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alexandergir


Total Posts: 25
Joined: Dec 2007
 
Posted: 2015-03-20 03:53
Google search appears short on Global Macro Frameworks. Here is one:
http://www.dynamikacapital.com/public/pdfs/DynamikaCommentary20150311.pdf
Does anybody have one to share?

Global Carry, Yen and Dollar are irrefragable drivers of Global Macro. As we explain
equities and bonds are just derivatives of these factors.

SPX = long global carry + short yen + short dollar
US 10y Note = long global carry + long yen

alexandergir


Total Posts: 25
Joined: Dec 2007
 
Posted: 2015-03-25 18:15
Say last two days US equties sell of is purely driven by weekness in global carry and strength in yen factor which actually compensate each other in US Bonds so not much action there.

That is very different from the first three weeks of March when selloff and recovery in US equities was just a function of the dollar factor.

alexandergir


Total Posts: 25
Joined: Dec 2007
 
Posted: 2015-03-27 00:15
Very Timely Seminal Research From BIS!

Global Asset Allocation Shifts
A couple of days ago BIS (Bank of International Settlements) released a seminal research piece “Global Asset Allocation Shifts” in which authors explain that weekly institutional and retail portfolio reallocations (not just fund flows) of U.S. investors are 90% driven by two factors easily identified as Yen (Risk On/Off) and Dollar factors hence reaffirming our Global Macro Framework. They also explore systematic predictability of these factors in great details.

http://www.dynamikacapital.com/public/pdfs/DynamikaCommentary20150326.pdf
https://www.bis.org/publ/work497.htm

alexandergir


Total Posts: 25
Joined: Dec 2007
 
Posted: 2015-04-14 04:42
Seriously?
Global Carry keeps pushing through the roof. For a long term investor or risk parity portfolio fortune maker generating 1.5 sharpe using such a simple portfolio (10y+spx) which was not even touched or rebalanced for over 6y now...

Meanwhile Recession/credit blowout headline stories are breaking the news on ZH:
http://www.zerohedge.com/news/2015-04-13/unseen-recession-shocker-crushing-economy-revealed-credit-rejections-soar-most-ever

I mean it will really end in tears for risk parity, carry holders and whatever is close to it like 60/40 which is everywhere... the disconect is getting mind blowing.

Apologies for the rant.

tbretagn


Total Posts: 260
Joined: Oct 2004
 
Posted: 2015-05-06 12:16
How's risk parity doing alex?

Et meme si ce n'est pas vrai, il faut croire en l'histoire ancienne

NeroTulip


Total Posts: 1013
Joined: May 2004
 
Posted: 2015-05-06 13:29
@tbretagn: sounds harsh.

To alex's credit, he stated that a simple risk parity portfolio has a 5y Sharpe of ~1.5, which is more of a fact than an opinion, and added "it will end in tears", which is not exactly an endorsement of the strategy.

I tend to agree that we could see an unwind of the last 6 years' yield grab, which means that anything with a yield could take a hit: equities, bonds, credit, carry, etc... could all go out of the window at the same time.

@alex: happy to hear more thoughts

Inflatable trader

tbretagn


Total Posts: 260
Joined: Oct 2004
 
Posted: 2015-05-06 14:38
Sorry didn't mean to sound harsh, but agreed it does. Actually am very curious about it and I very much like Alex's reports.
Think part of the problem is a lack of liquidity and fast money staying on the sideline. Am interested in the risk parity view because if they start to move then things will get ugly (for example credit spreads haven't really moved lately - for some obvious reasons but nonetheless).

So alex, updates are welcome :)

Et meme si ce n'est pas vrai, il faut croire en l'histoire ancienne

alexandergir


Total Posts: 25
Joined: Dec 2007
 
Posted: 2015-05-08 07:06
updates:
lots of tears over last two weeks which were really all about "global carry" unwind:
http://www.dynamikacapital.com/public/pdfs/DynamikaCommentary20150429.pdf
as i put it two weeks ago if Bunds go so will global carry
http://www.dynamikacapital.com/public/pdfs/DynamikaCommentary20150421.pdf
and it did, largest correction since Taper Tantrum actually, and it is behind most of the liquid assets reversals which created lots of pain for momentum folks too. Desperate recovery now:


misc2014


Total Posts: 30
Joined: Aug 2014
 
Posted: 2015-05-09 10:14
A really interesting thread for me... I invest on a 5 year horizon optimised for monthly yield, long only, indexes only: corp bond (GBP,EUR), EM bond (USD,LOCAL), gov bond (GBP), high div equity (e.g. IAPD.L), REIT (USD/GBP). Skewed heavily toward bonds, targeting a 4.5% annual return. Have about 35% of the portfolio in cash, waiting for a catastrophe.

Pretty much everything has gone south at the same time... From a retail investors perspective, how would you suggest positioning over the next 2 years?

tbretagn


Total Posts: 260
Joined: Oct 2004
 
Posted: 2015-05-09 16:12
Yes I believe risk parity worked as a pure QE trade. Though the ECB QE could continue the trend, it will be much much harder. Personally I think we are in the same conundrum as early 2009, where market was under heavy pressure from over leniency and exaggerated positions.

@misc2014: imo credit is very dangerous given lack of warehousing from banks. Govies are not entering a bear market, but sharpe is too low. I'd stick with equities, after the collapse we could see coming in the next few months (or invest in european equities if it makes sense).

Et meme si ce n'est pas vrai, il faut croire en l'histoire ancienne

misc2014


Total Posts: 30
Joined: Aug 2014
 
Posted: 2015-05-09 18:41
Thanks for this @tbretagn, I had similar thoughts hence the 35% reserve. I'll wait for the crash then enter a world equity index in 2 or 3 tranches to try and reap the recovery. Both the corp and the EM stuff is mostly asset backed (SLXX, IEBC, SEML, SEMB), so hopefully not too dangerous over the longer term.

alexandergir


Total Posts: 25
Joined: Dec 2007
 
Posted: 2015-05-18 23:45
more updates:
Just to recap on major asset driving factors:
Global Carry has obviously stabilized for now (chart below) while a couple of interesting things are ongoing.

First, risk on/off defined as rotation between bonds & equities is kind of fishing risk on bottom at the moment. Below is a simple proxy in terms of futures (short spx e-mini and long 5y and 10y notes futures). Maybe good time to start getting a bit of it.

Second, US yield curve steepening has gone parabolic. It has been in slow motion since the beginning of the year and moved front of the curve down which does not make it look neither healthy nor overly optimistic on short term rate hikes. What makes it look even more troublesome is that long term US bonds sell off is driving flows into Japanese assets (Yen and Nikkei) and is the reason for their solid performance which makes it appear as carry deleveraging to me. Below is a factor responsible for it, its move up corresponds to US yield curve getting steeper and you see it has been going on since 1-Jan-2015 basically.

Cheers

alexandergir


Total Posts: 25
Joined: Dec 2007
 
Posted: 2015-05-27 17:15
Wanted to post an update, but what the heck, why won't we do it on twitter.
Starting today: volatility dynamics, assets dynamics & economy dynamics updates are here https://twitter.com/dynamikacapital

Jurassic


Total Posts: 114
Joined: Mar 2018
 
Posted: 2018-05-12 12:37
Does anyone know where I can find this pdf , http://www.dynamikacapital.com/public/pdfs/DynamikaCommentary20150311.pdf

The link is broken now

HankScorpio


Total Posts: 477
Joined: Mar 2007
 
Posted: 2018-05-13 03:37
Have you heard of the web archive?

https://web.archive.org/web/20150513084741/http://www.dynamikacapital.com/public/pdfs/DynamikaCommentary20150311.pdf
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