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

Wednesday, December 13, 2017

Year End 2017

Another year is ending, seventeen is in the books,
Before moving to the passing lane, let’s take some rearview looks.
Let’s review who’s made the news, every hero and every chump,
And take stock of where we are, a year into the reign of Trump.
We’ve had some ups and downs, of some things we are not proud,
Like the challenge some had measuring, the tiny inauguration crowd.
With my rhymes now please bear with me, your patience I do beseech,
Sit back now and relax, like Christie on a shut down beach.

The eclipse was pretty awesome, moving from northwest down to southeast,
Love or hate that guy Tom Brady, that Super Bowl comeback was pretty beast.
Sexual misconduct allegations, men abusing positions of power,
Weinstein, Franken, O’Reilly, Moore, Rose, Spacey, and Lauer.
Catalonia voted for secession, alas the Spaniards took it back,
Too bad Equifax can’t do that, with your personal info lost in the hack.
The women marched on Washington, with quite a large turnout,
The Astros won in seven, the Warriors won in a rout.

Bad news we had aplenty, always on terror high alert,
Trucks driving into people, bombs at a Manchester concert.
Migrants fleeing into Europe, refugees pouring out of Burma,
Hurricanes smashing the Carribean, Maria, Harvey, Nate and Irma.
Maduro in Venezuela, Kim Jong-Un and other kooks,
Destroying their own countries, or hell bent on having nukes.
Destruction in Aleppo, a double California fire outbreak,
Mass shootings in Vegas and Texas, a Mexican earthquake.

Goodbye we said to many, without them empty we may feel,
Chuck Berry rolled over Beethoven, Monte Hall taught us how to make a deal.
David Cassidy and Jerry Lewis, of you we were quite fond,
Hugh Hefner was our playboy, Roger Moore was our James Bond.
Sam Shephard and Tom Petty, Lil Peep and Fats Domino.
The psychopath Charles Manson, no one’s sad to see him go.
The diplomat Zbigniew Brzezinski, we never could pronounce your name,
The chancellor Helmut Kohl, reuniting Germany brought you fame.

The first year of the administration, an interesting one it’s been,
Few legislative victories, but a guilty plea from Flynn.
The Russia thing’s a mess, always another strange plot twist,
Manafort, Gates, and Papadopolous, on Mueller’s naughty list.
Price, Preibus and Steve Bannon, not one a year did survive,
Scaramucci had his day, well to be accurate he lasted five.
Comey from his post ejected, for excessive investigatory intervening,
Before resigning I wish that Spicer, had explained covfefe’s meaning.

Our country is divided, the left against the right,
Every issue that’s debated, ends up a bitter fight.
All you nutty fringe extremists, on both sides of the aisle,
Put your country before your party, and stop being so hostile.
Enough with the shouting and the violence, don’t get all up in my grill,
Please stop all of this chaos, we don’t want another Charlottesville.
Our country isn’t perfect, we have many problems that do displease,
But to the NFL you’ve made your point, it’s time to get up off your knees.

The markets have been bullish, with synchronized global growth,
To short every little vol spike, we all have now taken an oath.
Credit spreads have tightened, the momentum trade has been astounding,
US short rates have moved higher, dollar weakness has been confounding.
The yield curve it has flattened, emerging markets all have rallied,
Large cap growth stocks are on top, a winning year they’ve tallied.
But the winner of them all, has been the bitcoin and the crypto,
They’ve sprinted ever higher, this is no walk, or jog, or tiptoe.

So the New Year is upon us, it’s getting really close,
Please put down all those opioids, you don’t need another dose.
In eighteen please stay alert, I don’t think it will be boring,
Vol may just make a comeback, you don’t want to be caught snoring.
A new Fed chair’s taking charge, as the balance sheet is shrinking,
Of buying every dip, you may want to do some fast rethinking.
With your gains this holiday season, be generous and don’t be chintzy,
Be charitable with your winnings, and don’t spend $450 million on a da Vinci.

Friday, December 1, 2017

November 2017 - Monthly Market Commentary

November was a mixed month for global risk assets.  Developed and emerging market equities were mixed, the USD weakened, the US yield curve continued to flatten, the oil complex moved higher, and high yield credit spreads widened slightly.  The Federal Reserve left rates unchanged at its November 1 meeting with no surprises in its statement; minutes from the meeting reinforced expectations for an additional rate hike in December.  For the first time in a decade, the Bank of England raised its benchmark interest rate, but signaled that any additional tightening would be gradual.  The US job report showed that 261,000 non-farm jobs were added in October, the unemployment rate fell to 4.1%, and the labor force participation rate fell to 62.7%. 
Notable corporate transactions announced in November included the $780 million purchase of full control of the Kirin-Amgen joint venture by Amgen, Permira’s $1.75 billion acquisition of Duff & Phelps, the $384 million purchase of Tazo tea from Starbucks by Unilever, the $950 million acquisition of a majority stake in AmTrust Financial’s US based fee business by Madison Dearborn, Synopsys Inc’s $565 million purchase of Black Duck Software, Leonard Green’s $843 million acquisition of Pure Gym, Total’s $2 billion purchase of Engie SA’s LNG business, James Hardie’s $548 million purchase of Fermacell from Xella International, the $1 billion purchase of Musical.ly by Beijing Bytedance Technology, the acquisition of ShyaHsin Packaging by Blackstone for between $800-900 million, B.Riley Financial’s $143 million purchase of magicJack VocalTec, the $6 billion purchase of Cavium by Marvell Technology, AmerisourceBergen’s $815 million acquisition of H.D. Smith, the $1.9 billion merger of Stone Energy and Talos Energy, the $1.85 billion purchase of Time Inc. by Meredith, the $875 million acquisition of SeaStar Solutions by Dometic Group, the $2.9 billion purchase of a major stake in Sun Art Retail Group by Alibaba, the $425 million acquisition of Care Investment Trust by Mainstreet, Thoma Bravo’s $1.6 billion purchase of Barracuda, the $1.2 billion sale of Inkia Energy to I Squared Capital, the $521 million acquisition of Bazaarvoice by Marlin Equity, the $300 million purchase of Wall Street English by Baring Private Equity and CITIC Capital, Unilver’s acquisition of Sundial Brands, and the $2.9 billion acquisition of Buffalo Wild Wings by Roark Capital.
Developed market equities were mixed in November (see page 8), with the largest gains in Hong Kong (+3.5%), the S&P500 (+3%), and Australia (+1.5%); the worst performing were Spain (-2.9%), France (-2.1%), and Italy (-1.9%).  US small caps performed roughly in line with large caps, with the Russell 2000 up 2.9% and the Russell 1000 up 3% (see page 3).  Telecom (+6%), Consumer Staples (+5.7%), and Consumer Discretionary (+5.1%) were the best performing sectors in November, while Materials (+1%), IT (+1.1%), and Energy (+1.8%) were the worst performing (see page 2).  Large cap value (+3.1%) slightly outperformed large cap growth (+3%) in November (see page 3).  Emerging market equities were mostly lower in November (see page 9), with the biggest gains in Russia (+3.5%), China (+1.6%), and Thailand (+0.1%); Argentina (-4.7%), Taiwan (-3.8%), and Mexico (-3.2%) were the worst performing. 
In currencies, the USD Index was down -1.6% in November (see page 10).  The Norwegian Dollar was down (-1.8%) against the USD, while the strongest currencies against the USD were the Euro (+2.2%), British Pound (+1.8%), and Swiss Franc (+1.4%).  Emerging market currencies were mostly stronger against the USD, with the biggest gains in the Malaysian Ringgit (+3.5%), South African Rand (+3%), and Korean Won (+2.8%) and losses in the Turkish Lira (-3.3%) and Russian Ruble (-0.2%).
The US Treasury yield curve flattened in November (see page 12).  10 year rates closed the month at 2.41%, up from 2.38% at October month end, while 1 year rates widened 19bps during the month.  Investment grade spreads were little changed and high yield credit spreads widened in November (see page 13).
In commodities, the GSCI index was up 1.4% in November (see page 11), with gains in Energy (+3.4%) and Agriculture (+0.5%), and losses in Industrial Metals (-3.2%) and Livestock (-5.5%); Precious Metals were flat.  Within individual commodities, Cotton (+6.3%), Crude Oil (+5.2%), and Palladium (+3.3%) saw the biggest gains, while Lean Hogs (-7.8%), Aluminum (-5.4%), and Live Cattle (-5%) saw the biggest losses.  Gold was up 0.3% for the month.

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