Monday, September 12, 2016 3:14:55 AM
Australian banks sending US hedge funds broke
Michael Pascoe May 26 2016
US hedge funds are not having the best of years. Profits are hard to find, they're underperforming and the punters are losing patience, withdrawing US$15 billion ($20.8 billion) in the March quarter. They're expected to withdraw more this quarter.
To try to stem that tide, the American hedgies have increased their bet against Australia in general, and our banks in particular. The schadenfreude would be entirely understandable if that bet sent the hedge funds broke.
VIDEO - 01:54
Australian banks and Trump
Could our banks send US hedge funds broke? Michael Pascoe comments.
The vast majority of the funds missed the Big Short of book and movie fame. Quite a few of them think they can make up for that by shorting Australia's banks now. After all, housing prices have indeed soared here, just like they did in the US before the GFC, right?
Except the Australian housing mortgage market and banks are actually rather different. That's something the hedge funds don't seem to understand.
The Big Short: Most hedge funds missed the US home loan bubble that triggered the GFC. Some
think they can make up for that now by shorting Australia's banks. Photo: Jaap Buitendijk
According to various reports, the funds have boosted their short positions on Australian banks to $9 billion. That's a big bet when their backers are taking money out instead of putting it in.
The March quarter withdrawals were the biggest since the GFC. They still have more than US$2.8 trillion under management, but the outflow trend is unnerving and many of them need to make good money soon.
Earlier this week, Capital Economics' Paul Dales received plenty of media coverage for a research report finding that Australian housing prices could correct by 10 per cent .. http://www.smh.com.au/business/the-economy/house-prices-to-fall-by-10-per-cent-say-capital-20160523-gp1hxl .. in a few years – but there's actually nothing in that report of comfort to the hedge funds.
A 10 per cent correction is not unreasonable for some of our housing markets, though I think some of Capital Economics' reasoning is flawed .. http://www.smh.com.au/business/property/the-good-%20old-housing-%20crash-%20%20publicity-machine-%2020160523-gp2548.html .. in its reading of likely RBA action and the interest payment burden.
But even with that caveat, the main thrust of the research is that Australia actually is not like the US, that our banks can easily handle the forecast correction, that our market is indeed different.
A local stockbroker tells of a New York colleague who believes many US hedge funds managers, despite their massive pay packets, think the Australian mortgage market is just the same as America's before the GFC. They're used to the "jingle mail" of people walking away from mortgages, the massive sub-prime element, the cascading craziness of the American securitisation market.
They don't understand the nature of Australia's secured home loans and the quality of our supervision, let alone the impact of negative gearing and the tendency of Australians to pay down mortgages relatively quickly as well as the cushion provided by popular offset accounts.
Thus they've been betting big on Australian banks crashing for quite a while now, with little to show for it. From time to time, some of them seem happy to talk their own book, trying to jawbone the collapse they're betting on. It's an easy way to get a headline in the local press and may have become an echo chamber for fellow hedge funds – but it hasn't worked.
Capital Economics isn't alone if finding our banks healthy. UBS equity strategist David Cassidy's latest Australian equity portfolio retains overweight banks .. http://tinyurl.com/hjpd4q3 . "We see the sell-off this year (on a mix of global banking system concerns and local housing market concerns) as overdone," he wrote. "We believe valuations for the sector are attractive despite constrained EPS growth currently (due primarily to equity issuance). The bad debt cycle is still looking very benign."
By comparison, the US hedge industry just gets shakier. A Financial Times report .. http://www.ft.com/intl/cms/s/0/6f9cadb6-1b32-11e6-a7bc-e846770ec15.html#axzz49fgXKdQw .. on how hedge funds managers increasingly prefer non-withdrawable capital offers the idea of shorting the shorters:
"Paying attention to how much capital is permanent or manager-owned is not enough. A hedge fund may be relatively less at risk from redemptions by its own investors, but is it exposed to redemptions from investors in other hedge funds? If the industry moves into a period of capital outflows, the most popular hedge fund trades will have a headwind against them. Checking the correlations between a hedge fund's portfolio and the industry as a whole is, rightly, moving up investors' agenda.
"As an aside, there may be ways for retail investors to exploit any period of outflows from the hedge fund industry: Goldman Sachs' planned exchange traded fund tracking the 50 most popular hedge fund stocks might be better shorted than purchased.
"There was no denying the downshift of mood at [hedge funds conference] SALT this year. Underperformance makes hedge fund managers shy, so there were noticeably fewer big-name managers in attendance. Meanwhile, investors such as Roslyn Zhang of China Investment Corp were outspoken in their criticisms of the industry's shallow research efforts, herd-like behaviour and weak results."
There will be no tears shed by Australian bankers or bank shareholders should the combination of shallow research, shrinking funds and bad bets send the hedge funds under.
http://www.smh.com.au/business/banking-and-finance/australian-banks-sending-us-hedge-funds-broke-20160526-gp4a91.html
Over regulation in the financial sector is not a problem in Australia, and it certainly never should be considered as such in the USA.
No doubt a President Trump would be looking to changes to enrich his personal financial situation, and at the expense of many of those he claims to care for.
---
Bulging super funds lure US asset managers to Australia
US asset managers are being lured to Australia by the bulging pot of retirement savings.
Picture: Christian Gilles.
Vera Sprothen
Dow Jones 9:11AM June 10, 2016
http://www.theaustralian.com.au/business/financial-services/bulging-super-funds-lure-us-asset-managers-to-australia/news-story/5a1836fd4884049a0bf2057a0a7a5a9a
For years off-and-on i've mentioned here seeing little ads on many internet sites predicting a U.S.A.-like crash in the Australian housing market, and
always thought no way .. for a number of reasons .. one being Australia has a better regulated and enforced system so a more secure financial sector.
In a search for a bit more here i bumped into this one
Towers of Secrecy
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=110825010
again .. this time the thought arises .. could there be in it another Trump-Russian connection?
Michael Pascoe May 26 2016
US hedge funds are not having the best of years. Profits are hard to find, they're underperforming and the punters are losing patience, withdrawing US$15 billion ($20.8 billion) in the March quarter. They're expected to withdraw more this quarter.
To try to stem that tide, the American hedgies have increased their bet against Australia in general, and our banks in particular. The schadenfreude would be entirely understandable if that bet sent the hedge funds broke.
VIDEO - 01:54
Australian banks and Trump
Could our banks send US hedge funds broke? Michael Pascoe comments.
The vast majority of the funds missed the Big Short of book and movie fame. Quite a few of them think they can make up for that by shorting Australia's banks now. After all, housing prices have indeed soared here, just like they did in the US before the GFC, right?
Except the Australian housing mortgage market and banks are actually rather different. That's something the hedge funds don't seem to understand.
The Big Short: Most hedge funds missed the US home loan bubble that triggered the GFC. Some
think they can make up for that now by shorting Australia's banks. Photo: Jaap Buitendijk
According to various reports, the funds have boosted their short positions on Australian banks to $9 billion. That's a big bet when their backers are taking money out instead of putting it in.
The March quarter withdrawals were the biggest since the GFC. They still have more than US$2.8 trillion under management, but the outflow trend is unnerving and many of them need to make good money soon.
Earlier this week, Capital Economics' Paul Dales received plenty of media coverage for a research report finding that Australian housing prices could correct by 10 per cent .. http://www.smh.com.au/business/the-economy/house-prices-to-fall-by-10-per-cent-say-capital-20160523-gp1hxl .. in a few years – but there's actually nothing in that report of comfort to the hedge funds.
A 10 per cent correction is not unreasonable for some of our housing markets, though I think some of Capital Economics' reasoning is flawed .. http://www.smh.com.au/business/property/the-good-%20old-housing-%20crash-%20%20publicity-machine-%2020160523-gp2548.html .. in its reading of likely RBA action and the interest payment burden.
But even with that caveat, the main thrust of the research is that Australia actually is not like the US, that our banks can easily handle the forecast correction, that our market is indeed different.
A local stockbroker tells of a New York colleague who believes many US hedge funds managers, despite their massive pay packets, think the Australian mortgage market is just the same as America's before the GFC. They're used to the "jingle mail" of people walking away from mortgages, the massive sub-prime element, the cascading craziness of the American securitisation market.
They don't understand the nature of Australia's secured home loans and the quality of our supervision, let alone the impact of negative gearing and the tendency of Australians to pay down mortgages relatively quickly as well as the cushion provided by popular offset accounts.
Thus they've been betting big on Australian banks crashing for quite a while now, with little to show for it. From time to time, some of them seem happy to talk their own book, trying to jawbone the collapse they're betting on. It's an easy way to get a headline in the local press and may have become an echo chamber for fellow hedge funds – but it hasn't worked.
Capital Economics isn't alone if finding our banks healthy. UBS equity strategist David Cassidy's latest Australian equity portfolio retains overweight banks .. http://tinyurl.com/hjpd4q3 . "We see the sell-off this year (on a mix of global banking system concerns and local housing market concerns) as overdone," he wrote. "We believe valuations for the sector are attractive despite constrained EPS growth currently (due primarily to equity issuance). The bad debt cycle is still looking very benign."
By comparison, the US hedge industry just gets shakier. A Financial Times report .. http://www.ft.com/intl/cms/s/0/6f9cadb6-1b32-11e6-a7bc-e846770ec15.html#axzz49fgXKdQw .. on how hedge funds managers increasingly prefer non-withdrawable capital offers the idea of shorting the shorters:
"Paying attention to how much capital is permanent or manager-owned is not enough. A hedge fund may be relatively less at risk from redemptions by its own investors, but is it exposed to redemptions from investors in other hedge funds? If the industry moves into a period of capital outflows, the most popular hedge fund trades will have a headwind against them. Checking the correlations between a hedge fund's portfolio and the industry as a whole is, rightly, moving up investors' agenda.
"As an aside, there may be ways for retail investors to exploit any period of outflows from the hedge fund industry: Goldman Sachs' planned exchange traded fund tracking the 50 most popular hedge fund stocks might be better shorted than purchased.
"There was no denying the downshift of mood at [hedge funds conference] SALT this year. Underperformance makes hedge fund managers shy, so there were noticeably fewer big-name managers in attendance. Meanwhile, investors such as Roslyn Zhang of China Investment Corp were outspoken in their criticisms of the industry's shallow research efforts, herd-like behaviour and weak results."
There will be no tears shed by Australian bankers or bank shareholders should the combination of shallow research, shrinking funds and bad bets send the hedge funds under.
http://www.smh.com.au/business/banking-and-finance/australian-banks-sending-us-hedge-funds-broke-20160526-gp4a91.html
Over regulation in the financial sector is not a problem in Australia, and it certainly never should be considered as such in the USA.
No doubt a President Trump would be looking to changes to enrich his personal financial situation, and at the expense of many of those he claims to care for.
---
Bulging super funds lure US asset managers to Australia
US asset managers are being lured to Australia by the bulging pot of retirement savings.
Picture: Christian Gilles.
Vera Sprothen
Dow Jones 9:11AM June 10, 2016
http://www.theaustralian.com.au/business/financial-services/bulging-super-funds-lure-us-asset-managers-to-australia/news-story/5a1836fd4884049a0bf2057a0a7a5a9a
For years off-and-on i've mentioned here seeing little ads on many internet sites predicting a U.S.A.-like crash in the Australian housing market, and
always thought no way .. for a number of reasons .. one being Australia has a better regulated and enforced system so a more secure financial sector.
In a search for a bit more here i bumped into this one
Towers of Secrecy
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=110825010
again .. this time the thought arises .. could there be in it another Trump-Russian connection?
It was Plato who said, “He, O men, is the wisest, who like Socrates, knows that his wisdom is in truth worth nothing”
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