MacroScope

from Global Markets Forum Dashboard:

GMF @HedgeWorld West, World Bank/IMF and Financial & Risk Summit Toronto 2014

(Updates with guest photos and new links).

Join our special coverage Oct. 6-10 in the Global Markets Forum as we hit the road, from the West Coast to Washington to the Great White North.

GMF will be live next week from the HedgeWorld West conference in Half Moon Bay, California, where we’ll be blogging insight from speakers including Peter Thiel, former San Francisco 49ers great Steve Young and other panelists' viewpoints on the most important investment themes, allocation strategies, reputation risk management ideas and more.

 

 

Eric Burl, COO, Man Investments USA

Eric Burl, COO, Man Investments USA

Our LiveChat guests at HedgeWorld West include Jay Gould, founder of the California Hedge Fund Association, on Monday; Rachel Minard, CEO of Minard Capital on Tuesday; and Eric Burl, COO of Man Investments, on Wednesday discussing the evolving global investor. If you have questions for them, be sure to join us in the GMF to post your questions and comment.

Follow GMF’s conference coverage and post questions live via our twitter feed @ReutersGMF as well, where we’ll post comments from other HedgeWorld panelists. They include: 

    Peter Algert, Founder and CIO, Algert Global Adrian Fairbourn, Managing Partner, Exception Capital Nancy Davis, Founder & CIO, Quadratic Capital R. Kipp deVeer, CEO, Ares Capital Judy Posnikoff, Managing Partner, PAAMCO Caroline Lovelace, Founding Partner, Pine Street Alternative Asset Management Cleo Chang, Chief Investment Officer, Wilshire Funds Management Brian Igoe, CIO, Rainin Group Mark Guinney, Managing Partner, The Presidio Group

In a preview of the HedgeWorld West conference, Rachel Minard said what matters most to investors today is "not so much what something is

Rachel Minard, CEO of Minard Capital

Rachel Minard, CEO of Minard Capital

called but what is its behavior," she told the forum. "What investment instruments are being used -- what is the ROI relative to cost, liquidity, volatility, market exposure, price/rates and is this the most "efficient" method by which to achieve return. What's great from our perspective is the meritocracy of the business today -- the proof necessary to validate the effective and sustainable ROI of any fund or investment strategy."

from Global Markets Forum Dashboard:

More volatility expected as Fed rate rise looms – Cumberland Advisors’ David Kotok

David Kotok, Cumberland Advisors

David Kotok, Cumberland Advisors

A healthy dose of fear has re-entered financial markets in the final three months of the year. The Chicago Board Options Exchange VIX, a widely tracked measure of market volatility, rose to a two-month high on Wednesday.

Varying news reports offered threats from the Ebola virus and a stagnating European economy as tangential reasons. Perhaps another point is many investors view the U.S. Federal Reserve’s pending decision to raise interest rates as a rumbling train far off in the distance that they now hear headed their way. Closer to the horizon are headlines that can no longer lean on “Fed easing” to explain away rising asset prices and a rising stock market.

“We are in a new period of volatility and it's been developing for the last two or three months,” David Kotok, chairman and chief investment officer of investment advisory firm Cumberland Advisors told the Global Markets Forum on Wednesday. “When you suppress all interest rates to zero you dampen volatility and you distort asset pricing. Now the outlook for interest rates is changing so we are restoring volatility.”

Moment of truth for EU sanctions

The logo of Russia's top crude producer Rosneft is seen in Moscow

President Barack Obama and the leaders of Germany, Britain, France and Italy agreed on a conference call last night to impose wider sanctions on Russia’s financial, defence and energy sectors.

EU ambassadors are meeting today and are expected to target state-owned Russian banks and their ability to finance Moscow’s faltering economy.

European Council President Herman Van Rompuy has written to EU leaders asking them to authorise their envoys to complete an agreement by the end of today. That would avoid the need for leaders to hold a special summit to approve the sanctions.

A question of energy

After two days in The Hague, Barack Obama moves on to Brussels for an EU/U.S. summit with Ukraine still casting the longest shadow.

Europe’s energy dependence on Russia is likely to top the agenda with the EU pressing for U.S. help in that regard while the standoff with Russia could give new impetus to talks over the world’s largest free trade deal.

Russia provides around one third of the EU’s oil and gas and 40 percent of the gas is shipped through Ukraine. EU leaders dedicated part of a summit to the issue last week and German Chancellor Angela Merkel supported asking Obama to relax restrictions on exports of U.S. gas.

New face at the ECB

The European Central Bank held a steady course at its first policy meeting of the year but flagged up the twin threats of rising short-term money market rates and the possibility of a “worsening” outlook for inflation – i.e. deflation.

The former presumably could warrant a further splurge of cheap liquidity for the bank, the latter a rate cut. But only if deflation really takes hold could QE even be considered.
Sabine Lautenschlaeger, the Bundesbank number two poised to take Joerg Asmussen’s seat on the executive board, breaks cover today, testifying to a European Parliament committee. A regulation specialist, little is known about her monetary policy stance though one presumes she tends to the hawkish.

Iran and the EU announced on Sunday that a deal between Tehran and six major powers intended to pave the way to a solution to a long standoff over its nuclear ambitions will come into force on Jan. 20. Thereafter, negotiations will begin on a final settlement. Brent crude has fallen in response. It’s early days but if oil falls significantly this year, that will factor into fears about deflation taking hold in Europe.

Dr. Doom goes to Beverly Hills

When it comes to predicting a dark future, Nouriel Roubini – the NYU economist who earned the moniker Dr. Doom after he correctly predicted the financial crisis – is not about to let anyone get in his way.

Even if it’s his host. And even, or maybe especially, when there are 500 witnesses.

That’s precisely what happened Wednesday morning, when Michael Milken – the former junk-bond king – shared the stage with Roubini at Milken’s Global Conference. What was billed as an interview in one of the Beverly Hilton’s grand ballrooms had the feel of a pitched battle.

What’s behind the spike in oil prices?

It’s easy to blame tensions with Iran for all of the recent spike in petroleum prices. But there are other catalysts for the market’s sudden surge. For one thing, U.S. economic data have been consistently surprising to the upside while the European situation appears loosely under control, both factors that suggest the global economy may yet coast along through 2012 without faltering.

Then there are the actual hits to supply taken due to geopolitical events around the world, says Marc Chandler at Brown Brothers Harriman, which in just two months have helped push Brent crude prices more than $20 higher to a 10-month high above $125 a barrel:

There has been a genuine supply shock. Between Sudan, Yemen and Syria, nearly 750k barrels per day (bpd) have been taken out of production due to political instability. On top of this Libyan oil output is about 600k bpd below pre-civil war levels.

Four yardsticks for sovereign wealth funds

Sovereign wealth funds, a $3 trillion industry managing windfall revenues for future generations, arguably need a set of benchmarks different from those used by other private investors as they are state-owned. Andrew Ang, an associate at U.S. National Bureau of Economics and a professor at Columbia Business School, proposes the following four benchmarks in a recent paper distributed to SWFs.

ECONOMY CHINA MEASURES

The Benchmark of Legitimacy. Whatever the source of wealth, the SWF exists to transfer the benefits of that wealth from the present to the future. Without this benchmark, the money in the SWF is at risk of being immediately depleted. A necessary condition to maintain legitimacy is to have well-developed legal institutions in place.

The Benchmark of Integrated Policy and Liabilities. A critical part of this benchmark is detailing how and under what conditions the money can be distributed from the fund. Clear, yet flexible, spending rules must be set to meet well-defined liabilities.

Sovereign wealth fund and a remote island

Little Diomede, a remote U.S. island in the Bering straits only 2.5 miles from Russia, has 129 people living in a traditional Ingalikmiut Eskimo village.

 On an island surrounded by rocky slopes and harsh storms with the sea frozen for half a year, employment is limited to the city and school whereas seasonal mining, construction and commercial fishing positions have been on the decline.

Little Diomede villagerberings are part of tens of thousands of qualified Alaskans who receive dividends from regional wealth fund Alaska Permanent Fund.

Big ambition for Equatorial Guinea

This week has seen a rush of key policymakers and business executives from Africa flocking to London. Apart from Sierra Leone, oil and gas executives have been discussing the outlook for Equatorial Guinea, a small central African state rich in oil.

Equatorial Guinea made a relatively rare foray into the global news earlier this month for a presidential pardon of  former British army officer Simon Mann, who was serving a 34-year prison sentence in the country for his role in a failed coup d’etat in 2004.

Gabriel Obiang Lima, vice minister of mines, industry and energy, was in London to talk about his ambition for the country. “Our aim is not to be the Kuwait of the region. It’s to be the Singapore of the region,” he told dozens of business executives in a conference in London on Wednesday.