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CurAlea Associates LLC is an independent risk and due diligence advisory firm focused on hedge funds and family offices.

Monday, December 16, 2013

Year End 2013

Two thousand and thirteen, coming quickly to a close, 
Events that have transpired, let us here expose.
Over Russia flew a meteor, over the Vatican white smoke,
Bombings up in Boston, the stateless Snowden bloke.
Poison gas in Syria, floods in India in June,
The governmental shutdown, in the Philippines typhoon.

A new tenant in the White House?  Alas we were not so lucky,
At least the current occupant, appears increasingly lame ducky.
Like in many a second term, scandals now abound,
The yes we can agenda, has now sadly run aground.
Worried about big brother? You might be right my love,
The NSA can hack anything, except

Who left us this past year?  We wish them all Godspeed,
Farewell to Edward Koch, farewell now to Lou Reed.
Global statesmen left us too, men and women of high stature,
Goodbye Nelson Mandela, goodbye to Margaret Thatcher.
James Gandolfini we will miss you, and your softer side of crime,
Adios to Hugo Chavez, your revolution ran out of time.

In the markets year to date, we’ve had lots of steady action,
Your choice of asset class, has shaped your degree of satisfaction.
US equities won the race, all year they kept on sprinting,
Boosted by juicy steroids, also known as money printing.
Gold and bonds were laggards, causing their owners mental anguish, 
The Yen, Aussie, and Rupee, against the Dollar all did languish.

Among stocks there were big winners, that proved to be good picks,
The Facebook made a comeback, though not quite like Netflix.
Tesla hurt the shorts, cutting through them like a knife,
Other exhibits in that category, Green Mountain and Herbalife.
Losers have been scarce, in fact there are hardly any,
Blackberry and teen retail, and the flailing JC Penney.

And what about the macro, as we look out to fourteen?
Should we bet it all on bitcoin, to keep it in the green?
Across every class of asset, vol has disappeared like vapor,
The markets are complacent, worried not about the taper.
Remember you can’t go broke, with some profit taking,
Your smarts in this year’s rally, you should not be mistaking.

With those gains you can now harvest, let’s also do some giving,
There are still so very many, with a low standard of living.
Five years ago things were dismal, as the crisis was so dire,
Who imagined that so quickly, to new records we’d vault higher.
Be thankful this December, your health is just one reason,
Let’s think of those less fortunate, in this year’s holiday season.

Monday, December 2, 2013

November 2013 - Monthly Market Commentary

November saw wide dispersion in the performance of global risk assets, as developed market equities continued to rally, while most emerging market equities underperformed, the US dollar rallied, and commodity prices generally retreated.  A reasonably strong US jobs report led to continued anticipation of asset purchase tapering in the coming months by the Federal Reserve, which resulted in higher US interest rates for longer maturities.  Markets refocused on quantitative easing in Japan as the yen weakened and Japanese equity markets rose sharply.

Notable corporate deals announced in November included TRI Pointe Homes’ $2.7 billion agreement to merge with Weyerhaeuser’s home-building division, Shire’s $4.2 billion acquisition of ViroPharma, China National Petroleum’s $2.6 billion purchase of assets from Brazil’s Petrobras, Devon Energy’s $6 billion acquisition of GeoSouthern Energy’s shale assets, an $8.3 billion deal by Brazilian conglomerate Odebrecht and Singapore airport operator Changi Airport Group to operate Rio de Janeiro’s Galeao airport for 25 years, and CVS Caremark’s $2.1 billion purchase of Coram LLC from Apria Healthcare Group.

Most major developed market equity markets rose in November (see page 6), led by Japan (+5.9%), Germany (+4.1%), and the US S&P 500 (+3%).  US small caps outperformed with the Russell 2000 up 4% (see page 3); YTD the Russell 2000 has outperformed the S&P500 by 7% (36.1% vs 29.1%).  Healthcare (+4.7%) and Financials (+4.6%) were the best performing US sectors (see page 2), while Telecom (-2.6%) and Utilities (-1.9%) were the worst performing; YTD Telecom has been the worst performing sector (+11.8%), while Healthcare has been the best performing sector (+40.3%).  Large cap growth and large cap value performed in line in November with both +2.8% (see page 3).  Emerging Market equities were mixed (see page 7), with the biggest gains in Argentina (+20.5%), China (+4.9%), and Mexico (+3.6%) and the biggest declines in Indonesia (-6.8%), Thailand (-5.9%), and the Philippines (-4.6%).

In currencies, the USD Index rose 0.6% in November (see page 8).  Weakness was seen against the USD in the Japanese Yen (-4%), Australian Dollar (-3.7%), and Norwegian Krone (-3%), while strength was seen in the British Pound (+2%), Swiss Franc (+0.1%), and Euro (+0.1%).  The USD strengthened against most emerging market currencies with the exception of the Korean Won (+0.3%) and the Chinese Yuan (flat); the weakest emerging market currencies were the Brazilian Real (-4.2%), Indonesian Rupiah (-4.1%), Russian Ruble (-3.3%), and Thai Baht (-2.8%).

US Treasuries sold off in November except at the short end of the curve (see page 10).  10 year rates closed the month at 2.74%, up from 2.55% at October month end.  Investment grade and high yield US credit spreads tightened in November to YTD lows (see page 11).  European sovereign spreads also tightened in November, with Spain and Italy closing the month at the tightest levels since the European crisis in the summer of 2011 (see page 12).

In commodities, the GSCI index closed down 0.8% in November (see page 9), led by weakness in Precious Metals (-6%) and Industrial Metals (-4.5%); losses were also seen in Livestock (-0.9%), Agriculture (-0.9%) and Energy (-0.2%).  Within individual commodities, Natural Gas led gains (+8.8%), followed by Soybeans (+5.6%), Gasoline (+3.3%), and Heating Oil (+2.5%); Silver was the weakest performer (-8.6%), followed by Aluminum (-6.5%), Sugar (-6.4%), Gold (-5.6%), and Platinum (-5.5%).

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