Famous No1 Amil Baba Love marriage Astrologer Specialist Expert In Pakistan a...
Swan aug-15
1. 12 Upper Grosvenor Street, London, W1K 2ND ~ Tel +44 (0)20-7208-1400 Fax: +44 (0)20-7208-1401 ~ www.odey.com
Authorised and Regulated by the Financial Conduct Authority
■ In August-15 the Fund returned +6.6% against the MSCI Daily TR Net
Europe return of -8.3%.
■ Positive performance came from our holdings in sectors including
Consumer Discretionary (+4.2%), Energy (+1.4%) and Materials (+0.9%).
Our holdings in the Information Technology (-0.8%) sector disappointed.
■ Individual best performers this month were Las Vegas Sands (+1.3%) and
Sands China (+0.9%); the worst were Sky (-0.8%) and LM Ericsson
Telefon (-0.4%)
28-Aug-2015
The developed world averted a recession in 2008 by cutting rates to 0%, then
embarking on QE. We all hoped we would get healing, then growth, then inflation,
then rising rates. But we have experienced the distortions of QE without
generating enough growth or inflation. Now central banks have ended up with the
safe assets and driven pensions and savers into everything else. We haven’t
achieved inflation, so we haven’t worked through our debt and the solution may
have to come from default.
In China, we foresaw the risks building rapidly - imbalances in capex and growth,
huge debt accumulation and falling competiveness due to the political imperative
for continued wage growth. We predicted a myriad of consequences - falling
export performance, faltering growth, rising fear of defaults, confidence in the
system failing, capital flight, falling currency reserves. So now China faces five
critical challenges; the economic slowdown, lack of competitiveness as wages
continue to rise, an overvalued currency, debt at 300% of GNP (with borrowers
who can’t pay the interest) and a stock market bust. The global implications are
profound – commodities crashing, EM currency wars, falling global trade, RMB
devaluation and a deflationary shock. In 2007-8, US housing indebtedness and
lack of visibility was the problem and we see the same in China now, with huge
debt and true affordability being hidden. In 2007-8 the interbank markets started
the recession, now that risk comes from China. If individuals lose confidence and
try to get their money out, the outflow from the RMB, already witnessed by the
fall in Chinese FX reserves, will turn into a flood.
As trading terms turn against EM economies, currencies take the strain. Currency
wars will lead to trade disputes, rising tariffs and trade block formation. And even
devaluation will not save EM economies as, post devaluation, imports fall a lot
quicker than exports rise. Eventually incomes will be a lot lower and the currency
markets will have to work out who owes what to whom. Many currencies will go
to the wall. This is a huge threat to world trade which, in the last 25 years, has
gone from 12% to 35% of GNP. The beneficiary of this transformation, China,
will turn from customer to competitor as it tries to move up the value chain to
protect its industries from a domestic and export slowdown.
For the indebted, if operating returns are faltering and deflation makes zero rates
too high, debt forgiveness becomes the only way out...
€ Fund
MSCI Daily TR
Net Europe
Rel.
MTD 6.6 -8.3 14.9
3-month 8.5 -10.6 19.0
1-year 11.1 8.4 2.7
YTD -8.4 7.6 -16.0
1yr to 28-Aug-2015 11.1 8.4 2.7
1yr to 28-Aug-2014 -6.4 17.1 -23.4
Inc. to 28-Aug-2013 -3.4 2.5 -5.8
Since Inception 0.5 30.0 -29.6
CAGR since inception 0.2 11.2 -11.0
28-Aug-2015
€ I Class 100.49 € IR Class 100.88
€ R Class 99.30 AUD I Class 97.51
$ I Class 99.73 $ IR Class 99.34
$ R Class 98.66 £ I Class 100.78
£ R Class 104.49
Fund Size (€m) 531.34
Inception Date
Index MSCI Daily TR Net Europe
28-A ug-2015
08-Mar-13
Since Incept ion
80
100
120
140
160
Mar-13 Oct-13 May-14 Dec-14 Jul-15
%
Odey Swan(€) I
MSCI Daily TR Net Europe
28-A ug-2015
% Nav
Long Equity 88.0
Short Equity -134.5
Foreign Exchange 92.8
Government Bond -33.2
Commodity 6.7
-60.7
-9.1
-4.2 -4.2 -3.5 -0.3 -0.3 -0.1
0.1
89.5 92.6
-80
-60
-40
-20
0
20
40
60
80
100
120
AUD
HKD
JPY
SAR
SEK
GBP
NOK
CHF
DKK
EUR
USD
%
Shows all currency exposures of holdings and forward currency
positions. Internal unaudited figures.
Source for above 2 tables: Internal unaudited figures. All
performance figures quoted are net of fees. Past performance
is not a reliable indicator of future performance.
CAGR - Compound annual growth rate
Source for above table and chart: Quintillion Ltd and
Bloomberg. Calculation on a NAV basis as at 31-Jul-15. The
data below refers to the € I share class.
2. 12 Upper Grosvenor Street, London, W1K 2ND ~ Tel +44 (0)20-7208-1400 Fax: +44 (0)20-7208-1401 ~ www.odey.com
Authorised and Regulated by the Financial Conduct Authority
In Developed Market (DM) equities, we have high valuations and earnings risk. Not many assets are currently in distress but
there is evidence everywhere of the downturn. Three years after the replacement cycle began, we see growth faltering -
commodity capex is falling, the oil price is killing new aircraft demand, cars have already been replaced using cheap credit. As
demand weakens, we find ourselves on peak multiples of peak margins. Everyone has stayed in equities because there is
nowhere else to go, yet our short equity book has made money when it shouldn’t have done, in a world chasing carry. The
alpha in our short book has come from the sectors that broke early such as the Miners, but in August the whole market broke
down and, unlike last October, the technicals have turned, as short-term moving averages broke below their long-term
equivalents. We are not guaranteed a DM recession, but we are certainly not priced for any risk of one. Workaday stocks like
Kellogg are priced at 18-20x after a seven-year QE-fuelled market up cycle and the market is narrowing. Valuations are so
extended that they will need to fall 30-40% to be compelling in terms of carry.
So for investors, after a tumultuous August, the question is whether these shocks and adjustments are largely complete. Our
overriding conviction is that we are nearer the beginning of this process than the end. As discussed, China has huge
adjustments to make in terms of debt, competitiveness and lower growth (which will feel like recession to them), all the while
needing to stabilise the stock market, retain confidence in the system, keep the Party and people happy and manage a
migration from capex-led to service-biased growth. A virtually impossible task. We are already in a deflationary downdraft
amidst currency wars, yet China, the most bellicose country with the biggest army, has just fired the first shot.
In our view the cycle is no more abolished now than it was in 2007, when Bear Stearns and Northern Rock were seen as
containable. As Andy Haldane says, there is a recession every decade. We are now due ours. It is too late to chase the QE
happy trade, but not to enjoy the deflationary bust.
