Macro
With the correct set of risk management practices and quantitative investment analysis, returns north of 50% can be generated from recessionary global events. For a diversified portfolio of stocks or property, this offers complementary returns which permit wealth accumulation no matter the economic climate of the day. Such a strategy does,... Show More
Equities
Buying undervalued stocks is traditionally the way investors seek to deliver returns over the long term. At Vega Capital, we utilise a differentiated way of looking at the markets in the United States and discuss it in today’s blog. There are two overarching algorithms we utilise, the first uses macroeconomic... Show More
Let’s start by reviewing what the yield curve actually is. Consider a range of durations for government notes, for example, you can have 3-month notes, 1-year notes, 2-year notes and so on up to 30-year bonds and notes. Show More
Education
In my last blog, I provided an overview of Vega Capital’s model for identifying and pre-empting recessions in the United States. Last Thursday (at WeWorks Martin Place), I presented a talk on how our model would have approached the Great Depression and other recessions. The former is what I’ll be... Show More
Macro
Let’s start by defining what a recession actually is. Google’s dictionary defines it as ‘a period of temporary economic decline during which trading and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters’. In short, we’re looking for some sustained contraction in GDP. So... Show More
Asset Allocation
In my last Livewire post, I commented that The Vega Fund would be looking closely at economic data over the coming months to determine whether it should remain long (and weather out what I believe is a temporary correction) or whether going short would be a viable option. Show More
Statistically speaking a 10 to 20 per cent correction should occur about once a year (averaged out over time). Hence to see one shouldn’t be such a great surprise...but when it occurs, how do we handle it? Show More
With markets pulling back over the past few weeks, many investors are wondering whether this is the beginnings of a bear market. Today I wanted to discuss these trends and how I’d approach them. Show More
How can investors generate returns regardless of which way the market moves? In today’s article, I review the unique process which Vega Capital uses to achieve this goal. Show More
Today I wanted to provide some depth on how we use VIX products to manage risk in The Vega Fund portfolio. As far as we know, we’re the first fund in Australia to hedge in this particular fashion and hence some clarity is warranted. It’s not the only tool in... Show More
Hi Gary, thanks for your comment. You're right, backtests with a few data points aren't significant. This is why we've studied the performance of our macroeconomic algorithm back 100 years.
On How we plan to generate returns in the next global recession -
Hi Mark, thanks for your comment. We don’t unfortunately provide an investment signal service, nor advice on how individuals should diversify their portfolios with respect to asset classes. The most we can do as a wholesale fund is tell you what we’re seeing and what we’ve decided to do with the money that our investors have entrusted to us. These are legal restrictions which are enforced by ASIC. Even without those restrictions, however, we’d never tell individuals what to buy and sell. We’d get no thanks for getting it right and all the blame if it goes wrong. But what you do get from my article is a view of the economic outlook which is based on many years of model/algorithm development...for free. That’s no too bad at all.
On How we plan to generate returns in the next global recession -
Hi Ricky, thanks for your question. From the data I've looked at, I can't see the inversion itself creating the effects in line with the theory you're suggesting. The theory itself is fine, I've just seen no evidence to back it up as far. As always, I'm happy to be proven wrong if you can bring some analysis to my attention. In terms of the 'better sources of data', I don't normally go into exactly what we use or how we use it. As you would expect, we save our best IP for our investors. But generally speaking, there are 3 data sources we look at before waving the red warning flags. i) Money supply ii) Debt/interest rate stress iii) Employment levels Only 1 variable (money supply) has triggered a warning sign as far. We're cautious on markets because the other two aren't far from triggering.