Tag: news

The following chart, from the Balyasny Asset Management Q3 letter to investors, show just that: the magic of hedge fund leverage in the New Normal.

Specifically, it shows that while BAM’s AUM from 2010 until Q3 2013 has increased only modestly (light blue), it is the dark blue bar portion that shows just how much “purchasing power”, i.e., allocation, has been deployed by the fund, thanks to the good graces of its Prime Brokers, who have allowed it expand its leverage from 100% to nearly 500%! Compare this to the peak leverage in the old normal which was roughly half: yes, that was at a time when the so-called credit bubble exploded. It has now doubled.

From BAM:

During our soft-close period over the last two years, we have doubled the size of our allocations and our balance sheet while keeping AUM roughly the same. Our plan is to accept only enough new capital to allow us to keep our assets / notional dollars allocated ratio at 1 to 5.

 

We find that portfolio managers on average utilize about 70-80% of their maximum allocations – so $1 of assets to $5 in notional allocated dollars typically results in our target gross leverage of 3.5-4x. We will be very disciplined with this so please let us know as early as possible if you are interested in increasing your allocation next year.

Of course, when one is levered nearly 5x, being “very disciplined” is usually a good idea.

But who would be on the hook should things turn south, and the massive leverage blows up in the face of Balyasny and its LPs? Not Balyasny of course, but the Prime Brokers who provided the fund with 5x leverage. Prime Brokers who just happen to be the same TBTF banks that were bailed out last time around, and which will have to be bailed out once again as soon as the Bernanke levitation finally ends.

But most importantly, the chart shows quite clearly that without any new equity injections in the market, the one and only source of incremental “capital” injected into risk assets is, you guessed it, debt.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/bRExCAokePU/story01.htm Tyler Durden

The following chart, from the Balyasny Asset Management Q3 letter to investors, show just that: the magic of hedge fund leverage in the New Normal.

Specifically, it shows that while BAM’s AUM from 2010 until Q3 2013 has increased only modestly (light blue), it is the dark blue bar portion that shows just how much “purchasing power”, i.e., allocation, has been deployed by the fund, thanks to the good graces of its Prime Brokers, who have allowed it expand its leverage from 100% to nearly 500%! Compare this to the peak leverage in the old normal which was roughly half: yes, that was at a time when the so-called credit bubble exploded. It has now doubled.

From BAM:

During our soft-close period over the last two years, we have doubled the size of our allocations and our balance sheet while keeping AUM roughly the same. Our plan is to accept only enough new capital to allow us to keep our assets / notional dollars allocated ratio at 1 to 5.

 

We find that portfolio managers on average utilize about 70-80% of their maximum allocations – so $1 of assets to $5 in notional allocated dollars typically results in our target gross leverage of 3.5-4x. We will be very disciplined with this so please let us know as early as possible if you are interested in increasing your allocation next year.

Of course, when one is levered nearly 5x, being “very disciplined” is usually a good idea.

But who would be on the hook should things turn south, and the massive leverage blows up in the face of Balyasny and its LPs? Not Balyasny of course, but the Prime Brokers who provided the fund with 5x leverage. Prime Brokers who just happen to be the same TBTF banks that were bailed out last time around, and which will have to be bailed out once again as soon as the Bernanke levitation finally ends.

But most importantly, the chart shows quite clearly that without any new equity injections in the market, the one and only source of incremental “capital” injected into risk assets is, you guessed it, debt.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/bRExCAokePU/story01.htm Tyler Durden

Monty Pelerin’s World blog points out five provocative questions that Ben Hunt has raised. Many will answer “yes” to the five questions – and that has profound implications on what kind of country the US will become for the next generation…

 

1. Has the academic and bureaucratic capture of US monetary policy been duplicated in other policy areas, such as national security and healthcare?

 

2. Is there a common academic and bureaucratic response across these policy areas to the economic and political duress of the past 10 years, such that emergency policy actions against immediate threats have been transformed into permanent insurance programs against future and potential threats?

 

3. Is this the common thread woven through the three most important and controversial policies of our day: QE, Obamacare, and NSA eavesdropping?

 

4. Are there useful lessons to be drawn from the last time we went through such a wholesale redefinition of the *meaning* of government policy, back in the 1930’s?

 

5. What are the structural consequences for markets and investing that stem from this redefinition?

 

How many “yes”‘s do you see?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/t3bsH0gZZsw/story01.htm Tyler Durden

Monty Pelerin’s World blog points out five provocative questions that Ben Hunt has raised. Many will answer “yes” to the five questions – and that has profound implications on what kind of country the US will become for the next generation…

 

1. Has the academic and bureaucratic capture of US monetary policy been duplicated in other policy areas, such as national security and healthcare?

 

2. Is there a common academic and bureaucratic response across these policy areas to the economic and political duress of the past 10 years, such that emergency policy actions against immediate threats have been transformed into permanent insurance programs against future and potential threats?

 

3. Is this the common thread woven through the three most important and controversial policies of our day: QE, Obamacare, and NSA eavesdropping?

 

4. Are there useful lessons to be drawn from the last time we went through such a wholesale redefinition of the *meaning* of government policy, back in the 1930’s?

 

5. What are the structural consequences for markets and investing that stem from this redefinition?

 

How many “yes”‘s do you see?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/t3bsH0gZZsw/story01.htm Tyler Durden

In case the world needed any additional proof that the latest housing bubble (not our words, Fitch’s) was on its last legs, it came earlier today from Credit Suisse’ Dan Oppenheim who in his monthly survey of real estate agents observed that October was “another weak month” for traffic, with “pricing power fading as sluggish demand persists.” This naturally focuses on the increasingly smaller component of buyers who buy for the sake of owning and living in a home instead of flipping it to another greater fool (preferably from China or Russia, just looking to park their stolen cash  abroad). Quantifying the ongoing deflation of the bubble, Oppenheim notes that the “weakness was again broad-based, and particularly acute in Seattle, Orlando, Baltimore and Sacramento…. Our buyer traffic index fell to 28 in October from 36 in September, indicating weaker levels below agents’ expectations (any reading below 50). This is the lowest level since September 2011.”

Other notable findings:

• The Price appreciation is continuing to moderate: while many markets saw home prices rising if at a far slower pace, 7 of the 40 markets saw sequential declines (vs. no markets seeing declines in each of the past 8 months). Agents also noted increased use of incentives. Tight inventory levels remain supportive, but are being outweighed by lower demand.
• Longer time needed to sell: it took longer to sell a home in October as our time to sell index dropped to 42 from 57 (below a neutral 50). This is  typically a negative indicator for near-term home price trends.

Which is bad news for the Fed: recall that as the TBAC has been preaching for over half a year, unless the Fed manages to reflate the housing bubble to escape velocity speeds where the securitization product can become the equivalent of “high quality collateral”, Mr. Chairwoman will be unable to step away from injecting the credit money flow, while in the process extracting so much more collateral that the market ultimately runs out of things the Fed can legally (or illegally) monetize.

Full note:

Another Weak Month for Traffic, Though Some Saw More Signs of Life in Late Oct.

 

• Pricing power fading as sluggish demand persists: Add the government shutdown to the list of recent buyer concerns. Even as mortgage rates pulled back (which had ostensibly been the main driver of weaker trends this summer), buyers headed to the sidelines in October, especially in markets dependent on the federal government or contractors as the government shutdown ensued. The end result was that after several months of weakening demand, price appreciation appears to be moderating in most markets. One potential bright spot is that we saw some comments from agents toward the end of the month highlighting a pick-up in activity after the shutdown and debt ceiling debate were resolved, though it wasn’t enough to move the needle on our index so we will watch closely in November.

 

• Buyer traffic falls again as government shutdown leads to further hesitation: Our buyer traffic index fell to 28 in October from 36 in September, indicating weaker levels below agents’ expectations (any reading below 50). This is the lowest level since September 2011. Agents had previously highlighted growing hesitancy from buyers given the sharp move higher in home prices and mortgage rates, but even as rates came in, buyer confidence took a hit from the government shutdown and debt ceiling debate, even in markets which on the surface wouldn’t appear overly reliant on the federal government. Weakness was again broad-based, and particularly acute in Seattle, Orlando, Baltimore and Sacramento. Dallas remained at healthy levels, while Denver, Houston and Vegas all improved sequentially.

 

• Price appreciation continuing to moderate: Our home price index fell to 57 in October from 72 in September, still pointing to higher home prices, but much less broad-based. In addition, 7 of the 40 markets we survey saw sequential declines (vs. no markets seeing declines in each of the past 8 months). Agents also noted increased use of incentives.

 

Tight inventory levels remain supportive, but are being outweighed by lower demand.

 

• Longer time needed to sell : Our home listings index pointed to stable inventory levels, but it took longer to sell a home in October as our time to sell index dropped to 42 from 57 (below a neutral 50). This is typically a negative indicator for near-term home price trends.

* *  *

Oh well: the latest mass delusion of instawealth was fun while it lasted.

< img src="http://da.feedsportal.com/r/180263864480/u/49/f/645423/c/34894/s/33766d6f/sc/22/rc/3/rc.img" border="0"/>

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/TUSG4thGb5s/story01.htm Tyler Durden

In case the world needed any additional proof that the latest housing bubble (not our words, Fitch’s) was on its last legs, it came earlier today from Credit Suisse’ Dan Oppenheim who in his monthly survey of real estate agents observed that October was “another weak month” for traffic, with “pricing power fading as sluggish demand persists.” This naturally focuses on the increasingly smaller component of buyers who buy for the sake of owning and living in a home instead of flipping it to another greater fool (preferably from China or Russia, just looking to park their stolen cash  abroad). Quantifying the ongoing deflation of the bubble, Oppenheim notes that the “weakness was again broad-based, and particularly acute in Seattle, Orlando, Baltimore and Sacramento…. Our buyer traffic index fell to 28 in October from 36 in September, indicating weaker levels below agents’ expectations (any reading below 50). This is the lowest level since September 2011.”

Other notable findings:

• The Price appreciation is continuing to moderate: while many markets saw home prices rising if at a far slower pace, 7 of the 40 markets saw sequential declines (vs. no markets seeing declines in each of the past 8 months). Agents also noted increased use of incentives. Tight inventory levels remain supportive, but are being outweighed by lower demand.
• Longer time needed to sell: it took longer to sell a home in October as our time to sell index dropped to 42 from 57 (below a neutral 50). This is  typically a negative indicator for near-term home price trends.

Which is bad news for the Fed: recall that as the TBAC has been preaching for over half a year, unless the Fed manages to reflate the housing bubble to escape velocity speeds where the securitization product can become the equivalent of “high quality collateral”, Mr. Chairwoman will be unable to step away from injecting the credit money flow, while in the process extracting so much more collateral that the market ultimately runs out of things the Fed can legally (or illegally) monetize.

Full note:

Another Weak Month for Traffic, Though Some Saw More Signs of Life in Late Oct.

 

• Pricing power fading as sluggish demand persists: Add the government shutdown to the list of recent buyer concerns. Even as mortgage rates pulled back (which had ostensibly been the main driver of weaker trends this summer), buyers headed to the sidelines in October, especially in markets dependent on the federal government or contractors as the government shutdown ensued. The end result was that after several months of weakening demand, price appreciation appears to be moderating in most markets. One potential bright spot is that we saw some comments from agents toward the end of the month highlighting a pick-up in activity after the shutdown and debt ceiling debate were resolved, though it wasn’t enough to move the needle on our index so we will watch closely in November.

 

• Buyer traffic falls again as government shutdown leads to further hesitation: Our buyer traffic index fell to 28 in October from 36 in September, indicating weaker levels below agents’ expectations (any reading below 50). This is the lowest level since September 2011. Agents had previously highlighted growing hesitancy from buyers given the sharp move higher in home prices and mortgage rates, but even as rates came in, buyer confidence took a hit from the government shutdown and debt ceiling debate, even in markets which on the surface wouldn’t appear overly reliant on the federal government. Weakness was again broad-based, and particularly acute in Seattle, Orlando, Baltimore and Sacramento. Dallas remained at healthy levels, while Denver, Houston and Vegas all improved sequentially.

 

• Price appreciation continuing to moderate: Our home price index fell to 57 in October from 72 in September, still pointing to higher home prices, but much less broad-based. In addition, 7 of the 40 markets we survey saw sequential declines (vs. no markets seeing declines in each of the past 8 months). Agents also noted increased use of incentives.

 

Tight inventory levels remain supportive, but are being outweighed by lower demand.

 

• Longer time needed to sell : Our home listings index pointed to stable inventory levels, but it took longer to sell a home in October as our time to sell index dropped to 42 from 57 (below a neutral 50). This is typically a negative indicator for near-term home price trends.

* *  *

Oh well: the latest mass delusion of instawealth was fun while it lasted.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/TUSG4thGb5s/story01.htm Tyler Durden