Macro Portfolio

Our flagship publication, which gives a real time view of the portfolio, and explains why and how a trade is implemented.

Rcube Macro Portfolio 15/12/2016Dec 15 2016
The breakout of US 5yr rates is a major event . It opens the door to a bigger move. We believe that the trade that comes out of this is a short JGB. When we went long USDJPY this summer at around 105.50, we highlighted that relative monetary base growth between Japan and the US was pointing at around 150 USDJPY, the yield factor (another catalyst) following the US 5yr breakout has just been triggered. The odds of seeing 140/150 next year have increased again.
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Rcube Macro Portfolio 25/11/2016Nov 25 2016
The sharp rise of the US currency folowing the Trump election is the manifestation of an increased confidence in US economic growth. Unfortunately, as Hyun Song Shin head of research at the BIS explains in a just published paper, this dollar strength could trigger a significant tightening of financial conditions down the line.
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Rcube Macro Portfolio 28/10/2016 Oct 28 2016
Our US equities model’s expected return has just plunged to levels last seen in 2000 and 2008. Expected annualized returns have dropped to -17.6%.
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Rcube Macro Portfolio 05/10/2016: Long HUF vs QE currencies. Increasing VIX exposure.Oct 05 2016
Currency markets are starting to move. Some meaningful technical breakouts are unfolding. It looks to us like commodity and EM currencies are about to significantly accelerate versus a basket of QE currencies, that is where QE is or has been implemented. We have been long EM equities versus SPX for a while, we recently added a short EURNOK and a short CHFNOK (we are also long AUDCHF, looking to add on a close above 0.76)
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Rcube Macro Portfolio 23/09/2016: More upside for EM vs US EquitiesSep 23 2016
Emerging market equities are climbing a wall of worry, supported by strong inflows, and better news flow...
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Rcube Macro Outlook Q4 2016Sep 23 2016
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Rcube Macro Portfolio 07/09/2016: The Consequences of the Likely Increase of the US Budget DeficitSep 07 2016
US economic momentum is diving. A few months ago we explained why higher employment costs, combined with weaker earnings, would hurt corporate profits and consequently business activity and, in the end, employment. Add to this elevated inventory levels, rising credit risks and tighter bank lending conditions and you have a risky business environment...
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Rcube Macro Portfolio 18/08/2016: Market ThoughtsAug 18 2016
More and more Equities’ behavioral indicators suggest that, at least from a sentiment standpoint, stock markets have become vulnerable. Bullishness has recently spiked to levels historically associated with major tops. A large consensus now believes that as long as yields will be as low as they are, the grab for yield mentality will force investors to seek returns away from bonds and into equity or equity linked vehicles...
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Rcube Macro Portfolio 04/08/2016: Adding US Small Cap Puts & VIXAug 04 2016
US equity downside is a bargain. It is too cheap to be ignored. The VIX deviation from our model’s fair value is the largest ever. The last two episodes when the gap was comparable were in May 2008 and in July 2014 and July 2015.
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Rcube Macro Portfolio 28/07/2016: Large Credit Channel DivergencesJul 28 2016
Central banks around the globe are releasing their quarterly lending surveys. The ECB’s survey results were surprisingly robust given the weakness of European banks’ share prices over the quarter. One one side, banks’ willingness to lend is improving, on the other, banks’ relative weakness is a dark cloud.
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Rcube Macro Outlook Q3 2016Jun 06 2016
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Rcube Macro Portfolio 19/05/2016: Short US Small CapsMay 19 2016
US commercial banks have now released their charge‐off and delinquency rates on loans and leases for Q1. NPLs are now rising at a faster pace than just before the great recession...
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Rcube Macro Portfolio 12/05/2016: Long USDJPYMay 12 2016
Japan’s current account balance came out on the strong side today. It is the second highest number ever (March 2007 remains the highest); the trade balance was also strong. The yen reacted by weakening sharply. This tells us that the timing to sell it again has arrived...
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Rcube Macro Portfolio 05/05/2016: The US Default Cycle Is About To AccelerateMay 05 2016
Yesterday the FED released its latest quarterly Senior Loan Officer Survey. Results show continuous tightening of lending standards.  The percentage of banks increasing spreads of loans over their cost of capital on C&I loans is now at zero. Some banks are already increasing the cost of capital for their customers.
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Rcube Macro Portfolio 27/04/2016: Relative US vs. EuropeanApr 27 2016
Yesterday, French employment data came out very strong. This is noteworthy because France is the middleground of Europe, and acts as a benchmark for the Eurozone. The job market has improved in the south of Europe as well. Spain and Italy have also seen their unemployment rates fall significantly lately. Additionally, the credit channels between US and Europe have diverged as a result of very different non financial corporate behaviors.
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Rcube Global Macro Monthly Review Apr 2016Apr 15 2016
We define financial booms as economic phases when private credit growth outpaces GDP growth significantly for more than 3 years. In 2015 alone, non‐financial debt rose 3.5 times faster than GDP (1.912 trillion vs. 549 billion). The FED policy of the last 4 years has once again sowed the seeds of the coming financial crisis.  
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Rcube Macro Portfolio 31/03/2016: US Corporate Profit RecessionMar 31 2016
The latest US GDP report for Q4 2015 revealed that US corporate profits were down 11% yoy. While investors currently believe they will snap back up by the end the year, since the drop was mostly the consequence of lower commodity prices, we think differently. 
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Rcube Global Macro Monthly Review Mar 2016Mar 24 2016
The magnitude of the rally in risky assets since mid‐February has clearly surprised us. US corporates have kept buying back aggressively their own shares in Q1 2016, something we did not anticipate. It is now estimated that total buybacks for Q1 could surpass the historical highs reached in Q3 2007...
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Rcube Macro Portfolio 26/02/2016: Korea Crash WarningsFeb 26 2016
South Korea’s credit crunch is intensifying. Assets there are mispriced. As a result, strong market opportunities have opened up.
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Rcube Global Macro Monthly Review Feb 2016Feb 17 2016
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month. Our investment philosophy relies on the study of the credit cycle‐. When the private sector is as leveraged as it is today (in the US and globally), significantly more weight should be given to the analysis of credit transmission mechanisms. The intermediation of credit flows has changed over the last 20 years. As we have shown several times, the non‐bank credit channel as a share of total credit has substantially increased...
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Rcube Macro Portfolio 09/02/2016: A Private Sector Deleveraging Phase Has StartedFeb 09 2016
Credit risks are rising everywhere. Europe which had been, until recently, the bright spot on the global credit landscape is now catching up. Financials’ credit risks are spiking, converging in the process with (lower) banking shares. This whole mess was triggered by the move from the BOJ into negative rates. It seems that, what was viewed until last year as support factors for risky assets, are is now turning into one of the causes of the ongoing repricing of financial risks.
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Rcube Macro Outlook Q4 2015Jan 20 2016
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Rcube Macro Portfolio 12/01/2016: When Technicals Meet FundamentalsJan 12 2016
Major equity markets are now sitting on critical long term levels. with the equity volatility term structure moving into a higher regime and the credit cycle turning down globally, we expect these levels to break and to trigger a full blown global equity bear market.
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Rcube Global Macro Monthly Review January 2016Jan 06 2016
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month. US credit spreads are blowing up, US small caps are under heavy pressure, equity volatility has entered a higher volatility regime, the broad dollar index is breaking out on the upside, the Yuan is being devalued, ...
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RE‐PRICING RISKS ON US INTEREST RATESDec 04 2015
Once again, the US 5yr yield is getting closer to the level (1.85%) that has capped every acceleration since 2013. There are currently several forces at work that could trigger an upside breakout. 1/ The lagging impact of energy prices on the manufacturing cycle. Over the last 50 years, each time oil prices crashed in a magnitude comparable to the last 16 months’ move, manufacturing activity was boosted with a lag. Historically, the adrenaline shot was felt between 6 and 12 months after the oil price crash...
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European vs. US EquitiesNov 26 2015
European equities will outperform their US peers in 2016. Several uncorrelated factors are now at work and are clear tailwinds for Eurozone equities on a relative basis. Let’s start with what we believe is the most underestimated catalyst by global investors: The diverging credit channels between the two zones. Over the last 3 years, European high yield has significantly outperformed US high yield. We have all the reasons to expect the trend to be sustained in 2016.
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An Update On the Russell 2000 Gold BasketNov 13 2015
The equally weighted basket composed of the Russell 2000 and Gold has meaningfully underperformed US large caps. This was one of the goals of the trade. When initiated (basket & SPX rebased to 1 at day of implementation), we mentioned that the trade could work in two different scenarios: a Fed Fund liftoff, or a deflation scare. The Fed now looks ready to act, while deflation risks have not receded (credit crunch risks in emerging markets are intensifying). The trade is therefore still very attractive.
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The US Credit Cycle Has TurnedNov 06 2015
The US credit cycle has turned. This looks clear now. The latest Senior Loan Officer Survey in the US shows that now, both banks’ and non-banks’ lending standards are being tightened.
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Rcube Macro Portfolio 03/11/2015: USD Upside, US Yield Curve Flatt., EM Eq. Underperformance, SX5ENov 03 2015
The US dollar trade weighted basket has been consolidating for the last 10 months. It should break out on the upside soon.
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Rcube Global Macro Monthly Review Oct 2015Oct 20 2015
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A Fertile Mix For a Sharp Downside Move On Risky AssetsOct 02 2015
The current divergence between investors’ positioning and risk appetite ‐ hence market liquidity ‐ is striking.
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Going Short an Equally Weighted Basket of US small Caps and GoldSep 10 2015
As we have recently explained, China is tightening domestic financial conditions by draining liquidity each time it intervenes in the FX market to slow down the yuan depreciation. We now have evidence that ongoing and probably intensifying PBOC interventions are also tightening global financial conditions. The absolute and relative performance of some assets since the CNY devaluation in August makes us think that China is selling treasuries (40% of its FX reserves) in order to defend its currency.
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World Equity Bear Market Starting. An Update on our Equity Volatility TradesAug 28 2015
The current combination of overpriced, overbought and over owned equities, sinking risk appetite, and extremely elevated bullish sentiment creates an environment where investors can panic very rapidly. Investors are re‐discovering the concept of “gap risk”, with world equities wiping out two years of positive returns in just four trading days. The MSCI world is nearly flat on a two year rolling basis.
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China’s Devaluation, EM Corporates and Rising Risk AversionAug 20 2015
Since Q4 2014, we have been explaining why China had little option but to devalue its currency (Rcube Macro Portfolio 20/11/2014). Last week’s move is just the early step of a much more meaningful devaluation. Authorities always choose to devalue as opposed to reforms when a crisis hits. China is currently dealing with deflating housing and equity bubbles, but also debt and economic restructurings all at the same time. The odds that in such difficult environment they choose reform over devaluation are extremely low in our opinion.
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Going Short KOSPIAug 11 2015
Massive debt burden by the private sector (non‐financial corporations and households), weakening exports due to both the sharp reversal of the Chinese investment cycle and the Japanese yen debasement are putting pressure on Korean companies’ credit risks. The three major rating agencies’ upgrade to downgrade ratios are the weakest since the Asian crisis.
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US High Yield, Japanese Yen and EM AssetsJul 27 2015
Corporate financing needs explain (amongst other things) the relative valuations between high yield corporate bonds and equities. The very aggressive re-leveraging of US corporates imply that US high yield bonds should yield between 300 and 500bp higher than current US equities earning yield. On a trailing basis, US equities earning yield is 6.5%. US high bonds yield 6.9%.
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Rcube Macro Portfolio 20/07/2015 Equity Volatility & Market UpdateJul 20 2015
We believe that equity volatility in the US is now more mispriced than it has ever been. Even more so than in Q2 2008, the last time our model flashed a signal of that magnitude.
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Global Macro Monthly Review June 2015Jul 10 2015
The topping process of global equities is well advanced. We are getting closer from downside acceleration. As we have pointed out since December last year, a number of worrying developments are weighing on global risky assets. Greece is “l’arbre qui cache la foret”. The real issues are we believe elsewhere. 1/Monetary policy error in China 2/ Emerging markets growth scare 2/ Severe tightening of global financial conditions 3/ Substantial mis-pricing of US risky assets (credit and equities) 4/ Investors complacency
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US vs Europe Equity Implied VolatilityJun 18 2015
The VIX to V2X ratio is at theits lowest level ever. Short term equity volatility has spiked in Europe on the back of fears of a Grexit, while the SPX realized volatility is so low that it caps the VIX. We believe that this sThe situation is we believe not sustainable.
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US Consumer Discretionary Stocks to UnderperformJun 04 2015
Timing looks right to sell US consumer discretionary stocks versus the SPX. The catalysts are the recent spike in yields and the weak consumer spending environment, most likely the consequence of changing households’ behavior (higher savings rate).
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US Dollar Upside & Under‐priced Financial risksMay 29 2015
Has the second upleg in the US dollar already started? Is the FED, reassured by the recent batch of positive data, about to raise interest rates into what still looks like a slowdown. If so, how will emerging market corporate borrowers and global investors react to both a rising US dollar and rising interest rates?
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Global Macro Monthly Review May 2015May 15 2015
Let’s start with an adjustment to recent publications, where we grew very worried about the health of the US credit channel following extremely depressed readings on the NACM CMI survey. For reasons that are still unexplained to us, the NACC revised violently the last 4 months’ results. The scope of revisions without proper explanations discredits the survey. Nevertheless, the positive revisions combined with the Q1 Senior Loan Officer Survey from the FED, paint an ok situation of the credit channel in the United States.
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US vs. German Long End Yield DifferentialApr 27 2015
The 30yr yield differential between US and Germany has reached historical highs (200bp). This is explained by the relative economic strength of the two zones. The relative industrial production momentum captures this extremely well.  
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Rcube Global Macro Monthly Review April 2015Apr 13 2015
Rcube Global Macro Monthly Review April 2015
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US Corporate Profits Under ThreatApr 01 2015
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Global Macro Monthly Review March 2015Mar 20 2015
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month.
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Rcube Global Macro Outlook - 2015 Q2Mar 16 2015
Rcube Global Macro Outlook Q2 2015
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Chinese equities or Yuan Something's Gotta GiveMar 03 2015
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Negative Earnings Revisions GloballyFeb 26 2015
Earning revisions are being revised lower almost everywhere (Japan being an exception). The most important piece of data is the analysts’ short term change (1 month) of their 12 month forward forecasts. It is the most correlated with equity prices and equity volatility over time. While it is a leading indicator only in the US (analysts there seem to be much quicker to adjust their estimates), it is nevertheless positively correlated with equity momentum everywhere.
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Equity Volatility Going HigherFeb 20 2015
Equity investors are about to face a volatility regime shift. The low volatility regime US equities have enjoyed since 2010 is over. This document will try to demonstrate why.
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Attractive Bund Downside PayoffsFeb 17 2015
We think that the Bund has an attractive risk reward downside trades given the large gap between the recent Eurozone economic momentum rebound and German 10yr yields.
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Rcube Global Macro Monthly Review - February 2015Feb 13 2015
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month...
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EURUSD UpdateFeb 04 2015
The Euro is starting to squeeze higher following the rally in Greek bonds and the rebound in oil prices over the last few days. We suspect more short covering could follow...
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Thoughts on CHF, EUR and EM EquitiesJan 29 2015
The SNB’s decision to leave the EURCHF peg was, in our opinion, a watershed event. First, it is a confirmation that an asset can be manipulated for a long time, but when the manipulation stops, the asset re‐prices instantly with no volume at a far lower price than when the manipulation started. That is the lesson history has taught us...
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Going Long EURUSDJan 21 2015
The Euro is becoming interesting from a contrarian point of view. Relative economic momentum between the US and the Eurozone has recently turned in favor of the Euro. There has been a string of negative surprises in the US lately (Philly Fed, retail sales, capital goods new orders) while the opposite has happened in Europe...
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What the CHF Move Reveals In Three ChartsJan 20 2015
By lifting the CHF cap, the SNB basically let the CHF re‐price to where it should be. In 5 minutes, we found out where what we believe major proxies for risk appetite and world growth are. These two leading indicators of risk appetite (EURCHF) and world growth (AUDCHF) have dropped more than 15%...
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Rcube Global Macro Monthly Review - January 2015Jan 14 2015
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month...
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Warning SignsJan 14 2015
Late December, the FED released the flow of funds for Q3. On the nonfinancial corporate side, it revealed that non‐financial corporations financing needs have reached almost 4% of GDP. While that number is still half of where it was in 2008, it nonetheless means that balance sheet health is quickly deteriorating...
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A Questionable Relief RallyDec 27 2014
Earlier this week we mentioned the strong link between oil prices and corporate credit spreads. To sum up, about 20% of the US high yield market is made of oil & gas companies. Since the ability of these companies to roll over existing debt is tied to the value of their reserves, falling oil prices (and high oil volatility) imply wider credit spreads. Since credit spreads and equity volatility are tied, one can easily understand that oil and stocks’ implied volatility are strongly correlated, even more so today than in the past...
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EM FX The Impact On EM EquitiesDec 16 2014
Emerging market currencies are cashing down. EM equities will soon follow...
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EM Corporates Feeling the SqueezeDec 12 2014
Volatility is spiking, finally catching up with rising credit risk. US HY spreads are now higher than October 15th highs. The negative divergences observed since this summer are worsening....
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Rcube Global Macro Monthly Review December 2014Dec 10 2014
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month...
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Equities - Downside Risks AheadDec 02 2014
While many are looking at the commodity meltdown and particularly at the oil crash as a bullish factor for equities, there is a risk that it triggers a credit event and/or a very violent correction on EM assets in the short term (<3 months)...
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Buying Yuan PutsNov 20 2014
One of the most gratifying activities in Global Macro consists in finding highly asymmetric trading ideas, with payoffs that can generate more than a year’s worth of target returns for a fund, with a very limited downside risk. This piece is going to go through some of the reasons for which we believe that buying OTM puts on the Chinese Yuan is a strong candidate for this type of trade...
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Equity Credit Divergence A WarningNov 13 2014
Major equity / Credit divergences should always be taken very seriously. They were among the best forward looking indicators at almost every major turning point for equities over the last 20 years...
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Rcube Global Macro Monthly Review November 2014Nov 11 2014
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month...
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Asset Allocation ReviewOct 24 2014
The combination of crashing global energy prices, melting yields, a better functioning global credit channel (and for Europe and Japan more specifically much easier financial conditions due to weaker curencies on top of the above-mentioned factors) made us activate our models' signals on equities by going long at the beginning of what we thought would be a shallow correction....
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Rcube Global Macro Monthly Review October 2014Oct 08 2014
Portfolio performance The September performance was + 175 bp ( net ) for the Rcube Global Macro Fund. This leaves the offshore fund slightly up since inception a year ago. In September, almost all of our investment themes delivered positive performances.
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Going Net Long EquitiesOct 02 2014
As mentioned in recent past publications, we have been looking to go long European equities (Spain & Italy). Both our tactical and Asset Allocation models are currently sending very strong buy signals. We missed the summer low, thinking that the US market correction was not over. The MSCI World is now trading below the Aug 08 bottom. Since then, we got an Oil price crash (Brent is down 18.5% from the June highs) and a further rally in European sovereign bonds.
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The case for US FinancialsSep 23 2014
The upside for the US Financial equity sector is large, on both a relative and an absolute basis. Our model, which looks at the relative expected return of the sector versus the S&P500, is based on inputs that have historically been strong explanatory factors (details at the end of the document). The main factors in terms of predictive power are the housing sector, loan growth, the US dollar, interest rates and credit spreads.
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Rcube Global Macro Monthly Review September 2014Sep 16 2014
In our last monthly report, we mentioned a window of opportunity to cover our hedges and go long European equities. Unfortunately, the market rebounded from much higher levels than we were expecting. The S&P500 dropped by less than 5% while we were looking for 1840 to be tested.
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Rcube Global Macro Monthly Review August 2014Aug 18 2014
The portfolio was up 3bp in July. The largest contributors were our long Ibex short Dax, as well as the tactical hedges that we initiated recently, namely our Long VIX and short SPX & Short FTSE positions. Swap spread wideners also started to generate P&L, which might be related to the low liquidity in corporate bonds after weeks of outflows.
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More US Curve Flattening AheadJul 22 2014
The US yield curve is now rapidly flattening. We have been exposed to the theme since last November and are now adding to our exposure. We think the trend has only begun. As Janet Yellen mentioned again in her latest speech, the FED actions are now extremely data dependent. We believe that the front end of the curve will trade poorly in coming months.
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Rcube Global Macro Monthly Review July 2014Jul 11 2014
The portfolio was up 30bp in June. The biggest contributor was our long GBP exposure (+0.83%). The U turn on monetary policy by the BOE was the catalyst for the pound to break out on the upside from the last 5 years’ range. We remain fully exposed and are increasing our risk on the theme by adding EURGBP short (more details in the outlook segment).
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VIX Priced for perfectionJun 20 2014
US equity implied volatility is trading 10.5 in the very front end. The curve remains steep, which implies negative carry for those who are looking at buying vol, but as we will try to show here, there is now a clear widening gap between volatility historical drivers and its level. Our fair value model is showing the largest deviation from fair value since 2007. As a reminder, the model is based on three information blocks: Earnings, Credit availability, and non‐financial balance sheet leverage.
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Rcube Global Macro Monthly Review June 2014Jun 12 2014
May’s fund performance was ‐110bp, mostly due to our equity relative value strategies. The short consumer discretionary vs. SPX was the main negative contributor. Nevertheless, we expect the sector to resume its YTD underperformance going forward. The recent reversal in rates and the rise in energy prices are clear additional headwinds. Our long European banks versus the personal & household goods also suffered because of additional bank shares issuance fears. The relative performance’s low was printed on the day Deutsche Bank announced its shares issue program. The recently announced ECB measures should create more relative upside for European banks. We are therefore still exposed.
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Tactical Short DurationJun 02 2014
Back in October last year, we highlighted that global growth expectations were significantly too optimistic as implied by relative asset prices price action. Yields had spiked violently over the summer, and equities (outside emerging markets) were at cycle highs. Some of our favorite leading indicators were pointing in the other direction. Nine months afterwards, bonds have significantly outperformed equities. Interestingly, we are finding ourselves today in the exact opposite dynamic...
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Rcube Global Macro Monthly Review May 2014May 13 2014
We closed the month of April down 62bp. The main loss came from our Long USD exposure (81bp) versus both the JPY and the Taiwan dollar. We closed the TWD exposure, while the portfolio’s sensitivity to the JPY diminished due to the lower delta of our USDJPY calls. We remain convinced that USDJPY will move higher before year end (115/120) and we’ll re‐expose the portfolio on either further price weakness from current levels or new catalysts....
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European EquitiesMay 02 2014
Is the improvement in periphery Europe’s economic momentum about to gather strength? Judging from the just released ECB Q1 lending survey, it could be the case. The most striking element of the survey is the sharp improvement in all categories for loan demand...
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Rcube Global Macro Monthly Review April 2014Apr 11 2014
We closed the month of March flat (+0.03%, +0.40% since launch in September). Consumer discretionary shares severely underperformed the market in the US, generating 117bp of PnL. This cancelled negative performances on our short EM equities, long GBP and long Treasuries. We sold our Treasury futures in the second half of the month...
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US & EU Financials vs Consumer Shares Apr 03 2014
Sector rotation is in full swing. Value is currently outperforming growth. Shareholders are asking for more capex spending and less buybacks. This could have further impact on some equity sectors’ relative performance...
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Out of US TreasuriesMar 21 2014
Recent data reinforce the view that capex spending might finally be about to accelerate in the US. As we have highlighted earlier this week, US banks’ commercial & Industrial loans have spiked since Jan 1st (25% 3 months annualized growth rate).
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Euro$ M6M7 FlattenerMar 20 2014
We have a US yield curve flattener on at the moment. We want to add to the theme, but on a different vector than the 5/10 we are exposed to. Yesterday’s FOMC makes the timing of the trade more urgent. As we explained when we initially put it on, the curve looks too steep, and could flatten in two scenarios....
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Rcube Global Macro Monthly Review March 2014Mar 12 2014
Portfolio performance The Rcube Macro Portfolio was down 1.49% in February (+0.37% since launch in September). Our equity positions contributed to most of the negative performance. The short EM logically suffered in the equity rebound, while the squeeze caused consumer discretionary stocks to outperform. We expect the downside trend for both reassert itself soon...
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Going Long VIXFeb 27 2014
Recent developments in China reinforce our belief that a crisis is brewing. First interest rates, then the currency. The financing needs of the Chinese private sector are so large that the slightest tightening of financial conditions will impact their ability to repay their debt load in a meaningful way. This is already happening...
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Rcube Global Macro Monthly Review February 2014Feb 07 2014
The Rcube Macro Portfolio was up 0.5% in January (1.87% since launch in September). FX performance was a drag during the month. JPY strength was the main source of negative PnL...
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Going short JGBsJan 24 2014
JGBs’ resilience is one of the most interesting financial conundrums. Over the past 20 years, JGB yields have consistently defied common sense (and Econ 101) by steadily falling in the face of an exploding supply of government debt, earning the infamous “widowmaker” nickname in the process...
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US Consumer Disc - Increasing Exposure.Jan 20 2014
We are adding to our short US Consumer Discretionary sector vs. the SPX. The retail sector has plunged on a relative basis since the beginning of the year following weak holiday season sales...
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Rcube Global Macro Monthly Review January 2014Jan 09 2014
The Rcube Macro Portfolio was up 0.31% in December (1.37% since launch in September). The main PnL contributor remains FX, where the JPY and commodity currencies weakened further...
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ADDING TO OUR GBP EXPOSURE - SHORT EURGBPJan 08 2014
It looks like animal spirits are back in the UK. The just released BOE Credit Survey and the UK BCC quarterly economic survey (Q4 2013) points in that direction. It provides further evidence that the British economy is accelerating from an already strong momentum.
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Rcube Global Macro Monthly Review - December 2013Dec 06 2013
Portfolio performance The Rcube Macro Portfolio is up 1.39% in November and 1.06% since launch in September. The main PnL contribution is...
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Portfolio AdjustmentsNov 27 2013
The GBP is breaking out versus the USD after having already accelerated versus commodity currencies. We are adding to our exposure, as mentioned in previous Rcube Macro Portfolio...
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US Swap Spread Widener & Portfolio AdjustmentsNov 25 2013
We recently highlighted that one of the major macro themes at play today is the strong improvement in the US budget deficit. We isolated five investment ideas built around the theme. 1/ US Yield curve flattener 2/...
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AUDCAD Booking ProfitsNov 13 2013
Chinese financial conditions are tightening. Yields (5 year NDF swap rate) have almost doubled in a year from 2.5% to almost 4.7% today. The trade weighted CNY has gained 17% since mid 2011, and banks reserve requirement ratios are at historical highs...
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Rcube Global Macro Monthly Review - November 2013Nov 08 2013
The temporary resolution of the debt ceiling fiasco in Washington and Yellen’s nomination pushed risky assets further up in the second half of the month, despite a very weak global economic momentum globally. To illustrate this, we looked at the recent divergence between...
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US Yield Curve FlattenerOct 29 2013
The US yield curve in the US is still extremely steep by historical standards. We think it will flatten going forward, independently of the macro scenario. Either economic momentum accelerates, in which case investors will start pricing rate hikes more aggressively, or...
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Adjustment USDJPYOct 28 2013
USDJPY implied vol has recently sharply adjusted lower, moving from 15% to 9.4% on the 6mth and dropping 2 vol points since we initiated the trade...
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Short AUDCADOct 23 2013
The AUDCAD has rebounded almost 10% since bottoming in early August. It is a good barometer of the US/China relative economic momentum...
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US Budget Balance Improvement - ConsequencesOct 17 2013
The US budget deficit which has already shrunk at a pace never seen over the last 50 years is likely to shrink even more going forward given the ongoing republican fight for more spending cuts...
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Buying USDJPYOct 14 2013
We are going long USDJPY. Both our scoring and fair value models are flashing sell for the Japanese Yen.
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Rcube Global Macro Monthly Review - October 2013Oct 08 2013
September saw risk appetite rise further, with global equities rallying strongly on the back of stabilizing rate markets and the FED’s decision not to taper. Summers’ pulling out of the FED chairman race was another positive catalyst. This positive news flow forced equity bears to capitulate in mass. We believe that...
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GBPCAD - Increasing ExposureSep 25 2013
We want to add to our long GBPCAD trade, mostly because of a technical confirmation of our case rather than a fundamental catalyst...
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Fading the Summer Equity Short SqueezeSep 24 2013
While our portfolio was positioned not to be too exposed to either the nomination of the FED’s next chairman or the tapering game (being long Bonds / Short equities), the FED’s decision of not going ahead with the tapering confirms...
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Strong Headwinds for US Consumer Discretionary StocksSep 12 2013
We consider the consumer discretionary sector as an interesting one, since, more than other sectors, its relative performance can be explained by macro inputs ....
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Portfolio ImplementationSep 06 2013
We are implementing our main investment themes today in the portfolio. We believe that the recent massive bond underperformance versus equities is overdone....
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Rcube Global Macro Monthly Review - September 2013Sep 04 2013
China’s explosive private sector credit growth since 2009 has triggered a substantial deterioration of Chinese non‐financial corporates’ balance sheets...
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Further Adding TreasuriesAug 23 2013
We want to add some Treasuries following the weak US new home sales report...
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Going Long GBPCAD And Increasing Our Treasuries ExposureAug 20 2013
UK economic momentum has gone from strength to strength lately. Housing, consumption, manufacturing and service PMIs have all accelerated....
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Global Macro Monthly ReviewAug 08 2013
The FED Senior Loan Officer Survey was released earlier this week, it brings little to what is already known (and priced). Banks are lending, lending standards are being eased and spreads over cost of funds are narrowing further...
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Treasuries: Initiating a Long ExposureJul 30 2013
We are initiating a long Treasuries position today. As mentioned in recent publications, US 10 year yields recent upward moves are at odds with some strong leading indicators
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Global Macro Monthly ReviewJul 12 2013
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month
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Risk Management: Portfolio ResetJun 20 2013
After having significantly reduced our VaR exposure two months ago, we are now closing almost all positions in the portfolio
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Global Macro Monthly ReviewJun 12 2013
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month
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Japanese Equities - Booking ProfitsMay 15 2013
We went long Nikkei on Nov 19th 2012 at 9150. We are booking profit today at current 15210
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Going Long European EquitiesMay 09 2013
Our European equity model is now sending a powerful buy signal (‐1 standard deviation) thanks to a large improvement of its liquidity and valuation components
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Global Macro Monthly ReviewMay 06 2013
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month
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Going Long EM FXApr 29 2013
EM FX has seriously lagged the equity rally; part of this can be explained by this rally’s defensive stance...
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Further Risk ReductionApr 18 2013
Emerging markets are now down 8% ytd. They have significantly lagged behind developed markets since the beginning of the year...
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Global Macro Monthly ReviewApr 04 2013
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month.
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Emerging Market Equities UpdateMar 22 2013
Emerging markets have been underperforming very substantially since the beginning of the year, giving up all of last year’s Q3 and Q4 relative outperformance..
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Yield Curve Flattener vs. Money Market Curve SteepenerMar 08 2013
The US yield curve is starting to look too steep.
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Global Macro Monthly Review March 2013Feb 27 2013
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month.
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Adding Chinese Equities to our EM ExposureFeb 08 2013
China’s economic numbers came out strong today.
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Global Macro Monthly Review February 2013Feb 06 2013
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month.
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Initiating a Short Duration Exposure.Jan 25 2013
Is it time to try short duration bets?
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Book Profits on JPY ShortsJan 25 2013
We are booking profits on our Long USD JPY initiated last year at 79.
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Booking Profits on our Equity Volatility ShortsJan 22 2013
Equity volatility has crashed, just like the implied volatilities of every other asset class. Spot VIX has just reached its lowest level since May 2007. We have been consistently short volatility since last August, and we wish to book profit on the trade.
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Update on China & EMsJan 11 2013
Equity markets finished the year strongly, even more so in emerging markets. We believe that more outperformance lies ahead, and that China should do particularly well. The trade data that was released two days ago was strong
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Rcube 2012 RecapJan 07 2013
2012 Performance Analysis We are closing 2012 up 10.05% at the NAV historical highs. The NAV volatility for the year was the lowest since inception, at 4.9% for a full calendar year.
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Global Macro Monthly Review December 2012Dec 06 2012
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month.
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EU Equities: A Look at Our ModelsNov 29 2012
European equity markets seem ready to break out on the upside (SXXP, DAX, UKX).
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Equity Volatility UpdateNov 23 2012
Volatility across all asset classes has crashed. As the chart below highlights, when this happens, global macro strategies tend to suffer both on both an absolute and relative basis. This is why we have developed valuation and timing tools for implied volatility trading.
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JPY Weakness and Japanese EquitiesNov 19 2012
The yen is weakening; it is doing so even in the current risk off environment. Recent political declarations seem to be behind the move. We have been long USDJPY since May.
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Adding Russia to our Emerging Market Equities ExposureNov 14 2012
Equity markets have drifted lower over the last 2 months, in a quite disparate way. Developed markets have underperformed while emerging markets have held up much better, with Asia outperforming noticeably.
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Portfolio AdjustmentNov 07 2012
We wish to book profit on our long Australian equities (ASX200 Index) vs S&P500.
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Global Macro Monthly Review November 2012Nov 06 2012
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month.
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Continuing our Switch from Credit to EquityOct 23 2012
As we have recently explained, we believe that, on a risk‐adjusted basis, equities should outperform credit going forward.
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Going short AUDCADOct 08 2012
We have been short the AUD (vs. USD) as a hedge for a while. The trade is flat while equities have rallied by more than 25%. In essence, the trade has worked for us.
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Rcube Macro Portfolio Adjustments: Adding EM EquitiesOct 05 2012
We want to book profit on the balance of our ITRAXX Xover exposure (€30mln), for mostly the same reasons as the ones that exposed on our Rcube Macro Portfolio 14 09 2012 – Increasing EM Equities Exposure.
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Global Macro Monthly Review October 2012Oct 05 2012
This publication describes our asset allocation views and explains the reasons behind our main portfolio moves for the preceding month.
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US Flow of Funds Asset Allocation Consequences: Out of Credit into EquitiesSep 25 2012
The FED released the Flow of Funds data for Q2 2012. US Non‐financial businesses are slowly but surely re‐leveraging.
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Fiscal Cliff HedgesSep 20 2012
How to protect a portfolio against the risk of the US fiscal cliff being steeper than currently expected?
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Increasing EM Equities ExposureSep 14 2012
Risky assets are accelerating on the upside. Equity indexes are starting to break away from the last three years’ price range. The Rcube Macro portfolio has been positioned for such a move since May.
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Going Long EM EquitiesSep 07 2012
We have been waiting for the right time to get exposure to EM equities for a while. At the beginning of the year, our thesis was to profit from EM central banks‘ monetary easing plus credit risk compression, while neutralizing the FX risk (dollar‐denominated sovereign debt).
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Sell VIX ForwardsSep 06 2012
The short‐term change on 12mth forward earnings forecasts had recently pushed our model’s fair value above spot prices. This is no longer the case.
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Global Macro Monthly Review September 2012Sep 03 2012
This publication consists of a description of our asset allocation views and explanations of the reasons behind our main portfolio moves for the preceding month.
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Short the US Consumer Discretionary Sector on a Relative BasisAug 29 2012
We have been short the US consumer discretionary sector, first on an absolute basis then on a relative basis for the last 12 months.
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Portfolio Adjustment: Taking Profits on EM Sovereign DebtAug 24 2012
We have been exposed to USD denominated Emerging Market Sovereign debt since the beginning of the year. EM central bank easing, better relative EM fundamentals and the grab for yield were behind the investment theme.
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Portfolio Adjustment: Taking Profits on EM Sovereign DebtAug 24 2012
We have been exposed to USD denominated Emerging Market Sovereign debt since the beginning of the year.
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OAT / Bund Yield Spread WidenerAug 21 2012
We have been waiting for the right time to sell French OATs for a while. We believe that we are getting close to absolute and relative levels that offer such an opportunity.
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Going Long Gold MinersAug 09 2012
Since the beginning of the Rcube Macro Portfolio, we’ve been long gold between February 2009 and March 2011
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Adding to US High Yield ExposureAug 07 2012
The FED has released its quarterly bank lending survey. Results are positive, as the credit channel remains fully operational.
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Getting Back our Gold Exposure - DRAFTAug 02 2012
Our macro portfolio rode gold for between Feb 2009 and March 2011
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Global Macro Monthly Review August 2012Aug 01 2012
This publication consists of a description of our asset allocation views and explanations of the reasons behind our main portfolio moves for the preceding month.
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US Housing tailwindsJul 26 2012
Can US housing surprise on the upside in the next few months? We believe so. The Treasuries yield meltdown of the last few months has triggered a classic refinancing wave.
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AUDUSD Short as a hedgeJul 24 2012
Given the quick deterioration of the European sovereign situation we wish to hedge some of the credit risk we have (US & Europe High yield and EM sovereign debt) by selling the AUDUSD.
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Corporate Credit and the Merton ModelJul 19 2012
The original Merton model (from 1974) considers a firm that has a given value, a given volatility of the firm value, and a single future debt payment (i.e. a zero‐coupon).
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Rising Risk AppetiteJul 05 2012
Many market commentators were puzzled by last week’s lack of reaction to the large negative surprise on the June US PMI. The headline was clearly weak, and so were the subcomponents.
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Global Macro Monthly Review July 2012Jul 04 2012
This publication consists of a description of our asset allocation views and explanations of the reasons behind our main portfolio moves for the preceding month.
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Increasing our Exposure to EM Sovereign DebtJun 29 2012
We believe that this morning’s announcement that bailout money for Spanish banks is going to be treated pari passu (= equally) with existing creditors is clearly a bullish sign, and that it could have a more lasting effect on risky assets than the current popup.
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Short US Treasuries‐ Part 2Jun 20 2012
A lot of noise has recently been made about Hedge Funds shorting Bunds. We decided this week to sell Treasuries instead. Time will show if the choice was the right one.
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Short US TreasuriesJun 18 2012
US treasuries’ yields have plummeted to levels that can only be justified in a powerful deflationary environment. If risk appetite‐ as we expect‐ makes a brief comeback this summer, yields should rise like they did in Dec 2008, Oct 2010 and Sept 2011.
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Global UpdateJun 12 2012
China has recently moved more aggressively to sustain growth. Last week’s rate cut combined with RRR easing will help domestic and EM equities on a relative basis vs. DM markets.
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Portfolio AdjustmentsJun 06 2012
Following our willingness to increase our risk exposure (see today’s monthly review for June), we have selected two vectors that currently appear interesting to us.
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Global Macro Monthly Review June 2012Jun 06 2012
This publication consists of a description of our asset allocation views and explanations of the reasons behind our main portfolio moves for the preceding month.
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The Bulgarian Lev: a Probable Casualty of the GrexitMay 21 2012
Like the majority of observers, we believe that Greece will eventually leave the Euro. For various reasons, we think that the so‐called “Grexit” will take more time than the market currently expects, but this is not the subject of the present paper.
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Global Earnings Momentum UpdateMay 10 2012
With the first quarter’s earnings season coming to an end, looking at earnings revision ratios should give important information on the direction of the global economic momentum.
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Global Macro Monthly Review May 2012May 04 2012
This publication consists of a description of our asset allocation views and explanations of the reasons behind our main portfolio moves for the preceding month.
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FED SLOS: Adding Credit ExposureMay 01 2012
The FED has just released its quarterly Senior Loan Officer Survey. Quite logically, and in phase with most other surveys globally, it shows that the US credit channel has eased further.
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Q1 ECB Lending Survey: Adding Credit ExposureApr 25 2012
Since early February, one of the catalysts behind our bearish view has been based on the tightening of lending standards across the world, and more particularly in Europe.
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Tactically Going Long Credit on ITRAXX XoverApr 18 2012
The French Association of Treasurers has just published its monthly survey. Results have improved further. Treasurers now rate their operating cash situation as significantly better, while the overall cash situation has now been considered stable for 3 months in a row.
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Re‐entering Short EURCADApr 17 2012
Following the hawkishness of the Bank of Canada today as well as last week’s very strong business outlook and loan officer surveys, we wish to re‐enter our short EURCAD.
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Portfolio AdjustmentsApr 16 2012
Following the improvement of emerging market banks’ funding conditions and lending standards, the dovishness of central banks last week after only a few percentage drops in the MSCI World, and the first signs of oversold conditions (mostly) in European indexes, we wish to tactically reduce our short stance.
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Global Macro Monthly Review April 2012Apr 11 2012
This publication consists of a description of our asset allocation views and explanations of the reasons behind our main portfolio moves for the preceding month.
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Adding Downside ConvexityApr 09 2012
One week ago, the S&P 500 total return (dividends included; SPXT Bloomberg ticker) made a new historical high (>2007’s high).
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China Business Cycle Signal: Adding to AUD ShortMar 29 2012
The China Business Cycle Signal, which was jointly developed by Goldman Sachs and the Chinese National Bureau of Statistics, has just been updated for the month of February.
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KOSPI DownsideMar 22 2012
This morning’s European PMIs are a reminder that the Eurozone is still experiencing a severe credit crunch. In that context, investors who believe that the recent EU macro momentum upturn is sustainable could be severely disappointed.
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The End of the Risk Rally? Taking Profits on CreditMar 21 2012
We wish to book profits on our Xover exposure at current levels of 508. On a risk‐adjusted basis, the Xover total return index has recently strongly outperformed equities.
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Increasing Credit ExposureMar 16 2012
Risky assets have rallied strongly since the beginning of the year. While we positioned ourselves correctly in January by going long risk (Short Equity volatility and Short credit protection in Europe) we reversed our exposure early in February.
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Going short AUDMar 12 2012
Last week’s Australia’s trade balance came in much weaker than expected. The spread between the median economist consensus and the actual release was the largest ever (‐673 vs +1500 estimated).
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Two Interesting Carry TradesMar 07 2012
Risky assets have sold off. A mix of overbought technicals, extreme bullish sentiment readings and negative newsflow (from China and Greece) has triggered some profit taking after a 30% rally since early October 2011 for global equities.
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ZEW Upside SurpriseFeb 14 2012
The Zew came out much stronger than consensus; the gap between economists’ estimates and actual data has never been wider for the expectation series.
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Global Credit Crunch Worsening: Going Short RiskFeb 01 2012
The ECB has just released its quarterly bank lending survey. Given that it was conducted right after the LTRO announcement, it should have captured part of the macro improvement based on the liquidity injection.
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US SLOS: Long EEM / SPYJan 31 2012
The FED has just released its Senior Loan Officer Survey for Q4 2011. As we expected, results are clearly not encouraging.
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Expecting Further EM Monetary EasingJan 27 2012
Risky assets are rallying, mostly on the back of policy action expectations: Emerging markets’ monetary and credit easing, improvement of US macro-economic momentum, combined with expectations of a US housing bottom (and pick up?), as well as the LTRO’s potential impact on European commercial banks’ lending behavior.
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Long EURCHF, Portfolio AdjustmentsJan 20 2012
The EURCHF has been drifting lower lately. Spot is getting closer to the SNB floor at 1.20. This makes a long exposure quite interesting from a risk reward perspective.
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Adding to Long Risk: Buying NasdaqJan 19 2012
Risk appetite is making a comeback. It has surprised most investors, who are finding themselves underinvested and over protected. The move initially came with an equity volatility crash (the VIX dropped from 40 to 20 in less than 2 months).
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Adding to our Long Credit ExposureJan 12 2012
We want to add to our long European credit (short credit protection via ITRAXX Xover).
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EURO UpdateJan 10 2012
The Bank of Canada has just released its quarterly lending survey (Senior Loan Officer Survey).
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Getting Exposure to European Credit (Itraxx Xover)Jan 05 2012
Despite our concerns on European growth, we believe that European crossover currently offers interesting spread levels to tactically get exposure.
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2011 Recap, 2012 OutlookJan 04 2012
For the third time since the launch of the RCUBE Macro Portfolio, we will try in the following pages to analyse our performance for the past year by going through our successes as well as our mistakes.
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