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

Thursday, December 17, 2015

Year End 2015

Goodbye to twenty fifteen, hello to fifteen plus one,
I hope your year’s been good, as it’s all but said and done.
Some ups and downs we’ve had, we’ve taken a bruise and bump,
We’ve heard some stupid stuff, almost all of it from Trump.
How will this year be written? When historians look back,
It will likely be remembered, as the year of the terror attack.
Another likely legacy, when scholars about the year will ask,
Is that even the liberals conceded, that Obama wasn’t up to the task.

There was much bad news this year, and more than just one crisis,
Many of them caused, by the lunatics called ISIS.
Our hearts go out to all, our friends in Paris, France,
Attacked twice in the past year, by crazies in a suicide trance.
Plane crashes too we saw, over the Sinai a Russian jet,
A deranged pilot over the French Alps, stranger than that it doesn't get.
Mass shootings almost every week, on this side of the Atlantic,
Jihad in San Bernardino, it leaves you feeling frantic.

Goodbye to Yogi Berra, so much we learned from thee,
As we look out towards the future, it sure ain’t what it used to be.
We’ll miss you Leonard Nimoy, you went where no man went before,
May we all live long and prosper, as we continue to explore.
Your voices will live on, Ben E. and BB King,
You sure could play the R&B, and boy could you guys sing.
Omar Sharif and Kirk Kerkorian, John Nash and Lee Kuan Yew,
You left your mark on this world, as very few can do.

The markets all were tough, making everyone feel pissy,
It started right in January, with the revaluation of the Swissie.
By springtime we had thawed, though commodities kept sneezing,
The risk appetite was whetted, with Draghi’s quantitative easing.
Though early summer felt nice, by August we were back on our knees,
As we saw crude oil break forty, and a devaluation from the Chinese.
All the while the Fed kept threatening, to give the rates a raise,
We’ll see if their recent boost, will bring an end to this malaise.

Growth destroyed the value, as the FANGs all did rerate,
Labor force participation and Brady’s footballs, sadly did deflate.
Junk amongst your junk bonds?  It’s enough to cause a panic,
E.coli in your burrito? It’s not even safe to eat organic.
A nukes deal with Iran, with Cuba diplomatic relations,
Some places to consider, for your next spring break vacations. 
Josh Duggar and Bill Cosby, two sickos down in flames,
Brian Williams and his stories, all based on bogus claims.

Prepare yourself for next year, it’s really not far in the future,
If your portfolio is bleeding, raising cash could be a suture.
You can blame any losses on the Fed, or blame it on bad karma,
You can blame it on dispersion, or just blame Valeant Pharma.
Making choices can be tough, with spouses and with money,
It’s all about the tradeoffs, like choosing sad or funny.
You can’t always win in life, whether it’s investing or badminton,
Choices can be no win situations, as in choosing Trump or Clinton.

Tuesday, December 1, 2015

November 2015 - Monthly Market Commentary

November was a mixed month for global risk assets.  Developed market equities were mostly higher, while emerging market equities were mostly lower, the US Dollar strengthened, commodities weakened, credit spreads widened, and US interest rates increased.  Concerns over global economic weakness faded as the terrorist attacks in Paris and ensuing reaction dominated news headlines.  The Federal Reserve FOMC did not meet in November, though Chairwoman Yellen indicated in Congressional testimony that a December rate hike was “a live possibility” given that the US economy was “pretty strong and growing at a solid pace”.  The US job report showed 271,000 jobs were added in October, while the unemployment rate fell to 5.0% and the labor force participation rate remained at 62.4%, a four decade low. 
Notable corporate transactions announced in November included the $23.4 billion acquisition of Visa Europe by Visa, Shire’s $5.9 billion purchase of Dyax, Activision Blizzard’s $5.9 billion acquisition of King Digital Entertainment, Expedia’s $3.9 billion purchase of HomeAway., Alibaba’s $4.2 billion acquisition of Youku Tudou, Plum Creek Timber’s $20 billion merger with Weyerhauser, Molson Coors’ $10 billion purchase of the remaining stake in the MillerCoors joint venture, Marriot’s $12.2 billion acquisition of Starwood Hotels, Liberty Global’s $5.3 billion acquisition of Cable & Wireless Communications, Urban Outfitters’ purchase of Pizzeria Vetri, Air Liquide’s $10.3 billion acquisition of Airgas, and Pfizer’s $155 billion merger with Allergan.
Developed market equity markets were mixed in November (see page 8) as Germany (+4.6%), France (+1.5%), and Japan (+1.1%) saw the biggest gains, while Hong Kong (-3.1%), Australia (-0.7%), and Canada (-0.3%) saw the biggest losses.  US small caps outperformed, with the Russell 2000 up 3.3% and the S&P500 up 0.3% (see page 2).  Financials (+1.9%), Industrials (+0.9%), and IT (+0.9%) were the best performing sectors in November, while Utilities (-2.1%), Telecom (-1.3%), and Consumer Staples (-1.1%) were the worst performing (see page 2).  Large cap growth (+0.3%) slightly underperformed large cap value (+0.4%) in November (see page 3).  Emerging Market equities were mixed in November (see page 9), with the biggest gains in Russia (+3.4%), Malaysia (+0.6%), and Indonesia (+0.3%); Argentina (-9.9%), China (-3.4%), and the Philippines (-2.9%) were the worst performing. 
In currencies, the USD Index strengthened 3.3% in November (see page 10).  The weakest developed market currencies against the USD were the Euro (-4%), Swiss Franc (-4%), and New Zealand Dollar (-2.9%), while the Australian Dollar (+1.2%) strengthened against the USD.  The USD was stronger against most emerging market currencies with the biggest gains seen against the South African Rand (-4.3%), Russian Ruble (-3.5%), and Indian Rupee (-1.6%); the Malaysian Ringgit (+1%) and Turkish Lira (+0.1%) strengthened against the USD (see page 10).
US Treasury yields rose in November (see page 12) across the curve.  10 year rates closed the month at 2.21%, up from 2.14% at October month end.  Investment grade and high yield credit spreads widened in November (see page 13).
In commodities, the GSCI index was down 9% in November (see page 11), with losses in Energy (-11.1%), Livestock (-8.4%), Precious Metals (-7.1%), Industrial Metals (-6.9%), and Agriculture (-3.9%).  Within individual commodities, Sugar (+2.8%) and Cocoa (+2.1%) moved higher, while Palladium (-19.9%), Platinum (-15.8%), and Crude Oil (-13.1%) saw the biggest losses; Gold was down 6.7%.

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