- 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 HALF have been profitable. SINCE INCEPTION (I.E. THE FIRST TIME WE RECOMMENDED THESE TRADES, ALL HAVE BEEN SUBSTANTIALLY PROFITABLE.)
- Overall the portfolio has been Neutral since the last ScoreCard. Please note that over time 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 start 2014 by updating our ScoreCard. Please note that we are recommending changes to our current positions, although our Macro-economic themes remain in place, due to external factors. All trades without exception are profitable since Inception but only half are so since the last ScoreCard back at the end of December 2013.
THE GOOD:
Long US Equities: Positive
This trade has done marginally well since the last scorecard published in December. Though equities in the US will continue on their trajectory we find it prudent to exit this very profitable trade (though it has really not made any substantial returns since the last Scorecard at the end of December, it has nevertheless made substantial sums since we have first put on this trade back in May 2013) due to the uncertainties pertaining to the Ukrainian situation and China's banking system. We have seen the repurcussions of using Copper as collateral in China and are worried that this may not be the end of the liquidation process. This process could result in further defaults in corporate China and though we believe the government will act by either cutting reserve requirements or increasing money supply, we still would like to err on the side of caution.
The US$ has indeed strengthened against some EM markets, especially those with current account deficits, as predicted back in May in our publication "A love supreme - The US$ is back". However, in essence we have published this trade in earnest in our ScoreCard of September 2013 and it has performed handsomely ever since.The Turkish Lira stands out as the star performer as unexpected yet welcomed political issues have caused the Lira to depreciate quickly above our well publicised 2.20 target against the US$. We will however, exit the trade immidiately above 2.20 TRY/$ as we do believe that unexpected events both within Turkey and abroad could unexpectedly cause very volatile movements. In essence, within Turkey we do expect more political pressure before the local elections at the end of March, but are in no way certain, while abroad the uncertainty over both China and the Ukraine again moves us to the sideline.
THE BAD
Short US Treasuries: Negative
This trade has performed well over time, and we have recommended this trade back in April 2013 in "There is treasure in those Treasuries" (Thursday, April 4, 2013) with a 12-18 months time horizon (in April US 10-year yields were trading around 1.60 vs their current 2.73 level). Since the last ScoreCard at the end of December 2013 this trade has performed quite badly and this may be exacerbated by the Ukrainian and Chinese situation as well as the bad economic data coming out of the USA due to its harsh weather. We are, however, unwilling to cut this overall substantially profitable trade and sit tight.
Short JPY long USD: Negative
Since the last ScoreCard this trade has not performed and fell from around 105 to 102.7 currently. However, we view this trade (which is still substantially profitable since we recommended it first time back in November 2012 and exited briefly in "Take Five" June 3, 2013 and re-entered in July 2013's ScoreCard) 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 theirs. If what we believe about China's slowdown becomes reality over 2014 we could see Japan doing even more QE than currently planned over this 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 reducing the position and keeping stops wide and positions moderate.
We are also exploring to short the Yen against other currencies like the GBP and the Euro, and hence constructing a basket against the yen. We will not add to the position due the uncertainties mentioned above and the status of the Yen as a safe haven currency (the reason for which is beyond us, but it is the harsh reality that we must adhere to).
We are also exploring to short the Yen against other currencies like the GBP and the Euro, and hence constructing a basket against the yen. We will not add to the position due the uncertainties mentioned above and the status of the Yen as a safe haven currency (the reason for which is beyond us, but it is the harsh reality that we must adhere to).
THE UGLY
Not this time and for that we are grateful.
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