Global Allocation Fund commentary for the month of July 2017.
- These Behavioral Biases Are Driving Investor Decisions
- Q2/H1 Hedge Fund Letters – Letters, Conferences, Calls, And More
- This Chart Explains Why Germany’s Economic Stability Depends On The US
In the month of July, time has been our ally. In fact, during this month Global Allocation became the best performing fund in 5 year (Morningstar). Vain consolation.
The Talas Turkey Value Fund returned 9.5% net for the first quarter on a concentrated portfolio in which 93% of its capital is invested in 14 holdings. The MSCI Turkey Index returned 13.1% for the first quarter, while the MSCI All-Country ex-USA was down 5.4%. Background of the Talas Turkey Value Fund Since its inception Read More
Nevertheless, our gold and silver positions did badly during the month. And the dollar movement did not favor us either. It seems that investors prefer cryptocurrencies. There is a bubble in the making, it is no grave by the moment, but will be. Let´s give time to time and we will see.
About bubbles, this month Alan Greenspan (great expert in bubbles…) has warned that the big one is in bonds, being especially significant in government bonds, and when it blows up it won´t be good for anyone. He says though, that stock markets are cheap from a relative value perspective, even if S&P 500 is making new highs by the day. As you know, we plenty agree. Since some time ago we have kept short positions, during different periods, in 30-year German bonds.
This month we changed our German shorts into Italian bonds, which incorporate a “risk spread”. If things start to get ugly out there, German bonds will probably act as a refuge. In any case, after the last press conference by Mr. Draghi, the new bubble expert, it seems that he is going to keep printing as if there was no tomorrow. This has provoked bonds not only to stabilize but to end the month with gains, especially lower risk ones.
Spreads among both of Eurostoxx 50 companies have reached multi year lows, Spanish bond spread to Germany went lower than 100bp, and in general, the higher the risk, the better performance. This is the reason why we have increased our exposure to equities, which is even cheaper in relative terms. This way, we have closed our shorts in bonds while we increased our exposure to equities. We have finished the month with one of the highest exposures to equities that we have ever had.
This time is different, and some are calling this environment “the everything bubble”, something like the Lego version “everything is awesome”. By the way, real estate looks good as well. This is what negative rates have. Anything could have infinite valuations.
See the full PDF below.