財經觀察 2187: Goldman Sachs Wrong on Economic Recovery

Goldman Sachs Wrong on Economic Recovery, Macro Hedge Funds Say
2009-09-01 04:01:01.8 GMT

By Cristina Alesci
    Sept. 1 (Bloomberg) -- Paul Tudor Jones, the billionaire hedge-fund manager who outperformed peers last year, is wagering
that Goldman Sachs Group Inc. and Morgan Stanley got it wrong in declaring the start of an economic recovery.
    Jones’s Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are taking a bearish
stand as U.S. stock and bond prices rise, saying that record government spending may be forestalling another slowdown and
market selloff. The firms oversee a combined $15 billion in so-called macro funds, which seek to profit from economic trends by
trading stocks, bonds, currencies and commodities.

    “If we have a recovery at all, it isn’t sustainable,” Kevin Harrington, managing director at Clarium, said in an
interview at the firm’s New York offices. “This is more likely a ski-jump recession, with short-term stimulus creating a bump
that will ultimately lead to a more precipitous decline later.”

    Equity and credit markets have rallied on hopes that government intervention is pulling the U.S. out of the deepest
economic slump since the Great Depression. The Standard & Poor’s 500 Index jumped 51 percent from its 12-year low in March
through yesterday.

    The economy will expand at an annualized rate of 2 percent or more in four straight quarters through June 2010, the first
such streak in more than four years, according to the median estimate of at least 53 forecasters in a Bloomberg survey.

    Tudor, the Greenwich, Connecticut-based firm started by Jones in the early 1980s, told clients in an Aug. 3 letter that
the stock market’s climb was a “bear-market rally.” Weak growth in household income was among the reasons to be dubious
about the rebound’s chances of survival, Tudor said.

                          Yields Drop

    Yields on corporate bonds relative to U.S. Treasury benchmarks have sunk to levels unseen since before the collapse
of Lehman Brothers Holdings Inc. in September, a positive sign for credit markets. Spreads on junk bonds fell in July to within
10 percentage points of Treasuries, lifting them out of the distressed category for the first time in almost a year.

    “We think the recession is ending right now,” Abby Joseph Cohen, senior investment strategist at Goldman Sachs, said in a
Bloomberg Radio interview Aug. 17. The New York-based bank forecasts 2 percent growth in U.S. gross domestic product in
2010.
    Economists at New York-based Morgan Stanley in the past month have incrementally raised their GDP growth estimate for
the current quarter to 4.8 percent annualized from 3.5 percent.
    President Barack Obama said a decline in July’s unemployment rate signaled “the worst may be behind us.” GDP
shrank 6.4 percent in the first quarter and 1 percent in the second, after a 4 percent contraction in the second half of
2008.

                     Different Jobless Rate

    A focus on misleading indicators is driving markets, macro managers say.
    Clarium watches the unemployment rate that accounts for discouraged job applicants and those working part-time because
they can’t find full-time positions, Harrington said. July joblessness with those adjustments was 16 percent, according to
the Department of Labor, rather than the more widely reported 9.4 percent.
    The housing data isn’t as rosy as some see it, Harrington said. As existing U.S. home sales rose 7.2 percent in July from
the previous month, distressed deals including foreclosures accounted for 31 percent of transactions, according to the
National Association of Realtors, a Chicago-based trade group.
    A report by the Mortgage Bankers Association, based in Washington, showed the share of home loans with one or more
payments overdue rose to a seasonally adjusted 9.24 percent in the second quarter, an all-time high.

                        Loaded for Bear

    Clarium, which oversees about $2 billion, is positioned for an equity bear market through investments in the U.S. dollar,
Harrington said. Falling stock prices will strengthen the currency by forcing leveraged investors to sell equities to pay
down the dollar-denominated debt they used to finance those trades, he said.
    High unemployment, lower wages and potential missteps by policymakers around the globe may stifle economic growth in
2010, Tudor said. The firm, which manages $10.8 billion, is at odds with 55 economists projecting an average of 2.3 percent
growth next year, according to the Bloomberg survey.
    Macro managers’ pessimism is fueled in part by the U.S. government’s response to last year’s financial crisis, which
they say fails to address the root cause. Banks still hold hard-to-sell assets on their balance sheets, the managers said.

                     Subdued Credit Growth

    “Some critical initiatives have been cut short,” Tudor said. “As a result, toxic assets remain on balance sheets and
credit growth is likely to be subdued for a long period.”
    Some firms, including Brevan Howard Asset Management LLP, see the recession at its end while dismissing the likelihood of
robust growth.
    Brevan Howard, Europe’s largest hedge-fund manager with $24 billion in assets, told clients the U.S. could stumble when
stimulus spending fades after the current quarter. The London-based firm, whose macro fund gained 20 percent last year, said
consumer wealth erosion, scant bank lending and troubled world economies may result in a lackluster recovery.
    The U.S. Federal Reserve and other policy makers took unprecedented steps in the past year to stave off financial
disaster. The Fed’s Board of Governors used emergency powers to rescue markets for commercial paper, housing bonds and asset-
backed securities. The Fed’s balance sheet swelled to $2.08 trillion last week, more than doubling from a year earlier.

                       Accounting Effect

    The Financial Accounting Standards Board voted in April to relax fair-value accounting rules. The change to mark-to-market accounting allowed companies to use “significant” judgment in gauging prices of some investments on their books, including
mortgage-backed securities that plunged with the housing market.
    Banks are reporting better earnings because they haven’t been forced to account for their losses yet, Clarium’s
Harrington said.
    “We haven’t fixed the problem,” he said. “We’ve just slowed down the official recognition of it.”
   Hedge funds rose in July for the fifth consecutive month, returning an average of 2.4 percent as stocks advanced,
according to data compiled by Hedge Fund Research Inc. Bearish stances prevented some macro funds from joining the rally. The
category lagged behind the industry average in July, rising 0.6 percent.

                       Fund Performance

    Clarium, whose assets were mostly in fixed income, dropped 6 percent this year through June. Horseman’s fund slid 16.3
percent. Tudor’s BVI Global Fund Ltd. returned 11 percent.
    The funds held up in 2008 amid the industry’s record 19 percent loss. Horseman’s Global Fund USD, which focuses on
stocks, made HSBC’s private bank list of top 20 performers by gaining 31 percent. Tudor’s and Clarium’s funds fell 4.5 percent.
    Macro managers are examining China for hints on how to place currency and commodities bets. Tudor said the country’s
spending spree on raw materials inflated commodity prices and weakened the U.S. dollar.
    A government mandate forcing banks to make about $1 trillion in loans during this year’s first half is spurring
short-term growth that may not last, according to Clarium.
China’s banking regulator drafted capital requirements Aug. 19 that may lead banks to rein in lending.
    Horseman, with $4.1 billion under management out of London, was investing in long-term U.S. Treasury bonds. The firm
believes interest rates will stay low for longer than the market expects, benefiting the asset class.
    “Despite every effort by government in North America and Europe to avoid deflation,” Horseman wrote, “the current
numbers suggest they are losing the battle.”