Absolute Investment Advisors
Commentary
Absolute Strategies Fund Portfolio Commentary
In our last quarter commentary we posed a simple question: "Why does the economy need so much stimulus and quantitative easing for so little growth?" Over the last two years or so, we feel that we have identified and explained the structural issues and risks very clearly. But in the second quarter, the equity and credit markets may have done a better job offering investors a true glimpse of the realities facing global markets.
Commentary
Q412 Portfolio Commentary
While much of the fundamental picture has played out as we expected over the past 18-24 months, the financial markets appear to be concerned solely with the existence or non-existence of macro headlines and events. There seems to be a disconnect between market movements and fundamentals which means doing real work based on intellectual honesty and logic puts you at a disadvantage. Chasing momentum and profiting from central bank market manipulation appear to be the current winning strategies.
Commentary
The Absolute Return Letter - First Mover Advantage
Contrary to conventional wisdom, the eurozone crisis has always been a banking crisis. It only morphed into a sovereign crisis because of political incompetence. Given the rather stubborn approach of the German government to its beleaguered eurozone partners, the crisis is rapidly moving towards some sort of crescendo. It is only a question of time before one of the Southern European countries come to realise that they might be better off outside the eurozone, particularly if they are the first mover.
Commentary
Q112 Portfolio Commentary for the Absolute Strategies Fund
It is no secret the structural problems and crises throughout the global economy stem from excess debt. This letter attempts to explain why we think the global economy is in this situation, why the process for creating the problems continues to this day, why financial markets are not out of the woods. We are extremely optimistic about the future investing climate, but only after we get through the final stage of the credit bubble. In our view, the root of the problem stems from the willingness of a broad swath of investors and money managers to bid up asset prices to extreme levels.
Commentary
Q411 Portfolio Commentary
We continue to stress that investors remain patient. Given that we are likely in the 1% of money managers that look beyond the next 30 days, it is inevitable that the markets will move counter to our positioning. This is to be expected and is consistent with the Fund's historical performance.We continue to remain disciplined and receive counsel from the investing bible: Graham and Dodd's Security Analysis. For those few true value investors left, it's worth noting that nowhere is the phrase "margin of safety" defined by quantitative easing, government stimulus, or bank bailouts.
Commentary
Absolute Strategies Fund Q311 Portfolio Commentary
Looking out over the next several weeks and months, we have no idea what to expect or where the markets will go. We feel fairly certain that there will be continued attempts to bailout XYZ country, to recapitalize the European banks, or to engage in money-printing. There will be many that will hold up the "all clear" sign and this may prompt the crowd to speculate short term, resulting in powerful market rallies. In the end, there is no money. Only the true action needed to solve the crises will result in a sustainable recovery: broad debt and asset write-downs. We remain skeptical.
Commentary
Portfolio Commentary Q211
The Fund's overall positioning and exposures have changed very little over the past few months as our managers continue to see almost all asset classes priced to deliver unsatisfactory long term returns. There is no real change in overall thoughts from our previous commentary except to add that many of the issues and risks we have discussed are starting to become more significant and weakening fundamentals are finally becoming more apparent to investors. Ironically, the things that have created short term rallies of late are largely noise and are less positive than they were 3-6 months ago.
Commentary
Q1 2011 Portfolio Commentary
In a nutshell, the Fed-induced "risk trade" is once again at a crossroads with commodity/oil prices and the real economy. You know the endgame is near when the Bernanke/Yellen team dismiss the "bad stuff," much like they did with sub-prime. Investors should be prepared for a possible reversal of some of the above trends as they relate to the US dollar, European Union difficulties, and the potential ending of the credit boom across Asia. Given the high sensitivities and correlations across most global asset classes, diversification can be incredibly difficult.
Commentary
Portfolio Commentary : Fourth Quarter, 2010
For our 4Q commentary we have decided to alter our approach and provide direct insight into our managers? thoughts by pro?viding portions of their commentaries in a series of indepen?dent ?short stories.? Collectively they represent many of the thoughts that we have utilized for writing our quarterly com?mentaries, but we feel the current environment offers a unique time to hear things ?directly from the horse?s mouth.?
Commentary
Q310 Portfolio Commentary
Asset prices appear to be solely supported by the potential effects of QE2. Global credit markets, where liquidity could be highly strained given the large flows into bond funds and the hazardous reach for yield, are particularly disconcerting. While the Fed could successfully create asset inflation in the short term, the asymmetry of these policy efforts is to the downside, and patience should be better rewarded. Additionally, a dollar rally is quite possible given current sentiment, and could create much volatility in both global equity and credit markets.
Commentary
Absolute Strategies Fund Q210 Portfolio Commentary
If deleveraging trends persist and embed themselves into the economy, markets will need to adjust to the reality that the potential for deflation is a real risk. Labor, real estate, and state and local governments are structurally challenged as a result of weak consumer activity and limited credit availability. Heightened volatility in the credit markets is likely given the re-pricing of troubled sovereign debt and the potential for those concerns to catch up with the 'Amend, Extend & Pretend' refinancing of corporate debt.
Commentary
Q110 Portfolio Commentary
The potential for systemic risk continues to be very high, and Absolute Investment Advisors believes markets are only pricing in the optimistic outcomes and not the bad ones. This is the opposite of a year ago. The past few market cycles have been highly compressed as investors have appeared to recognize risks only after they occur. As such, the discounting mechanism of the markets has also become compressed as all assets have gone through stages of an escalator up and then an elevator back down (with very few floors to get off).