China Story Turns Negative

George Papamarkakis, co-founder of London-based hedge fund North Asset Management LLP, said he is concerned about declining investment in China's real-estate sector and what that will mean for demand for iron ore from Australia. Iron ore is the primary ingredient in steel, which is used in construction. Thanks in part to the iron-ore trade, China is Australia's biggest trading partner.

DJ Dollar's Plunge Hurts Hedge Funds Holding Bullish Bets

Many hedge funds managed to exit their bets on the dollar before its tumble Thursday.But an unfortunate few didn't make it out in time. The dollar plunged 2% against the euro to $1.419 Thursday afternoon in New York - its biggest one-day percentage drop since July 2010 - and saw even steeper losses against the Australian dollar and other currencies.
The drop came as European leaders secured a deal to reduce Greece's crushing debt and expand the firepower of their rescue fund for struggling members of the euro-currency zone. Meanwhile, the U.S. economy expanded by 2.5% in the third quarter, curbing fears of recession. However, funds had scaled back their bullish bets on the dollar in October, after piling into the currency the month before, when the economic outlook looked bleaker.
There was an "aggressive reduction of 'long' dollar positions," in October, according to JW Partners, a research and advisory firm for currency hedge funds. A long position is a bet the dollar's value will rise against other currencies.

Soros’s Quantum Holding 75% Cash Leads Hedge Funds Baffled by Instability

Keith Anderson, who runs the $25.5 billion Quantum Endowment Fund for Soros Fund Management LLC, has seen enough of choppy global markets.

In mid-June, Anderson told his portfolio managers to pull back on trades as the hedge fund’s losses hit 6 percent for the year, according to two people familiar with the New York-based firm. As a result, the fund is about 75 percent in cash as it waits for better opportunities, said the people, who asked not to be identified because the firm is private.

Soros and Moore Capital Management LLC are among hedge funds that have reduced the amount of money they’re investing in stock, bond and currency markets as they look for clarity on global events ranging from the debt crisis in Europe to China’s efforts to control inflation to the debate over the U.S. debt ceiling. About 18 percent of asset allocators, including hedge funds, are overweight cash, the highest level in a year and up from 6 percent in May, a Bank of America Corp. survey showed last month.

Traders' Targets: Portugal And Spain

As fears of financial "contagion" resurface in Europe on the back of Ireland's woes, hedge-fund managers are cautiously setting their sights on potential problems in countries such as Portugal and Spain. But they face political and other challenges in placing bearish bets.
The deteriorating economic picture in some corners of Europe clearly has the attention of many hedge-fund managers and other investors who see Ireland's rescue package as little more than a bandage for the continent's woes. They are expecting more bad news to come, predicting that borrowing costs elsewhere will become prohibitive, potentially forcing other countries to also seek a bailout or restructure their debt.

El plan europeo de apoyo a Grecia alienta a los especuladores financieros

La ayuda que la UE prometió ayer a Grecia para salvarla de la debacle económica carece de solidez para algunos `hedge funds´, que creen además que los responsables de los Veintisiete no están preparados para abordar el examen que supone la crisis interna que asola al país heleno.

Marc Von Rohr, del fondo de riesgo New Trend Capital Management, afincado en Zurich, Suiza, ha afirmado a EL BOLETÍN que la Unión Europea (UE) “encara un serio problema con Grecia”. “Por un lado, no puede permitir que Grecia salga de la Eurozona por las consecuencias que conllevaría, y por otro lado está el asunto de las ayudas, que puede crear precedentes negativos”, afirmó Rohr.

Bearish Bets On Greece: Short-Lived?

The short bet against Greece mightn't be around for long. The increasing possibility that European nations will come to the rescue of Greece is upending what had been a highly successful trade—betting that Greece would struggle or be unable to pay off its debt. The two main winning bets were buying credit default swaps, which rise as the risk of default increases, and shorting Greek bonds, which fall in value when the borrower is in trouble. In both cases, investors made big profits in recent months.

Now, with a bailout plan for Greece emerging, some investors are moving out of those now money-losing trades. A key factor hurting these trades is that if a plan goes through, there would be little doubt Greece could pay off the bonds it has issued that mature in April and May. On Monday, the annual cost of insuring €10 million of Greek government debt for five years was €341,000, down 14% from last Thursday. The cost hit a peak of €425,000 on Feb. 4.

Juncker pide a Merkel más apoyo para el euro

El primer ministro luxemburgués y presidente del Eurogrupo, Jean-Claude Juncker, ha advertido a Angela Merkel que Alemania debe incentivar el consumo interno para lograr fortalecer la moneda única e impulsar, así, la recuperación de la eurozona.

En una entrevista concedida al diario financiero alemán Handelsblatt, Juncker ha calificado de “necesario” un fortalecimiento “de la demanda interna” germana. Además, el mandatario luxemburgués, que también es uno de los líderes más respetados de la Unión Europea (UE), ha instado al motor del Viejo Continente a que reduzca los desajustes en la competitividad, que tienen como consecuencia una cada vez más precaria solidez de la moneda única.

La advertencia de Juncker es el primer aviso importante que Alemania recibe, después de que su índice de consumo interno cayese al finalizar el año pasado. Si la locomotora del euro ralentiza su marcha, la moneda única perderá consistencia en los mercados internacionales, perjudicando a la eurozona y beneficiando a las exportaciones alemanas, que según Simon Junker, analista del Commerzbank consultado por EL BOLETÍN, han ganado en importancia durante el año 2009, al encontrar en China un mercado ampliamente generoso.

La incertidumbre económica hunde la Bolsa española

La Bolsa española registró hoy una de sus jornadas más negras desde el estallido de la crisis económica. Su principal indicador, el Ibex 35, se depreció un 5,94%, hasta los 10.241,70 puntos. Habría que remontarse a noviembre de 2008, poco después de la quiebra de Lehman Brothers, para ver una caída similar. Los 35 valores que componen el índice cerraron con pérdidas y en algunos casos, como el de Ferrovial, superaron el doble dígito.

En un sólo día, el índice selectivo ha dicho adiós a 700 puntos y ha pulverizado las dos barreras de resistencia que más inquietaban a los analistas, situadas en los 10.500 y los 10.300 puntos. Si sus previsiones de hace una semana siguen ahora en pie, entramos en un terreno absolutamente desconocido.

Una de las explicaciones más extendidas es es la vulnerabilidad de la economía española, con más de cuatro millones de parados y un déficit público del 11,4%, ya no podía continuar pasando desapercibida por el mercado, sobre todo después de que ayer el Ejecutivo elevara la previsión de déficit para este año al 9,8%.

Los especuladores endurecen sus ataques contra la deuda española

Los especuladores financieros o ‘hedge funds’ han logrado, con la ayuda de algunos bancos, consolidar la rentabilidad del bono español por encima del 4%. Su estrategia sería obtener una ganancia doble: la reportada por la deuda irlandesa y la que les generaría su apuesta bajista por la española.

Un informe de la oficina londinense del Deutsche Bank recomienda a los inversores “comprar deuda pública irlandesa a 10 años y vender los bonos españoles”. Curiosamente, hace un mes, el pasado 18 de diciembre, el hedge fund afincado en Londres, North Asset Management, confirmó a EL BOLETÍN que su estrategia de inversión pasaba principalmente por Irlanda. “Irlanda es el ejemplo de estrategia que tenemos en estos momentos”, dijo George Papamarkakis, portavoz del fondo, a este periódico entonces. Es decir, que un mes después de que los fondos de alto riesgo entrasen en Irlanda, el Deutsche Bank recomienda comprar deuda pública de este país, mientras trata de rebajar el precio de la española, que quizás podría ser el próximo destino de algunos fondos que pretendan obtener una doble ganancia en el proceso: la que ya ha debido de reportar Irlanda y la que podría generar, ahora que ha superado el 4% de rentabilidad, el bono español.

Central Banks Rattle Markets

Tuesday's contrasting moves by two major central banks—Japan zigged while Australia zagged—are just a few of the many jolts that policy makers will inflict on currency markets in the months to come.
For currency traders, predicting these moves and making the right trades to profit from them could make or break their year.

Some of the steps seem obvious. The Reserve Bank of Australia has been ahead of the pack in raising interest rates—making its latest move on Tuesday—which has pushed the Australian dollar higher. Others are proving less predictable. Japan surprised the market on Tuesday by announcing plans to inject more money into its financial system, causing the yen to weaken.

The wrath of the titans

For many of the "anti-capitalist warriors" descending on the G20 summit in London, the excesses of the boom years are epitomised by hedge fund managers. Aggressive, arrogant and seemingly all-powerful, these secretive financiers became known for both for their sporadic attacks on public companies and an opulence that surpassed toffs, bankers and even footballers' wives.

"Forget McDonald's, forget Fred the Shredd [sic] – the rich hedge funders are the real enemies of the people," read one on-line posting last week. "The only thing the government is getting right is banning hedge funds," said another.

Away from the picket lines the views are similar. Hedge funds are the popular culprits, charged with helping to start the financial crisis, exacerbating it through the practice of short-selling and, worse, pocketing millions from the disasters.

In January, four top managers were lambasted by the Treasury select committee, accused of "gambling against the public". John McFall, the committee's chairman, said: "You're snubbing the public; not only that, but you're making shedloads of money."

President Obama has led the heavy charge of leaders, as well as regulators such as the head of the FSA, Lord Turner, and the European Commissioner, Charlie McCreevy, who have vowed to bring change to the high-rolling sector.

High Performance

John Paulson

Paulson Enhanced Partners
Paulson had a chance to learn from the best, working alongside legendary investors like Odyssey Partners' Leon Levy and Bear Stearns' Ace Greenberg early in his career. Something rubbed off. His Paulson Enhanced Partners fund, a leveraged merger-arbitrage vehicle with $2.78 billion in assets, has ridden the surge in merger and acquisition activity to big profits.
Merger-arbitrage firms essentially go long or short the shares of buyers or sellers in a merger deal, depending on whether they believe a deal is going to close at the promised time and price; be renegotiated up or down; attract more bidders; or possibly fall apart. Paulson's fund, ninth in our ranking, is pretty good at it, having posted a cumulative average gain of nearly 38% a year over three years; it was up more than 55% in 2007, through June.