Alexander Altmann

=> The U.S. labor market report produced a knee-jerk reaction among major FX – but MXN, COP, BRL, and ZAR are bucking the trend => MXN clearly likes the idea of a stronger growth in the U.S. Further, President Sheinbaum continues to send orthodox policy signals (including the post-election fiscal adjustment), and there is now a possibility that parts of controversial judicial reform might be revised => BRL/COP/ZAR’s outperformance is even more interesting – Domestic factors still getting noticed? (chart’s source - Bloomberg LP)

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A couple of (hopefully useful) thoughts from my presentation at QuantMinds on the potential of structural corporate liabilities pricing framework to bridge some gaps in factor investing. #QuantMinds #StructuralFactorInvesting https://lnkd.in/esK4GBWM

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What does an equity analyst actually do? . Hard to believe people are interested, but the last post got a huge response. . . Today we talked to the Investor Relations team of a company we own, MKS Instruments (Full Disclaimer: This is not investment advice and please note that we have owned MKSI for over a year. I'm making no statements about whether it is discounted or a good investment or not.). . . In the thirty minutes we spoke, below are some of the questions we asked: . . Where is the sell-side getting their product data on you? (We would love to get this data direct) . . Why is your photonics business out-performing your vacuum chamber power supply business? (They are both semi-conductor fabrication related) . . and more . . In essence, we ask questions trying to disconfirm our thesis. It's like playing Clue, where you actually want someone to prove you wrong. This way your understanding can move closer to the truth. . . Please note that we try to already know a decent amount about the company before we talk to them. Management team (and even IR team) time is precious and tough to come by. . . The wonderful thing about being an analyst is taking this qualitative data and figuring out how you want it influence your analysis or valuation of the company your looking at. (Ultimately, the task is probably impossible, but it is fun using your imagination. . . I still don't see how people get value from this, but should I keep posting these? If so, give it a like and follow James Falbe, CFA

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Türkiye’s impressive but uneven macroeconomic adjustment - Progress in some areas, challenges in others: => The country’s current account posted a larger than expected surplus in August signaling that earlier improvements are not one-offs => Türkiye’s disinflation progress, however, has been more bumpy - the latest inflation print overshot the consensus and 12-month inflation expectations were largely unchanged at 27.44% => Fast disinflation is Priority #1 for Turkish authorities, and a slower progress can easily delay rate cuts until 2025

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Japanese equities’ performance in 2023 was the best since the Abenomics-driven rally a decade ago, as the country enjoyed a reprieve from long-suffering deflationary pressure. However, it was a challenging year for Japanese active fund managers, with 78% of Japanese domestic equity funds underperforming the broad-based S&P Japan 500 Index over the year. Please see my recent blog on this topic. S&P Global #Indices #SPIVA

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"Conditional Betas": "Changing firm attributes and economic conditions lead to time-variation in betas... We compare several econometric or machine-learning methods...The 'individual LASSO'' method performs [best]." https://lnkd.in/erGHdbbM

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This week we focus on the difficulty of individual stock picking. Bessembinder et al. (2023) analyzes over 64,000 global common stocks from January 1990 to December 2020 to evaluate long-term shareholder outcomes. They find that 55.2% of U.S. stocks and 57.4% of non-U.S. stocks, underperform one month U.S. Treasury bills over past 30 years. Only 2.4% of firms account for all the $US 75.7 trillion in net global stock market wealth creation from 1990 to December 2020. #markets #activemanagement #SPX Al Cumplido, CFA

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JPMaQS documentation: "There is strong evidence of a positive predictive relation between relative labor market dynamics, defined as relative improvement in the base currency area versus the benchmark area (USD or EUR) and subsequent FX forward returns."  https://lnkd.in/e-stsCBB

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Türkiye’s pivot musings: => Türkiye’s manufacturing PMI dropped to the post-pandemic low in September - yet another sign (alongside positive net reserves, improving external balances, lower gold imports and FX-protected deposits) that the policy U-turn is working as intended. => But is it enough for a monetary policy pivot and a rate cut already this year? A lot will depend on the central bank’s ability to meet its year-end inflation target of 38%. Quick calculations show that for this to happen, monthly CPI should average 1.15% or less in September/December. The September print (on Thursday) will show whether this is feasible.

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"Dynamic Asset Allocation with Asset-Specific Regime Forecasts": "Our framework leverages both unsupervised and supervised learning to generate tailored regime forecasts for individual assets... Results consistently show outperformance across various portfolio models." https://lnkd.in/d9cMd428

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Paper: "Systematic tail risk [of assets]... proxied by a generalized tail dependence coefficient... is compensated with an economically sizeable and statistically significant premium." https://lnkd.in/e4CKna3Y

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Is the UK facing another bond market implosion? Yields on 30Y Gilts have been rising steadily since September and recently edged *higher* than during Truss' ill-fated 2022 fiscal event, while the pound touched a new 12 month low. I've seen a lot of commentary suggesting this is somehow reflective of the unique set of challenges the UK is facing. I guess you can read the data different ways, but I would argue quite vigorously *it isn't*. At our Macro Breakfast this morning, I made the following points: Slide 1) Most of the move in Gilt yields has simply followed similar moves in global bond markets; the rise in the 30Y Gilt yield has tracked the move in the 30Y UST almost bp by bp since September - the US/UK spread has remained almost completely flat. Contrast this with Truss, when the rate differential blew up by almost 200bps in what was very clearly an idiosyncratic move. Slide 2) For the first 10 months of 2024, GBPUSD followed moves in the US/UK rate differential fairly closely. The two then uncouple from the time of the US election onward. I don't think this is a coincidence; the decline in GBPUSD probably has more to do with Trump's tariffs than anything happening in the UK. The fact that sterling has actually *appreciated* against the euro while losing value against the dollar further suggests this is a greenback story more than a sterling story. The rise in yields still has real consequences, the most obvious being that the chancellor's £10bn fiscal headroom is probably all but gone, which could force some hard policy choices come her March budget. But it is not the damning verdict over UK assets some pundits have made it out to be, and I'm not seeing signs of implosion yet. --- Complete aside, but would you rather hold 30Y USTs at 4.9% or 30Y Gilts at 5.3%? I might be in the minority, but given that the UK... ...has traded at a yield discount to the US for most of the last decade... ...has similar or better inflation outlook... ...has lagged US GDP post-covid... ...faces slower long-term growth potential... ...arguably has the more attractive fiscal profile... ...the relative pricing doesn't make a ton of sense to me.

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Genuine question for fellow QT nerds / financial plumbing experts. The BoE MPC voted to keep the pace of Quantitative Tightening unchanged at £100bn for the next 12 months, c. 90% of which will come through a passive run-off of existing holdings, and c. 10% from active sales. Bank reserves are currently upwards of £700bn, well above the BoE’s own estimate of even the £490bn upper bound of the Preferred Minimum Range of Reserves (which should delineate between what central bankers have started calling “abundant” and “ample” reserves). In other words, by the Bank’s own reckoning, it should have lots of room to shrink its balance sheet before bank reserves start to become scarce. Fine. However, this is happening against the backdrop of exponentially growth in banks drawing on the Bank’s Short Term Repo (STR) facility – not something you would expect in an environment where every bank has “abundant” reserves. If you were sitting on the MPC, would this give you pause? Are there any risks associated with moving out of "abundant" territory too quickly, or are gilt-backed reserves just going to seamlessly get replaced with repo-backed reserves?

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Big thanks to Hamlin Lovell, Rod Sparks and The Hedge Fund Journal for the valuable award and insightful interview. #absolutereturns#hedgefunds#alternativeucits#markets#investing#Finance#WealthManagemen#FinancialMarkets#FundManagement#AssetAllocation#RiskManagement#AlphaGeneration#PortfolioManagement#derivatives#familyoffice#portfolioconstruction#diversification#funddistribution#optionstrading#liquidalternative#award#ManagedAccount

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https://lnkd.in/eDg_YmhM The FX strategy team at JPMAM have held a long-term view that a global slowdown would not necessarily lead to broad US dollar strength, largely due to a huge shift in global capital flows since the GFC. We update our thinking below.

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Adam Berger and Wellington Management, thank you for this analysis on how understanding market conditions is important to understanding long-term asset class performance - hedge funds in this case.   We at Mill Hill Capital, LLC applaud your conclusion: "If our longer-term macro view is correct, then we may not see a repeat of the 2010s “Goldilocks” period any time soon. Investors could find the market backdrop more challenging in some respects, but hedge fund managers may find more ways to generate alpha and their clients should benefit. To prepare for this potential shift, investors should review the size and composition of their hedge fund portfolios. Hedge fund exposure should be large enough to make a meaningful contribution to their objectives — and to be able to dampen total portfolio volatility in turbulent markets."

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Well, copper was telling us something, just not exactly what I thought. With the benefit of hindsight, the last post should have taken the obvious route that the extraordinary cheapness of copper (by our metrics) was an early signal of economic concerns more generally. In the days that followed every risk market has tanked and bonds have rallied. We could have looked like heroes. The leading duck had set off in a new course and the rest followed. #markets #economy #bankingindustry https://lnkd.in/eqfxQG45

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Josh Silva and I are on Odd Lots and the podcast has just dropped. If you are not familiar with Bloomberg's Odd Lots podcast and newsletter, Tracy Alloway and Joe Weisenthal run a fantastic markets podcast (and newsletter) which delves into a range of macro and micro topics about the markets and the economy. Needless to say, it was an honor, and a lot of fun, to be on with them. Our topic is the dispersion trade and stock correlation: why stock correlations are at record lows, why this this niche vol trading strategy has become so popular, and what market risks may be lurking around the corner. We also delve into the secular shifts in the cross asset volatility picture...see link below to access the podcast. Clients: FYI I will be publishing a detailed note on this topic which gets into these issues in some detail later this week. If you are interested in becoming a client, please reach out to me on Bloomberg or at [email protected]

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