A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
Surprise policy decisions by central banks have caused enough misery in the hedge fund world that broader market instability is becoming, if not probable, far more likely.
Bloomberg reports that two New York-based hedge fund managers at BlueCrest Capital Management, Olivier Pariente and Peter Findley, got caught out by the Bank of Canada's surprise rate cut, lost a ton of money for investors, and are now leaving the firm.
The portfolio losses resulting from the Swiss National Bank's desertion of its currency peg with the euro were far larger and the career death toll continues to mount. The Wall Street Journal outlines the (few) winners and the big losses from the SNB's decision, including this stunner:
"Marko Dimitrijevic, a hedge-fund veteran known for his aggressive gambles on emerging markets, decided to close Everest Capital LLC's flagship Global fund because of losses sustained after the franc's jump, a person familiar with the firm said.
The fund had $830-million in assets under management as of Dec. 31, according to an investor update viewed by The Wall Street Journal."
This is only the latest bad news for the hedge fund industry. In addition to the usual underperformance issues, global banks are withdrawing credit to hedge funds, and major pensions like California's state pension plan, are firing hedge fund managers. Widespread liquidation of leveraged hedge funds, while not assured, would cause considerable volatility.
"BlueCrest manager who lost on Canada rates said to leave" – Bloomberg
"A few savvy investors had Swiss Central Bank figured out" – Wall Street Journal
Brent crude is sharply higher Friday morning on news that Saudi king Abdullah bin Adbul Aziz has died.
The Washington Post reports that the succession plan for the world's most important oil producing nation will be complicated, not least because "the monarch, believed to be 90, was succeeded by his brother, Crown Prince Salman, according to state television. That put the region's most important Sunni power and America's closest Arab ally in the hands of a 79-year-old who is reportedly in poor health and suffering from dementia."
"Saudi King Abdullah's death sets up complex succession process" – Washington Post
"Oil prices probably won't keep gains made after death of Saudi king" – Bloomberg
Also in the energy space, Penn West Petroleum CEO David Roberts just came right out and said, "Our business doesn't work at $50 per barrel oil," according to BNN's Jameson Berkow . Reuters reports that the company is looking to restructure debt which is a polite way of saying the company will have trouble paying the bills if the crude price doesn't recover soon.
"Penn West to seek some relief from debtholders – CEO" – Reuters
European markets are ramping higher Friday morning on optimism surrounding the European Central Bank's quantitiative easing program announced yesterday. Goldman Sachs has helpfully supplied a list of European stocks that they expect will benefit most. These include luxury goods providers Burberry PLC, Daimler AG, and Christian Dior SA.
"Goldman Sachs says these stocks will benefit most from QE" – WSJ Moneybeat
European markets have disappointed investors a number of times in the past five years but analyst and investor Dan Davies published a compelling argument as to why Europe is a promising place for new investment. Mr. Davies notes that last year, European banks were reluctant to lend because of a pending stress test on their balance sheets. These tests are now completed and banks are again ready to lend. This credit creation, combined with monetary stimulus, is vastly improving the market outlook for a region where stocks with big yields are common.
This blog post is circulating everywhere, and rapidly, in European investment circles Friday morning.
"Draghi's force multipliers" - Bull Market
See Also: "Three bells in a row and euphoric highs." – Polemic Pains
Tweet of the Day: "@DavidKeo BofAML: largest precious metal inflow since Aug 2011 (very dodgy note header too -- not far from the Investec effort) pic.twitter.com/Tyr74y9PAN "
Diversion: It will be a while before the average person bebefits, but there is a truly exciting revolution happening in materials.
"New amazing metal is so hydrophobic it makes water bounce like magic" – Sploid
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow