Alternative Links: Asset Flows

“And after six months of strong results after years of underperformance, managed futures strategies (which make bets on commodities and other futures contracts) [brought in] $4 billion in January alone.”

As Hedge Fund Returns Falter, Money Continues to Flow In – (The New York Times)

Performance:

2015 is unlikely to be another 2009 – (CTA Intelligence)

Macro Hedge Funds:

Macro Hedge Funds “Stinking Up The Joint” – (Barry Ritholtz)

Crude Oil:

Emil Van Essen Explains “Volatile Two Way Markets” – (Wall Street Journal)

Commodities explained: Hedging oil volatility – (FT)

Brent below $60 on US crude build, Saudi sees recovery – (CNBC)

Industrial Metals:

London Metal Exchange to Improve Warehouses to End Aluminum Bottlenecks – (Wall Street Journal)

Attain & RCM Join Forces:

RCM Alternatives and Attain Capital Management to Join Forces – (Futures Magazine)

How RCM uses education to build business in alternative investments – (Chicago Tribune)

Making It Attainable: RCM Buys Attain To Broaden Managed Futures Reach – (John Lothian)

Attain and RCM to Join Forces! – (Attain’s Alternatives Blog)

7 Technical Indicators to tell when the Crude Sell Off is Done

Is Oil back at $100 and nobody told us? You would think with the Bloomberg headlines “Oil is on a Gigantic Tear,” and “Oil Enters Bull Market” that the down trend in Oil Prices may be over. Turns out, this is an example of why you sometimes need to read more than just the headlines, in one of those read between the lines / apply some context moments. Here’s Bloomberg’s context:

“After plunging for months, the price of oil has boomed over 20 percent in just the last three trading days. Last Friday it was just over $44 per barrel. Today it’s selling at nearly $54 per barrel.”

Now, Tuesday’s highs were in fact in the $54 range (even though it ended up the day in the $52 range) and the “bull market” math does work out if you buy into the sacred 20% level for signifying a bull market. But it sure doesn’t feel like a “Bull Market” in Crude Oil after the unbelievable veracity of the sell off, does it?  There should be some metric which adjusts the ‘bull market’ level for the just lived through ‘bear market’ levels.

Which leaves us with the question, how can you tell when these articles are just stirring the crude oil pot, and when is the market actually coming out of its months long downturn? How do professional trend followers tell when a trend is over? Or about to be over?

Is it as simple as watching until the market breaks through a carefully drawn trend line on your chart? It can be. But the professional traders who collectively run billions of dollars in managed futures programs with trend following models, actually use a few different methods for determining when a trend is over; looking at everything from moving averages to swing highs and lows, to directional indicators to relative prices.

Using some of these tools, we can look at just how far away (even after this three day “Bull Market”) Crude Oil WTI futures are from signaling an end to the down trend. PS – we assumed a closing price of $52.98 for the numbers below (that’s what was on our screen at the time we started writing).

[Read more…]

Alternative Links: The Swiss Franc

Swiss Franc:

David Harding on the Swiss Franc Move – (CNBC)

The Swiss (Franc) isn’t that Neutral – (Attain Alternatives Blog)

Hedge Funds Dodge Shock Move From Swiss National Bank – (ValueWalk)

Podcast:

Michael Covel Interview with Meb Faber – (Trend Following Radio)

Trend Following:

Managed futures funds shine anew, but mystery remains – (Investment News)

10 Myths about Momentum Investing, Squashed (Momentum is not Trend Following) – (Quant Investing)

Alphametrix:

Futures regulator dogged by questions on conflicts, governance – (Crains Chicago)

Commodity Funds:

After harsh commodity fund shakeout, even the winners see tough times ahead – (Reuters)

2014 – Best/Worst Performing Asset Classes

What “sport” has 1000’s of teams, no rules, gets played night and day across the world with a scoreboard updated minute by minute, day by day, year by year, and decade by decade? It’s none other than the “game” of investing, where a new year is a great time to see where different assets finished in relation to each other.

Now, we’ve said before that comparing different asset class performances is like comparing apples and oranges, so we won’t make too much of Managed Futures coming in “second place” But, hey, if you can’t trumpet managed futures good year on a managed futures blog, where can you do it? We’re just happy Managed Futures proved that they have unique return drivers, and can perform when stocks are moving up or down. (For more on how and why managed futures performed the way they did, see our 2014 Managed Futures Strategy Review).

Elsewhere, world stocks slid in December, to be the only other asset class finishing in the negative on the year other than commodities… talk about a tough year for diversified portfolios.

P.S – If you’re looking at commodities and wondering if we looked at the data incorrectly, the answer is no… commodities did end down -14.32% in December alone, down -32% on the year.

Asset Class Scoreboard Final(Disclaimer: Past performance is not necessarily indicative of future results)

Asset Class Scoreboard Chart

(Disclaimer: past performance is not necessarily indicative of future results.)
Source: All ETF performance data from Morningstar.com
Sources: Managed Futures = Newedge CTA Index, Cash = 13 week T-Bill rate,
Bonds = Vanguard Total Bond Market ETF (BND),
Hedge Funds= IQ Hedge Multi-Strategy (QAI)
Commodities = iShares GSCI ETF (GSG);
Real Estate = iShares DJ Real Estate ETF (IYR);
World Stocks = iShares MSCI ACWI ex US Index Fund ETF (ACWX);
US Stocks = SPDR S&P 500 ETF (SPY)

The 2014 Commy Awards

There’s the Emmy Awards, the Webby’s, the ESPY’s, (why do they all end in y’s), but no commodity awards as far as we know… Let’s see if we can’t do something about that, with the first (and perhaps last) edition of the Commy Awards:

(All Charts Courtesy: Finviz)

The ‘you probably didn’t benefit one bit from this’ market of the year = Coffee

In February, the coffee market shot up and never looked back, up around 48% on the year. However, unless you play with coffee ETF $JO, or are invested in a smaller niche managed futures manager – there’s no way you caught this move. It’s a shame too, because it was one heck of a move, and it all happened in first 2 months.

Coffee(Disclaimer: Past performance is not necessarily indicative of future results)

The Most likely to get your Houston Neighbor’s Grand Piano repossessed = Crude Oil

No one saw the crude implosion coming. Well maybe not nobody… but crude dropping almost  50% in 4 months was something trend followers sure enjoyed, even while the Russian government (and Ruble) did not. At 8.9 million barrels per day produced in US – that’s $411.7 million not there anymore… that’s a lot of pianos.

Crude(Disclaimer: Past performance is not necessarily indicative of future results)

The most popular, for no apparent reason = Gold

No matter how much the gold market moves, it’s the commodity market people love to write about, and people love to read about. Even though it finished the year basically unchanged, down -0.4% – there were reams and reams of digital ink written about its demise, its comeback, its luster, and its non-performance? And all for what? So that they can say they were wrong last time, and might be right this next time?  Honorable mention goes to the rest of the metals crowd, which actually fell quite a bit more than Gold.

Gold(Disclaimer: Past performance is not necessarily indicative of future results)

The S&P..who?  Award = Cattle

The S&P 500 wasn’t the the only market hitting new all time highs throughout 2014, so was Cattle. The problem? Not too many noticed or wrote about it, and it doesn’t count if it was an article about higher beef prices at the grocery store.

Live Cattle(Disclaimer: Past performance is not necessarily indicative of future results)

The Market most likely to make you look like an Idiot (Again) = US Bonds

Earning its 5th straight award in this category is the Bond market. 2014 was supposed to be the year for higher Interest Rates and Lower Bond prices, except it wasn’t. The US Bond Aggregate Index ETF ($AGG)  ended the year up 5.50% for the yr and rates dropped from  3.9 to 2.7, while everyone and their sister thought higher rates in store in ‘14 Bonds. You think yields will continue to drop or has it finally reached its lowest point? Are you willing to say it will go the other way? How about asking the people that made the same decision last year.

30 Yr Bond(Disclaimer: Past performance is not necessarily indicative of future results)

The Most (un)Likely to Succeed / Best Closer = US Dollar

It had its best quarter in 4 years, while other currencies fell flat. But it wasn’t just what it did, it was how it did it – closing fast. For the first six months, the USD didn’t move, while the last 6 months resulted with an up move of 13%.

USD(Disclaimer: Past performance is not necessarily indicative of future results)

The Most Likely Cause of your Acid Reflux = Corn

It’s hard to trade a market that has three consistent trend reversals in one year. From January to May it was up about 20%, then fell around 36% over the next 5 months, and rebounded 24% to close out the year. You must have a strong stomach to dabble in this market (honorable mention = Nat Gas)

Corn(Disclaimer: Past performance is not necessarily indicative of future results)

The Jennifer Aniston = U.S. Stock Indices

This year saw US stocks pile onto the already outstanding run the stock market has been on over the past 5 years, so while the stock market run may be getting a bit older… it’s still looking good, just like Jennifer Aniston.

US STocks(Disclaimer: Past performance is not necessarily indicative of future results)