?We are in a broad based liquidity driven bull market.? Furthermore, the major indexes are poised to tack on ?another 10% by the end of this year.?
That was the informed view of SkyBridge Capital managing partner Anthony Scaramucci, known as the ?Mooch? to his friends. I touched based with Anthony while passing through New York a few weeks ago.
Scaramucci?s Views are not to be taken lightly. SkyBridge Capital is a research driven alternative investment firm with over $10 billion in?total assets under advisement or management. The firm offers?hedge fund investing solutions?that address?a wide range of market participants from individual retail investors to large institutions.
SkyBridge tracks the strategies, outlooks, and the performance of many of the 10,000 hedge funds managing $2.7 trillion in assets. As a result, there are few better reads out there on where the global financial markets are heading than the view at SkyBridge.
Anthony says there are three major drivers for the markets today. A race to the bottom by central banks globally is forcing unprecedented liquidity into the markets.
Zero interest rates and a $4.6 trillion balance sheet have effectively made the Federal Reserve the world?s largest hedge fund. There are no longer any bond vigilantes to bring discipline.
Less appreciated by traders is the fine print in the Dodd/Frank financial regulation bill that has unleashed a new generation of corporate raiders. Corporations are using the $2 trillion in cash on their balance sheets to fight back, repurchasing their own shares. Thus, company buy backs are at all time highs, and there is much more to come.
All of this means that financial assets of every description can only go one direction, and that is northward.
One result of this is that index funds are beating the pants off of hedge funds. Long/short equity managers, which comprise 43% of the funds out there, are underperforming for the sixth consecutive year.
Macro funds are getting destroyed because many historical cross asset relationships have broken down. Suddenly, the world no longer makes sense to them and has apparently gone mad, at the investors? expense.
To me, this is all a classic sign of too much hedge fund money chasing too few trades. The hedge fund industry has gotten too big for its britches.
I learned in Japan?s never end bear market that when you only have hedge funds trading with hedge funds, nobody makes any money.
Another issue is our antiquated tax code, which has remained frozen in the 1980?s. Any attempt to change it is thwarted by well-funded special interests, at the economy?s, and your expense.
To broaden its horizons and enhance insights for its clients, SkyBridge recently purchased the rights to the old ?Wall Street Week? from Maryland Public Broadcasting, the once venerable TV investment program hosted by the respected Louis Rukeyser.
Scaramucci believes that the financial media have been hijacked by the 24-hour news cycle that distills crucial information down to 30-second bullet points. Complex economic and investment issues deserve a more thoughtful and extended analysis. Anthony plans to restart the long format program sometime next year.
Scaramucci is the author of two books, The Little Book of Hedge Funds: What You Need to Know About Hedge Funds but the Managers Won?t Tell You, and Goodbye Gordon Gekko: How to Find Your Fortune Without Losing Your Soul.
On my way out of Anthony?s office I noticed a K-bar, a vintage WWII combat utility knife, mounted in a plaque on the wall with a message of thanks from Wounded Warriors Project (click here for their site http://www.woundedwarriorproject.org ).
I laughed, as I have the exact same plaque on my wall at home. The blade is still razor sharp. In recent years, Anthony has raised an impressive $5 million for the worthy veterans organization.
I thanked the ?Mooch? for his contribution and headed out the door for the Lexington line, hoping to beat the rush hour traffic.