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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, 2019

Year End 2019

Twenty nineteen is now ending, goodbye to the year and the decade,
Let's look back and then move forward, please do not be afraid.
As always in a year, there's been bad and there's been good,
We'll examine both below, we'll take a look under the hood.
The Patriots won again, they now have six Super Bowls,
This season may be different, their offense appears to have some holes.
We had some first time winners, that started brand new chapters,
The Nationals in DC, in Canada the Toronto Raptors.
In soccer the US women, took the win over in France,
UVA in college hoops, took the win in the big dance.

Many legends we have lost, great legacies they did bestow,
Supreme Court justice John Paul Stevens, the billionaire Ross Perot.
Fashion designer Karl Lagerfeld, actress and singer Doris Day,
JuiceWRLD the emo rapper, legendary architect IM Pei.
Peter Mayhew played Chewbacca, Cameron Boyce one of Disney's stars,
Eddie Money's got tickets to paradise, Ric Ocasek headlined the Cars.
Lee Iacocca rescued Chrysler, Gloria Vanderbilt's blue jeans were so tight,
Paul Volcker tamed inflation, Toni Morrison sure could write.
More shocking deaths emerged, fighting Thanos in Endgame,
Without Ironman and Black Widow, the Avengers won't be the same.

In Maduro’s Venezuela, things have really gone downhill,
A catastrophic dam break, in neighboring Brazil.
A crash in Ethiopia, revealing flaws for Boeing’s Max,
Mosque shootings in New Zealand, in Sri Lanka church attacks.
A mass shooting in El Paso, hours later a Dayton copy,
A Mormon massacre in Mexico, in the DR they shot Big Papi.
A tragic dive boat fire, California homes destroyed by flame,
The rainforest too is burning, another fire wrecked Notre Dame.
To know the climate’s not like the past, you don’t have to be a historian,
Just look at the Venice flooding, or the wreckage left by Dorian.

Trump and Kim Jong Un, becoming buddies seemingly,
Met up in Vietnam, then crossed Korea’s DMZ.
Major protests in Hong Kong, much to China’s consternation,
Riots too in Chile, over subway fare inflation.
Drone attacks on Saudi oil, Iran allegedly the source,
Al-Baghdadi in a tunnel, taken out by Delta Force.
Elections there were many, Zelensky in Ukraine,
Who then was asked to play a role, in an American campaign.
Modi’s BJP in India, won in a significant landslide,
As did Johnson in old England, where Brexit will not be denied.

The Dems too are campaigning, and grandstanding up on stage,
They're shaking all their fists, some are filled with lots of rage.
If you don't know whom to back, ask your daddy or your mommy,
There's the extremist Lizzie Warren, or Bernie the old commie.
After watching them debate, it's hard to feel inspired,
Andy Yang has decent energy, Joey Biden's looking tired.
Mayor Pete is quite articulate, he's one of two Rhodes scholars,
The other's Cory Booker, though he's behind in campaign dollars.
Billionaires Steyer and Bloomberg, have joined the magic quest,
Along with Klobuchar and Gabbard, they're a bit of a snooze fest.

In the markets things were rosy, as equities screamed higher,
For every stupid seller, there was an even dumber buyer.
Despite a trade war and more tariffs, and a brief inversion in the curve,
Jay Powell had your back, and gave the bulls plenty of nerve.
But not so unicorn IPOs, which were pretty much a bust,
And so in private valuations, engendering distrust.
Uber, Lyft, and Slack all traded lower, and then there was WeWork,
Where Masa bailed out Neumann, who ran off with billions and a smirk.
Crude oil rallied strongly, the bitcoin almost had a double,
Not so the bonds of Argentina, where an election caused some trouble.

So wrap up your year end business, wrap up the presents too,
Perhaps a baby Yoda, or some Air Pods for your crew.
Get away from all the noise, go find a respite on some beach,
Whichever side you’re on, of the motion to impeach.
In the coming vote next year, we may change the President’s name,
But we all should be prepared, that it may remain the same.
Let’s resolve to be more civil, on all of us rests this onus,
Let’s worry more about each other, than the size of this year’s bonus.
Happy New Year to you all, we’ve made it through another year,
Be good to those around you, and spread some holiday cheer.

Monday, December 2, 2019

November 2019 - Monthly Market Commentary

November was a fairly strong month for global risk assets, as developed market equities rose, emerging market equities were mixed, the US yield curve shifted slightly higher, the US dollar rose, credit spreads tightened, and the oil complex rallied. The US ISM manufacturing activity index rose slightly in October, but remained below 50, signaling continued contraction in the sector, while the non-manufacturing index rose to 54.7. In Congressional testimony, Fed Chairman Powell indicated that another interest rate cut was unlikely this year. US consumer prices rose 0.4% in October, while the US budget deficit for the 12 months ended in October exceeded $1 trillion for the first time since February 2013. Consumer inflation in China rose 3.8% in October from a year earlier, driven by soaring pork prices, though producer prices fell 1.6%, and the People’s Bank of China cut its lending benchmark rate. Japan’s GDP grew at a 0.2% annualized rate in the third quarter, the slowest pace in a year. The US jobs report showed that 128,000 jobs were added in October (the 109th consecutive month of job creation), the unemployment rate ticked higher to 3.6%, the labor force participation rate increased to 63.3%, average hourly earnings rose 3% from a year earlier, and the total labor force hit a record high of 164.4 million, of which 158.5 million were employed.

Developed market equities were mostly higher in November (see page 8), with the biggest gains in the S&P 500 (+3.6%), Canada (+3.5%), and Germany (+3%), and losses in Hong Kong (-1.6%). US small caps outperformed large caps, with the Russell 2000 up 4.1% and the Russell 1000 up 3.8% (see page 3). IT (+5.4%), Financials (+5%), and Health Care (+5%) were the best performing sectors in November; Utilities (-1.8%), Real Estate (-1.7%), and Consumer Staples (+1.3%) were the worst performing sectors (see page 2). Large cap growth (+4.4%) outperformed large cap value (+3.1%) in November (see page 3). Emerging market equities were mixed in November (see page 9), with the biggest gains in Argentina (+7.1%), Taiwan (+1.8%), and China (+1.7%), and losses in the Philippines (-3.2%), Indonesia (-2.4%), and Malaysia (-2.1%).

In currencies, the USD Index was higher (+0.9%) in November (see page 10). The Australian Dollar (-1.9%), Swiss Franc (-1.4%), and Japanese Yen (-1.3%) weakened the most against the USD, while the Swedish Krona (+0.8%), New Zealand Dollar (+0.1%) strengthened. Emerging market currencies were mostly weaker against the USD, with gains in the South African Rand (+3%) and Chinese Yuan (+0.3%), and the largest losses in the Brazilian Real (-5.1%), Mexican Peso (-1.6%), and Korean Won (-1%).

The US interest rate curve shifted higher in November (see page 12). 10 year rates closed the month at 1.78%, up from 1.69% at October month end. US investment grade and high yield spreads tightened in November (see page 13).

In commodities, the GSCI index was flat in November (see page 11), with gains in Energy (+1%), and losses in Precious Metals (-3.4%), Industrial Metals (-2.7%), Livestock (-2%), and Agriculture (-0.1%). Within individual commodities, Coffee (+13.4%), Cocoa (+7.4%), and Wheat (+5.7%) saw the biggest gains, while Natural Gas (-16.1%), Lean Hogs (-11%), and Silver (-6%) saw the biggest losses.

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