- Here at Archbridge Capital we are judged on our performance. We are done so continuously and relentlessly. And we exist because judgement has been favourable. In that spirit we thought it was worth tracking how we did on our published research, even though our published research occurs after we have already entered/exited into the positions we advocate.
- We have published a number of views/trades in our publications in the last few months (list and results to date below).
- Out of the four suggested trades since our last scorecard ALL have been profitable (one has been Neutral).
- Overall the portfolio has been profitable. Please note that it is the fact that profitable trades are much more profitable in comparison to losing trades that assures the portfolio overall to be profitable.
- "There are good trades that make money and bad trades that make money. There are good trades that lose money and bad trades that lose money. Money in the long-run is made from continuously taking the good trades." - Old Trading Adage.
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We shall end 2013 by updating our Score Card. Please note that we have substantially reduced all our positions before the illiquid Christmas Season, although our Macro-economic themes remain in place. Please find below trades we thought would make money back in the year and what should be done with them going forward. Since September, all recommended trades have made money.
THE GOOD:
Long US Equities: Positive
This trade has done very well since the last scorecard published in September. Equities are increasingly responding to the underlying economic growth and the great rotation is slowly beginning: we are seeing a substantial outflow out of bonds and some of it is finding its way into equities.
The US$ has indeed strengthened against some EM markets, especially those with current account deficits, as predicted. However, since the last score card the South African Rand has not moved substantially. The Turkish Lira on the other hand has performed handsomely and we suspect this story of EM weakening is not over yet. As a vital guideline we believe this story will only come to a halt when real rates in the EM become substantially positive - and they are far from that especially in Turkey, where further currency pressures are to be expected.
Short US Treasuries: Neutral
This trade has performed well, with tapering now having started and with the markets realising that the US is in a cautious monetary tightening cycle. The Fed is careful not to destroy the recovery that is in place, while being aware that extraordinary measures like its QE programmes cause unwanted risk-taking. Though since the last ScoreCard on September 17th this trade has been neutral we see further profit potential going forward.
Short JPY long USD: Positive
We view this trade as a structural trade where the monetary policy over the next year or more of the USA will be the exact opposite of Japan's. The USA will tighten monetary stimulus further, while Japan will continue to loosen it. If what we believe about China's slowdown becomes reality over 2014 we could see Japan doing even more QE than currently planned over the next year. We expect to see levels above 115-120 in the US$ JPY trade, though this will take some time. In the meantime we would suggest keeping stops wide and positions moderate, since corrections to 93 could occur over this time scale.
THE BAD
Not this time and for that we are grateful.
THE UGLY
Not this time and for that we are grateful.
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