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

Friday, December 19, 2014

Year End 2014

2014 slipping by, another year to be retired,
Let’s review what we have seen, what really has transpired.
The year started out so cold, we learned a phrase called polar vortex,
That chilled us to our bones, and brain froze our frontal cortex.
Another chilling event, was the ebola epidemic,
Concerns about its spread, were more than merely academic.
Democrats took a beating, in this year’s mid-term elections,
As the right wing took the Senate, handing incumbents their ejections.

Give me Crimea for an appetizer, said the grabby Vladimir Putin,
For dessert some eastern Ukraine, as I continue with my lootin’.
Shooting down a Malaysian plane, was clearly this year’s biggest error,
While Islamic State emerged, as this year’s biggest terror.
Boko Haram was close behind, with their heinous kidnap attack,
Many have now forgotten, that the girls have still not been brought back.
A Pakistani school, another of this year’s horror scenes,
Resulting in the death, of a hundred innocent teens.

Farewell we said to others, their absence gives us shivers,
The world is laughing less, without our friend Joan Rivers.
We miss you Robin Williams, hysterical and looney,
Goodbye to Shirley Temple, goodbye to Mickey Rooney.
Godspeed to Maya Angelou, her poetry so sublime,
Casey Kasem left us too, up the charts he made us climb.
Philip Seymour Hoffman, each role played with finesse,
Oscar de la Renta, who showed us how to dress.

The big story in the markets, was the mighty US dollar,
If you were long against the Ruble, you’re a wealthy FX scholar.
The BOJ continued easing, causing the Yen to take a tumble,
Though in the end the Abenomics, may yet fall apart and crumble.
The Fed wrapped up the taper, though the ten year rate went lower,
As the expansion and inflation, proceeded to grow slower.
Two nasty falls from grace, that took most by surprise,
Crude oil and the bond king, both well off of their highs.

Meanwhile in the stocks, M&A was all the rage,
With healthcare deal inversions, taking center stage.
Actavis snatched up Allergan, Medtronic bought Covidien,
All boosting banker bonuses, by a couple of hundred million.
Google built a Nest, Suntory swallowed Beam,
Apple boogied to the Beats, Ballmer bought the LA team.
Facebook said What’sApp?, Comcast hooked up with Time Warner,
Halliburton took Baker Hughes, DirecTV’s in Ma Bell’s corner.

If you missed the market rally, if you took a hit on Shire,
Stay calm and please don’t panic, things are not so very dire.
If your returns are flat or down, though this makes you quite frustrated,
Take solace in the fact, your returns are not correlated.
Look at the bigger picture, even if your performance makes you vomit,
The European NASA, put a spacecraft on a comet.
The holidays are here, may the New Year bring you luck,
Things are looking up already, Obama’s a lame duck.

Monday, December 1, 2014

November 2014 - Monthly Market Commentary

November saw a continuation of recent market trends, with the US dollar strengthening, oil continuing its selloff, and global equity markets moving higher.  The oil price weakness was punctuated at month end by the meeting of OPEC, which decided not to cut production, leading to an acceleration in the energy market selloff.    The US monthly jobs report showed continued steady job growth, with employers adding 214,000 jobs in October and the unemployment rate falling to 5.8%.  While developed market central banks made no major policy changes in November, the People’s Bank of China cut interest rates for the first time in more than two years.

Global M&A activity showed renewed strength in November.  Notable announced deals included Laboratory Corp.’s $6.1 billion acquisition of Covance, Publicis’ $3.7 billion purchase of Sapient, Sterling Bancorp’s $539 million merger with Hudson Valley Holding Corp., Carlyle Group’s $700 million acquisition of Dealogic, Perrigo’s $4.5 billion acquisition of Omega Pharma, Cott’s $1.25 purchase of DSS Group, BB&T’s $2.5 billion acquisition of Susquehanna Bancshares, Berkshire Hathaway’s $4.7 billion purchase of Duracell from Procter & Gamble, Halliburton’s $34.6 billion acquisition of Baker Hughes, Actavis’ $66 billion purchase of Allergan, Kotak Mahindra’s $2.4 billion acquisition of ING Vysya Bank, Aviva’s $8.8 billion purchase of Friends Life Group, and RenaissanceRe’s $1.9 billion acquisition of Platinum Underwriters.
Developed market equity markets largely rose in November (see page 8).  Germany (+6.9%), Japan (+6.2%) and France (+4%) saw the biggest gains; Australia (-3.5%) was lower on the month.  US small caps underperformed, with the Russell 2000 up 0.1%, while the Russell 1000 was up 2.6% (see page 3).  Consumer Staples (+5.5%), Consumer Discretionary (+5.4%), and Information Technology (+5.3%) were the best performing US sectors, while Energy (-8.5%), Telecom (+1.2%) and Utilities (+1.2%) were the worst performing (see page 2).  Large cap growth (+3.2%) outperformed large cap value (+2%) in November (see page 3).  Emerging Market equities were mixed in November (see page 9), with the biggest gains in Taiwan (+3.2%), India (+2.7%), and Thailand (+2.1%) and the biggest losses in Malaysia (-2.1%), Mexico (-1.6%), and Argentina (-1.2%). 
In currencies, the USD Index strengthened 1.7% in November (see page 10).  The weakest developed market currencies against the USD were the Japanese Yen (-5.3%), the Norwegian Krone (-4%) and the Australian Dollar (-3.3%).  The USD was stronger against emerging market currencies with the biggest gains against the Russian Ruble (-14.7%), Brazilian Real (-3.7%), and the Korean Won (-3.5%).
The US Treasury yield curve flattened in November (see page 12).  10 year rates closed the month at 2.16%, down from 2.34% at October month end.  Investment grade and high yield credit spreads tightened in November (see page 13).
In commodities, the GSCI index fell 10.9% in November (see page 11), with losses in Energy (-15.7%), Industrial Metals (-3.1%), and Precious Metals (-0.2%); gains were seen in Agriculture (+0.4%) and Livestock (+0.9%).  Within individual commodities, Brent Crude led losses (-18.9%), followed by Crude Oil (-17.8%), Gasoline (-14.2%), and Heating Oil (-13.4%); Wheat (+7.2%), Natural Gas (+3.1%), Palladium (+2.6%), and Feeder Cattle (+1.1%) gained; Gold gained 0.3%.
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