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Most accidents don't happen when climbing a mountain of debt, but during the descent

16:22, 7/3/2012 .. 0 comments .. Link

Most Dutch "economists" argue that the Euro project created value for the Dutch society. Strangely enough, none of them accept at least some of the findings in Lombard Street paper. General comments are that you can not quantify the costs of exiting, so it is not worthwhile to have a broad debate on the pro and cons of the Euro project. But if you can not quantify the costs of leaving, how then come to an unbiased estimate of the gains of staying on board?

Experienced climbers will agree that climbing a mountain is less dangerous than descending from that same mountain. From a similar viewpoint you should observe the pro and cons of the Euro project. Still few "economists" observe that the Dutch economy is just half ways, in fact the majority recommends to continue climbing on the debt mountain. Unfortunatly they cann't yet present a clear map outlining how to descent the Dutch mountains of debt. Thus for a fairer assessment of Lombard´s report, you should never judge a country for reaching the top of it's debt. It’s better to patiently wait and see if that same economy can safely manages to get down.

Also from investors you may expect a more critical analysis of the current situation. Not only can investors maneuver outside political boundaries, rational investors are well rewarded to do so. Most successful global macro hedge funds I follow have no really deviating opinions from Lombard street. Actually, those seem the guys to follow and base your opinion upon. While European policy makers and economists were cheering the first decade of the EURO project and thought that the credit crises was a pure US event, the hedge funds industry started to express similar views and analysis as Lombard Street provided. Unsurprisingly they became early and big sellers of Garlic Bonds, then became big buyers of CDS protection on Greece, Portugal, etc and positioned themselves for rapidly declining German interest rates. Let's hope that the Dutch financial industry conducted similar (internal and thus objective) research as the hedge fund industry did. Therefore I am patiently waiting for research that shows how well the large Dutch financial sector understood and foresaw the growing imbalances within Europe. But how long do we need to wait for this unbiased research te be published in the press, or could it be that those same unbiased Dutch economists guided the Dutch institutional investors into far too risky bond portfolios? Perhaps the populist PVV just had to go to non-Dutch institutions or research houses, as none of the large Dutch financials institutions successfully managed themselves through the European sovereign crises

A fair assessment of the Euro project starts by gauging the quality of the growth rather than sticking to the absolute growth figures or to increasing market share of EU trade. In addition you should focus what is ahead. The Euro helped to climb a mountain of Debt, but can it support the descent as well? The first graph shows Economic Growth development since march 1997 (based on Bloomberg GDP figures plus own / consensus projections for 2012-2016). Though GDP data have their flaws and can be corrected (even after years), the following tendencies are important to notice

  • Germany is not a growth engine as the consensus believes (due to weak internal consumption, weak service sector, declining labor force). It is only the export sector that drives growth. But what will happen to the Mittelstand if Merkel is not re-elected and if the "green revolution (shutdown of Nuclear energy)" starts to undermine the competitiveness of the export sector, or what if China get's overheated and stops importing German products?
  • At least the 2000-2005 growth figures give some indication how a transfer Union in Germany (from West to East Germany, from South to North) can distract from overall growth and competitiveness
  • Note that all open economies US, Netherlands, Sweden, UK profited from increasing global trade, and investment flows in the early 2000's, but was this due to globalization or due to Euro project?
  • Sweden, UK, Switzerland started to deleverage their economy in 2009 – 2010. Similar to the Netherlands they all have an extended financial sector, but where the Dutch policy makers postponed taking austerity measures the other countries undertook early policies unwind the debt burden. This explains why growth figures for 2013-2015 in the Netherlands are behind those of Sweden and the US
  • Actually Sweden and the US started to depreciate their currency to rebalance their economies. The projected growth figures for Sweden and the US (versus the Netherlands), show prove that currency devaluation is a pleasant policy tool. 
  • The 'hard Euro" during 2008-2012 is not reflecting the strong economics of the Euro zones vis a vis the other countries, but merely shows the total misjudgment of the ECB of the European fundamentals
  • Spain, (with Ireland) achieved the biggest growth in 2000-2007, till some external investors started to question the underlying fundamentals. Nowadays they suffer from the too high policy rates (and rate curves) set in Frankfurt
  • The graph also illustrates that Italy had no growth at all (although Berlusconi stabilized debt levels)

The situation for the Netherlands can quickly become extremely dire. The second graph shows the relationship between consumer confidence and Dutch Housing prices. Given the low transaction volumes in housing, you can not expect a quick recovery in consumer confidence. Further admitting that the Dutch Debt mounting is collateralized by houses, that no transaction happen in the housing market and prices have further to fall, you may start to question the overall credit worthiness of Dutch debt. The last factor is that the Dutch economy can no longer trust in well-targeted monetary policies conducted by the ECB. As the article One size fits none’ perfectly points to is that the Dutch economic cycle is readily deviating from the German cycle, introducing a big risk that monetary policies will soon become way to harsh. (What will the Taylor rule suggest for an economy with negative growth, rising costs for ageing and declining house prices (while having a shortage of houses)??? ) Interest rates set in Frankfurt will potentially intensify the problems for the Netherlands in 2012-2015. Other statistics for Europe ("thanks to Barclays, strategist Julian Callow) show that apart from Germany no Euro countries are well equipped for the next 3-5 years. So increasing the risks that the ECB will conduct a misfitted monetary policy either for Germany, or for the rest of Europe.

Off course re-introducing the Guilder is not the quick fix to solve the current imbalances. But how do the Dutch "economists" asses the growing differences how National Central Banks within the Euro zone are dealing with the LTRO and using their own (rather than uniform) collateral requirements for the local banking industry. How does Joaquín Almunia - European Commissioner responsible for competition - response to some NCB taking more risk on their balance sheet and supporting their domestic banks, while other NCB's remain conservative and thus put their domestic banks into unfair competition?

In a few years team I expect some Dutch "economist’s will need to re read Lombard’s report again in order to understand why Dutch trend growth weakened substantially. Unless we can fully trust the Dutch policy makers to be experienced climbers, more reports will be written by unbiased hedge funds and or by biased economists

I do not vote for the PVV (but VVD), but at least I can prove to be an unbiased investor and a critical observer of general economic developments. My team sold all European sovereign bonds (except Germany and the Netherlands) late 2009, early 2010. Late 2011 we profited from the change in DNA at the ECB and  opportunistically  bought into EURO credits, but still question the long term imbalances within the Eurozone

  • Pvv.nl/images/stories/Netherlands and the Euro – Full Report final.pdf
  • Economist, Europe's crises, One size fits none, Jun 14th 2011, 18:33 by R.A. | WASHINGTON




Investor View: Don't Blame Excessive Speculation for Rising Commodity Prices

20:52, 5/3/2012 .. 0 comments .. Link

 Last November, IIN member Irene Ruis, Appolaris Pensioenbeheer, The Netherlands, posted a question on the ethics of commodity investing. Is it ethical, considering the potential ripple effects, such as rising food prices? The question has been a hot topic in the Netherlands where pension funds have been criticized for supposedly pushing up food prices through commodities investing. But such criticism is unfounded, according to IIN member Michel Salden, a portfolio manager at a Dutch pension fund. The reality, Salden says, is much more complex.

His main points:

  • IT'S ABOUT DEMAND: Fundamental changes in global demand are the main driver behind rising food prices, not excessive speculation. The rapid growth of the middle class in emerging markets (Latin America and Asia) explains the demand shock happening. Additionally, disappointing harvests, dietary changes and demand for biofuels, are also behind a massive global shift in demand and supply of commodities.
  • FINANCIAL PLAYERS DON'T GET PHYSICAL: It is harder to ‘manipulate’ commodity prices via the futures markets than via the physical markets. This because demand for commodity futures is automatically offset by increasing supply of futures. Only if financial investors exercise the future for physical settlement will they potentially impact the real demand and supply for commodities.
  • NO EVIDENCE OF CORRELATION: Most research papers do not find strong relationships between price levels and investments made by pension schemes. Rising food prices have not necessarily been caused by greater investment in commodities by pension funds just because the two events have happened in sync. Policymakers and opinion makers have struggled to grasp this.
  • MORE LIQUIDITY NEEDED, NOT LESS: If politicians want to expand production capacity in commodities, they should stimulate the efficient and fair functioning of the futures market. A greater role for investors and speculators creates more liquidity in the futures market, providing better ways for producers to hedge their long term production and investment programs. A ban on commodities investing will achieve the opposite!

Michel Salden talked to IIN European Content Director Matthew Craig about the interplay of commodity investors with forces of global demand and supply and why we should not leap to conclusions about pension fund investment in commodities. Salden, who is speaking in a purely personal capacity on this subject, has also produced an article in Dutch on this subject, Pensionenfondsen en speculatie, which is attached at the end of this article.

IIN: In your view, is the debate about the role of pension funds as investors in food commodities becoming too simplistic and ‘emotional’, with politicians and others using it as a chance to score points?

Salden: It is a very natural reaction that discussions on food investing become emotional. Nobody likes to see pictures of starving people in Africa and everybody wants to end this situation as soon as possible. Nevertheless, commodities are a relatively new asset class, meaning that investors, pension boards, the press and politicians need to educate themselves about the working of commodities derivatives before making direct conclusions. Better understanding of the linkage between the derivatives market and prices for physical commodities would tell them that answers in Africa’s problems will not be found in bans on speculation. Focusing on better local government, structural growth policies, higher income per capita are needed to answer the problems. The growing middle class in Asia shows what can be achieved by long term growth policies. Unfortunately the negative side-effect of globalization is that the middle class in Asia will become the largest buyer of food, thereby intensifying the problems in Africa.

Although there have been some headlines on the direct relationship between commodity investing and starvation in the developing world, the bulk of the academic evidence, including a balanced paper from the Dutch Ministry of Agriculture (see link below), does not find that commodity investing has caused higher food prices and hence shortages and starvation among the world’s poorest consumers. As said, many opinion-makers are still confusing correlation with causation. This tells me that politicians and opinion-makers still find it hard to learn from market behavior and the insights that the capital markets provide.

We saw this reaction with the ban on credit derivatives, the discussion of European rating agencies and now the same thing is happening with the debate on commodities and speculation. In all cases fundamentals ultimately determine the ‘fair’ price, whether policymakers like it or not. Rather than banning or imposing restrictions on capital markets, politicians should and can use the feedback from capital markets to learn about the long-term implications of their own policies. Better analyses of long term food prices would teach them that prices are almost at historical lows (corrected for inflation - see graph below). This probably explains why policymakers still believe in subsidizing bio-ethanol but overlook the reaction of the capital markets to these projects. We see similar mismatches between government investing and supporting renewables and markets disagreeing on whether renewables are the answer to potential energy crises.


As a final point here, before making investments I gauge how price elasticity is affected by inventories. It surprises me that most studies do not correct for this and underestimate a) how price elasticity changes when commodity inventories reach critical lows and b) how price elasticity on a short horizon can be totally opposite to the price elasticity on a longer horizon. The lower the inventory ratio, the less price inelastic commodities prices become, the higher the risk of price spikes. But longer term these price spikes will attract new supply.

IIN: Is the pace of development in South America and Asia, with a growing middle class consuming more meat, which in turn requires more grain, being overlooked as a cause of rising global food prices?

Salden: The middle classes in Latin America and Asia have been growing rapidly and they are consuming more meat as their incomes rise. For example, China was able to match domestic food demand with domestic supply until around 2000, but then it needed to import growing volumes on the global commodities market. It should be noted that most developing countries still subsidize domestic commodities prices. In addition, their politicians prefer growth targets and social stability above the long term control of inflation (monetary policies are not targeted at tempering food inflation, but focus on maximizing growth). This explains why the demand for agricultural commodities has become structural and will further accelerate. This increases the risk that price increase are needed to signal long term imbalances.

IIN: Do you think Africa has more fundamental reasons for rising food prices, such as high population growth, low economic growth, corruption, war, political instability etc, than commodity speculation by institutional investors?

Salden: I would argue that rising food prices are a global phenomenon and not specific to Africa. To solve Africa’s problems, you have to figure out how Africa can respond to this global demand shock. As rising food prices in Africa are predominantly a reaction to the dynamics in the Asian region, I am afraid there is no short term answer. Asia ambitions are clear; Africa lacks the structure to compete with Asia. It can be argued that commodity investing equals being short on innovations (or short real income growth). As said, I (and the markets) fear that Africa cannot adjust quickly to the changing dynamics of the Asian region. Many issues need to be resolved at once: better (local) government, outside investments, expansions in infrastructure etc. Don’t forget that targeting economies of scale will impact adversely on small local farmers, but is needed to improve the food supply on a national level. As there are no other jobs for local farmers, this can potentially increase social tensions.

IIN: Are critics of commodity derivatives markets and institutional investment in commodities missing the point that these markets tend to over or undershoot and that they are based on expectations?

Salden: You make a fair point. Commodities markets were, are and will remain volatile markets. This is inherent to the pricing mechanism and changing dynamics on these markets. Most pension schemes invest in commodities as they still see the dominance of commodities hedgers (producers and/or sellers) in influencing prices. As they are hedgers, they will structurally pay a premium to liquidity providers. The more investors and speculators become active in the commodities market, the better commodity producers and consumers can hedge their business risks. A better working and functioning of the futures market, is the best way to guarantee long term investments in commodities.

IIN: Is there any evidence that physical commodity prices are affected by commodity futures markets?

Salden: It is hard to structurally manipulate the capital markets. Other speculators will start to observe this behavior and start to take offsetting positions (if there is no ban). Also if prices are distorted on the futures market, arbitrage by physical players starts whereby they target the price differences between the physical and capital markets. It is, I guess easier to manipulate commodity prices on the physical markets than via the futures markets. Note that most physical players determine the flow patterns of commodities, thus having good insights on local inventories and storage costs etc. So market manipulation is easier to achieve via the physical market rather than the capital markets. Perhaps this explains why politicians have used subsidies, cartels and import tariffs for years to control commodities prices via the physical markets, rather than via the futures market.

Without a properly functioning and developed futures market, the only way producers can bare the risks of production expansions is by nationalization, clustering, and vertical integration within the commodities chain. Ultimately a ban on commodities investing will undermine an efficient long term supply of commodities. So the focus should be on oversight, transparency, development leading to a properly functioning futures market, rather than banning investors from this market. Note that the World Bank sees a better functioning and accessible derivatives market as way to understand and answer the food dilemma.. In fact it initiated a platform whereby farmers and countries can use the futures market to hedge their agriculture investments.

IIN: How efficient are commodity futures market relating to food?

Salden: There are various ways to define efficiency, but generally speaking you see the commodities with the strongest fundamentals showing the most price pressures and the most backwardation. (Backwardation is a good indicator for shifts in inventories). Though long-term investors can exploit these fundamental and or seasonal relationships for making good money, this does not automatically mean that prices are not fair and markets are inefficient. It shows that commodities producers and or consumers still dominate and are willing to pay premiums for liquidity for their hedging activities.

Another argument against the dominance of index investors is that they target US dollar amounts of futures exposure rather than commodities volumes. Hedgers, who typically hedge their production or consumption levels for commodities, continue to buy the same number of futures (independent of prices levels). So in rising price environments, the dominance of index investors will gradually disappear.

Recommended reading - see the attached PDF below, or use the following web addresses:

Henley Paper: Markets and States in Tropical Africa: the political basis of Agricultural policies, Robert H Bates - see PDF below

A Dutch language paper, Brief regering, `Hoge prijzen voor agrarische grondstoffen en voedsel – Landbouw- en Visserijraad´, is available here: http://www.denederlandsegrondwet.nl/9353000/1/j9vvihlf299q0sr/vinweil4t8xe

CME Group, CFTC Commitments of Traders Report Update - see PDF below

Futures Industry Association (FIA) 2009: CFTC Hearing on Price Discovery, Position Limits and Hedge Exemptions. Written Testimony of Mark D. Young, Kirkland & Ellis LLP on behalf of the Futures Industry Association."(Accessed November 2009) - see PDF below

Getu Hailu & Alfons Weersink, Commodity Price Volatility: The Impact of Commodity Index Traders, October 2010 - see PDF below

HM Government, Agricultural price spikes: causes and policy implications - see PDF below

OECD, Biofuel production 2010-19, see this URL: http://www.oecd.org/document/9/0,3746,en_21571361_44315115_45438665_1_1_1_1,00.html

Ke Tang and Wei Xiong Index Investment and Financialisation of Commodities - See PDF below

Michel Salden, Pensionenfondsen en speculatie - see PDF below


Instead of stopping investment in commodities, policymakers should focus on improving market efficiency.

What lessons could European policy makers learn from the following McKinsey report?

21:07, 13/2/2012 .. 0 comments .. Link

What lessons could European policy makers learn from the following McKinsey report? Why large M&A deals destroy value? McKinsey concludes that 80% of M&A deals do not create value. As management becomes typically more inward focused during a lengthy integration processes, they miss critical product or upgrade cycles and so destroy value on the long term.

These findings are very illustrative for the EU/ EMU debate. Rather than responding to increasing competition from Asia, the European political agenda focuses on restructuring and inefficient internal capital allocations. Notice that policymakers in Hong Kong, Singapore do not even mention integration. Severe competition is the key driver of innovation in this region. Did European policymakers perhaps perhaps follow another finding from the report: M&A in slow and maturing sectors can add value with the major reason that excess industry capacity is reduced (simply by eliminating competition). Current account imbalances in Europe prove there were some big believers of this kind of deal making



Waar blijft de DNB met een Long Term Repo Operation (LTRO) voor pensioenfondsen?

20:46, 30/1/2012 .. 0 comments .. Link


Pensioenfondsverplichtingen kunnen worden gezien als een langlopende lening verstrekt door de pensioendeelnemers. Goed balansmanagement door de fondsen moet ertoe moeten leiden dat bij pensionering de impliciete rente over de lening en een extra inflatiecompensatie kan worden terugbetaald. Helaas zijn nogal wat fondsen er niet in geslaagd om zelfs de impliciete rente te kunnen verdienen, met als gevolg dat niemand meer spreekt over reële pensioenambities en hier en daar zelfs nominale pensioenen gekort moeten worden. Sommige pensioenfondsen leggen de oorzaak daarvoor bij een lage rente. Echter, voor succesvol rentebeleid is niet alleen de hoogte van de rente van belang. Evenzo moeten pensioenfondsen kunnen profiteren van het verschil tussen de korte en de lange rente. Deze zogenaamde carry trade vormt het verdienmodel van een bank, waarbij banken kort en goedkoop lenen en lang en dus duur kunnen uitlenen. Weinigen beseffen dat pensioenfondsen van nature lang lenen en kort uitzetten en daarmee blootstaan aan een negatieve carry trade. Goed rentebeleid is dus vereist om deze ongunstige startpositie van de pensioenbalans door middel van renteswaps om te draaien in een positieve carry trade. Ofschoon rentedalingen en vervlakking van rentecurves in 2010 en 2011 leidden tot forse winsten op de swapportefeuilles van pensioenfondsen (meer dan 15% per jaar), zijn verdere koerswinsten beperkt. Net zo erg is dat de opbrengsten uit de eerder aangehaalde carry trade dalende zijn. Via renteswaps lenen pensioenfondsen momenteel ruwweg tegen een korte swaprente van 1.6% in ruil voor een lange 10-jaarsswaprente van 2.2%.

Gegeven de lage rente, de vlakke rentecurve, de economische en politieke problemen in Europa, de deflatiedruk en het geforceerd afbouwen van bankbalansen, is de vraag wat het optimale beleid is dat een centrale bank moet voeren in landen met een zeer omvangrijke pensioensector? Het succesvolle beleid van de FED biedt daartoe goede aanknopingspunten. Door het bewust creëren van een steile rentecurve (met gemiddeld 2.5% carry gedurende 2008-2012 ) faciliteerde de FED een gecontroleerde en succesvolle deleveraging van de US financiële sector. Een enorme winstgevendheid op de renteboeken, zelfs bij een renteniveau lager dan 3%, bewijst daarbij nog maar eens dat succesvol rentebeleid onafhankelijk kan worden gevoerd van het absolute renteniveau. Dus waar Europese banken nog in de beginfase van balansafbouw zitten, is de financiële sector in de VS in staat weer leningen te verstrekken aan consumenten en bedrijven.. Helaas stuurde de ECB vanaf 2008 aan op een vrij vlakke rentecurve, waardoor Europese banken, verzekeraars, maar ook pensioenfondsen steeds dieper in de problemen raken. Nu Duitsland aan invloed verliest binnen de ECB, begint deze instantie actiever te sturen op rente en rentecurven. Helaas wordt daarbij niet één Europees beleid gevolgd en wordt niet direct toegewerkt naar een steilere rentecurve, die de gehele Europese financiële sector door de het deleveragingsproces helpt. Wat begon met steunaankopen van staatsobligaties uit de periferie, gaat over in LTRO programma waarbij vooralsnog de banken uit de periferie obligaties en leningen uit de periferie opkopen en deze als onderpand inbrengen bij de ECB. Het opportunisme in de Zuidelijke landen is simpel: Spaanse en Italiaanse banken kopen obligaties op van de Spaanse en Italiaanse overheid (gemiddeld 6% rente) met geleend geld van de ECB en financieren deze aankopen tegen een rente van 1%. (zie het renteverschil met de eerder vermelde carry trade van pensioenfondsen) Echter, banken die vanuit prudentie zich willen kwalificeren voor nieuwe stresstesten, wel rekening houden met Basel regelgeving of geen (gedwongen) home bias hebben, zijn echter huiverig in het aankopen van deze obligaties. Zij gaan zelfs door met het geforceerd afbouwen van goede en slechte activa op hun balans om aan kapitaaleisen te voldoen.

Ook de Nederlandse pensioenfondsen kunnen niet direct profiteren van de nieuwe wind bij de ECB. Gezien de toenemende druk die op pensioenfondsen rust om te blijven profiteren van de carry trade, zou de DNB de pensioensector moeten faciliteren door (in)direct toegang te geven tot een eigen LTRO programma. Goede assets die nog steeds door banken geforceerd worden verkocht, worden voor pensioenfondsen namelijk extra aantrekkelijk als de DNB zorgt voor gunstige leenvoorwaarden. Verder zal een op pensioenfondsen toegesneden LTRO - met lage financieringsrente, hoge hefboom en een breed scala van toegestaan onderpand – een aantrekkelijker carry bieden dan de huidige portefeuilles van renteswaps. Snel schakelen, goed lobbywerk en gezond verstand is bij de toezichthouder, de DNB en de pensioenfondsen geboden om een einde te maken aan nieuwe en indirecte transfers binnen de EU. Waarom houdt de ECB wel de Spaanse en Italiaanse banken aan het infuus, maar moet de Nederlandse financiële sector tegen een te vlakke rentecurve blijven opboksen? Ook de Nederlandse pensioendeelnemers hebben ingestemd met één uniform Europees rentebeleid, daardoor hebben ze net zoveel aanspraak op ondersteuning als de Spaanse regionale banken!

Michel Salden

Leidt speculatief gedrag van pensioenfondsen daadwerkelijk tot honger?

22:52, 12/1/2012 .. 0 comments .. Link

Het zal u wellicht niet ontgaan zijn dat er in de media al geruime tijd forse beschuldigen worden geuit inzake het beleggingsbeleid van pensioenfondsen in grondstoffen. Pensioenfondsen speculeren ‘in honger’ en ‘voedselschaarste’.
Ofschoon de problemen in Afrika zeer schrijnend zijn en vanzelfsprekend vele emoties oproepen, is het mijns inziens belangrijk dat deze emotionele lading niet het beleggingsbeleid van pensioenfondsen gaat bepalen. Tot nu is alleen gewezen op de schadelijke kanten van grondstofbeleggingen. Er wordt echter zeer eenzijdig geput uit de grote hoeveelheid informatie en onderzoeken over speculatie op de grondstoffenmarkt. Het overgrote deel van de academische literatuur vindt namelijk geen oorzaak. Ook is een inhoudelijke reactie van asset managers of brokers nauwelijks te vinden, omdat deze partijen in dit emotionele debat nu eenmaal als gebiased worden gezien.
Een bredere kijk en een verdere nuancering zou echter snel tot de conclusie leiden dat er geen (tot kortstondige) verbanden zijn tussen het gedrag van financiële speculanten / pensioenfondsen en voedselprijzen. Wanneer pensioenfondsen hun beleggingen beperken tot uitsluitend financiële derivaten kan de voedselprijs niet structureel worden gemanipuleerd. (dit is anders als fysieke  posities in grondstoffen wordt opgebouwd) . Oorzaak en gevolg zijn bij analyses van prijzen en de derivaten posities van beleggers moeilijk van elkaar te onderscheiden. Verdere verdieping in de materie, betoogt juist dat er onvoldoende speculatie plaatsvindt in grondstofbeleggingen. De grondstofproducenten domineren deze markt van grondstofderivaten, ze kunnen echter onvoldoende tegenpartijen vinden om hun prijsrisico’s af te dekken. Als prijsrisico’s te groot zijn en niet kunnen worden afgedekt, leidt dit er mogelijk toe dat alleen in uiterst winstgevende projecten wordt geïnvesteerd, of dat er clustering van producenten plaatsvindt en of dat de private sector zich terugtrekt uit de productie. Met alle schadelijke gevolgen van dien. Wie meer lange termijn investeringen wil ontlokken in grondstoffen, zou juist moeten instemmen met meer beleggingsactiviteiten door institutionele partijen in deze markt. Blijkbaar dringt nu nog onvoldoende het signaal uit de markt door, dat voedselprijzen (gecorrigeerd voor inflatie) aan de lage kant zijn!

Omdat zowel de derde wereld, de pensioendeelnemer, de voedselconsumenten en -producenten gebaat zijn bij een grotere rol van pensioenfondsen heb ik mijn inzichten verder uitgewerkt (zie min rapport). Hopelijk worden daarmee de rationele aspecten in het debat teruggebracht. Niemand is erbij gebaat als pensioenfondsbesturen overhaaste stappen zetten en zich gedwongen terugtrekken uit hun grondstoffenbeleggingen.

Michel Salden

Het artikel is op persoonlijke titel geschreven, een uitgebreid rapport met toelichting inzake de rol van pensioenfondsen is bij de schrijver op te vragen


2011 commodities performance

15:18, 3/1/2012 .. 0 comments .. Link

  2011 was a great year for market neutral investing in commodities. My absolute return portfolio (size > USD 200 mi) generated more than 6.5% above cash (with a volatility target of 6%). The in- house managed accounts outperformed cash by 10.4% and 6.05% in 2011. (See below). Also in-house trading on the UK gas curve delivered more than 13% in H2 2011. Some externally sourced strategies showed slightly lower performance, albeit still positive (thereby acting as good diversifier and hedge against tail events)

Biggest themes for 2012:

  • escalation of conflicts in Middle East, social unrest in Egypt, Morocco, Nigeria, Gulf region leading to outperformance of Energy vs other sectors, underperformance of wheat vs corn and soybeans. (biggest risk remains lower global growth) 
  • End of ethanol subsidy will favor sugar vs aggs, but this needs time to work. Ethanol blending remains obligatory and Brazil is short ethanol.
  • Whereas the US can exploit domestic resources (natgas and shale, non conventional oil), Europe has to discover how to fill in the gap of German's ban on nuclear energy. (positive for Energy, LNG, Coal, Brent and Heating oil). Energy projects that are dependent on European government subsidies are at risk (wind, solar, electric cars)
  • Focus will shift from European financial markets (biggest risks remain in France and Belgium and markets need to push for reforms) to the sustainability of Chinese growth. Can the Chinese policy makers steer the economy (even if global growth faces setbacks?)
  • Another topic will be financing issues for the Japanese Government. Politicians are inert, but provide in return high deflation to the big Japanese savings pool. This status quo ends once Japans rising government  debt needs external financings sources
  • For European banks it's more economic to buy government debt, rather than performing their role of credit provider. So this massive ECB stimulus subsidizes those banks with the weakest client base and or positioned in the weakest sovereign. The deleveraging of the real economy continues. which remains postive for debt..., (bank debt becomes less risky vs. bank equity, margins will further decline)
  • Pension funds biggest bet remains on rising interest rates,  But interest rates are function of long term real growth (labor force and productivity gains) and inflation. Given negative growth rates for the labor pool, is it really productivity they bet on or inflation...??? In that lather scenario commodities fulfill an excellent hedge, rather than shorting rates (versus the liabilities) . Do not forget that geopolitical and social tensions rise in regions that are short commodities (North Africa, Europe?) or are big commodities exporters (Nigeriia and Middle East).  

Performance Histogram (absolute return portfolio vs DJUBS index)

Performance development of the commodities portfolio

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Most accidents don't happen when climbing a mountain of debt, but during the descent
Investor View: Don't Blame Excessive Speculation for Rising Commodity Prices
What lessons could European policy makers learn from the following McKinsey report?
Waar blijft de DNB met een Long Term Repo Operation (LTRO) voor pensioenfondsen?
Leidt speculatief gedrag van pensioenfondsen daadwerkelijk tot honger?


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