendered
some
of
the
reasoning
on
it
in
our
latest
Outlook.
Essentially,
we
argue,
the
fundamentally
flawed
Euro
construct
meets
a
dangerously
high
level
of
over-‐indebtedness
in
the
system,
on
a
near
global
scale.
The
fragile
Eur
fixed-‐exchange
system
is
all
the
more
inherently
unstable
when
measured
against
a
level
of
leverage
by
major
economies
which
grows
increasingly
unbearable
as
a
percentage
of
GDP,
real
productivity
and
industrial
production
(the
latter
stripping
out
the
borrowing
factor
from
GDP
aggregate
numbers).
And
the
denominator
of
the
troubled
‘global
Debt/productive
GDP
ratio’
receded
some
more
recently.
In
the
last
fortnight,
we
had
more
evidence
of
China
hard
landing
and
US
slowing
down.
In
the
US
in
particular,
latest
GDP
numbers
were
not
only
retrenching,
but
also
dependant
for
most
part
on
personal
consumption
expenditure,
where
(i)
half
of
it
was
due
to
a
drawdown
of
savings
rates
as
opposed
to
real
output
growth
or
real
wages
and
(ii)
the
rest
was
perhaps
due
to
the
boost
in
disposable
income
provided
for
by
the
extended
transfer
payments
and
tax
cuts
(cumulatively
a
whopping
1.4trn
in
the
last
year).
Now,
as
the
‘fiscal
cliff’
approaches
and
the
savings
rate
accelerates
its
rise,
the
fairy
tale
of
a
strong
recovery
in
the
US
might
just
be
about
to
dissipate.
And
with
it,
so
it
will
delusional
peak
profit
margins
of
American
corporations,
lying
on
the
thin
ice
of
an
unsustainably
debt-‐laden
economy.
Overall,
the
global
framework
we
operate
into
does
not
help
the
Euro
cause
in
the
long
term,
even
before
accounting
for
Europe’s
negative
externalities
abroad.
Phase
III:
Busting
of
the
Bubble.
To
us,
the
same
fact
that
the
current
level
of
10yr
government
yields
in
the
US
has
not
been
seen
for
220-‐years,
in
Japan
for
140years,
in
Germany
for
200
(and
in
Holland
for
500
years),
speaks
for
itself
and
calls
for
abnormal
market
conditions
on
abnormally
long
historical
4. evidence
and
time
series.
Our
outlook
for
Multi-‐Equilibria
Markets
means
just
that.
As
opposed
to
simple
mean
reversion,
the
dust
in
the
markets
could
settle
in
diametrically
opposite
ways
and
the
system
might
find
its
new
equilibrium
in
there.
The
expectation
that
things
will
be
sorted
out
and
the
old
trend
on
the
old
framework
will
resume
might
not
only
prove
delusional
but
also
preclude
one’s
strategy
from
capturing
amazing
value
in
the
current
context,
namely
what
we
refer
to
as
Fat
Tail
Risk
Hedging
Programs.
We
suspect
Europe
cannot
manage
to
paddle
forever
in
the
middle
of
the
distribution
curve
and
avoid
the
edges
of
these
cliffs.
As
per
Herbert
Stein's
Law:
"If
something
cannot
go
on
forever,
it
will
eventually
stop’’.
The
base
case
of
a
stagnant
Japan-‐style
slow
deleverage
could
lead
into
Fat
Tail
Risk
Scenarios
at
any
time
over
the
next
4
years.
Scenarios
include:
Inflation
Scenario
((Nominal
Defaults,
Debt
Monetization
and
Currency
Debasement),
Default
Scenario
(Real
Default
and
Debt
Rescheduling/Haircut),
Renewed
Credit
Crunch,
EU
Break-‐Up,
China
Hard
Landing,
USD
Devaluation.
Opportunity-‐Set
In
opportunity
land,
we
believe
the
most
interesting
value
investment
right
now
in
Europe
is
to
take
advantage
of
such
market
resilience
to
provide
one’s
portfolio
with
your
own
home-‐
made
backstop
facilities
and
firewalls.
In
fact,
Risk
Premia
are
nowhere
near
where
they
ought
to
be
should
one
factor
in
the
even
vague
possibility
of
partially
failing
European
policy
making.
Our
leit-‐motiv
remains
to
take
advantage
of
current
market
manipulation
and
compressed
Risk
Premia
to
amass
large
quantities
of
(therefore
cheap)
hedges
and
Contingency
Arrangements
,
thus
balancing
the
portfolio
against
the
risk
of
hitting
Fat
Tail
events
in
the
years
to
come.
If
we
do
not
hit
them,
then
great,
it
will
be
the
easiest
catalyst
to
us
hitting
the
target
IRR
on
the
value
investment
portion
of
our
portfolio
(what
we
call
Safe
Haven,
or
Carry
Generator).
If
we
do
hit
one
of
those
pre-‐identified
low-‐probability
high-‐impact
scenarios,
then
cheap
hedges
will
kick
in
for
heavily
asymmetric
profiles
(we
typically
targets
long
only/long
expiry
positions
with
10X
to
100X
multipliers).
Such
multipliers
are
courtesy
of
market
manipulation
and
‘interest
rate
rigging’
provided
for
by
Central
Bankers.
Look
no
further
than
that,
as
we
believe
that
they
represent
the
only
truly
Distressed
Opportunity
right
now
in
Europe.
Timing-‐wise,
the
next
6
months
may
provide
the
most
interesting
window
of
opportunity.
Beyond
that,
perhaps
within
18
months,
it
may
be
the
next
most
crowded
trade.
5. Portfolio
Construct
Our
personal
roadmap
to
successfully
riding
current
financial
markets
is
based
on
the
following
portfolio
guidelines:
-‐ Keep
the
Dry
Powder,
on
a
slim
and
nimble
liquid
portfolio,
heavily
under-‐investe
-‐ Accumulate
nominal
returns,
on
safe
senior-‐secured
short-‐dated
corporate
exposure
from
northern
Europe
(Value
Investment
section
of
the
portfolio)
-‐ Unload
it
fast
on
triggering
target
IRRs
and
meeting
Carry
Accumulation
plans
-‐ Amass
large
quantities
of
long-‐only
long-‐expiry
heavily-‐asymmetric
profiles
to
insure
and
over-‐hedge
against
pre-‐identified
Fat
Tail
Scenarios.
Accumulate
a
treasury
of
optionality
over
time,
banking
on
system-‐wide
dislocations
and
mis-‐
pricings
(leading
us
into
Cheap
Optionality,
Select
Shorts,
Embedded
Options
and
Dislocation
Hedges)
-‐ Follow
methodically
and
meticulously
the
list
of
pre-‐identified
Fat
Tail
Scenarios
and
match
it
to
the
list
of
pre-‐identified
Eligible
Instruments
(Fat
Tail
Risk
Hedging
Programs
section
of
the
portfolio)
From
here,
on
this
construct,
two
outcomes
are
we
prepared
for:
-‐ Pitfalls
in
Europe
on
the
way
to
restoring
imbalances
due
to
under-‐execution
of
austerity
programs,
and
‘adjustment
fatigues’,
leading
to
the
possibility
of
steep
market
corrections
and
the
chance
for
us
to
reload
fast
on
the
Value
Investing
part
of
the
portfolio,
at
cheaper,
safer
and
more
sustainable
valuations
(acceleration
of
the
ramp
up
of
the
portfolio)
-‐ Fast
forward
to
Tail
Events:
best
case
scenario
for
our
strategy
6. What
I
liked
this
week
Ray
Dalio:
Don't
Assume
Germany
Will
Bail
EU
Out;
"Fat
Tail"
A
Real
Possibility
Read
Swiss
base
money
spikes
as
the
SNB
defends
the
peg
Read
End
of
game?
Don’t
bet
on
it
Read
Natural
gas
up
44%
from
the
lows
Charts
W-‐End
Readings
Former
Reagan’s
Budget
Director
David
Stockman:
‘This
market
isn't
real.
The
2%
on
the
ten-‐year..
those
are
medicated
rates
created
by
the
Fed
and
which
fast-‐money
traders
trade
against
as
long
as
they
are
confident
the
Fed
can
keep
the
whole
market
rigged’
Video
How
things
change,
China
FX
manipulation.
The
renminbi’s
weakness
appears
to
stem
from
the
actions
of
market
participants
rather
than
those
of
policymakers
Read
Francesco Filia
CEO & CIO of Fasanara Capital ltd
Mobile:
+44
7715420001
E-‐Mail:
francesco.filia@fasanara.com
16
Berkeley
Street,
London,
W1J
8DZ,
London
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