Recap 2015-02-11


Interesting article from Bloomberg:

For almost two decades, David Einhorn has told clients he would aim for annual investment returns of 20 percent. The hedge fund manager has largely delivered with some of the best performance in money management. Times have changed. The 46-year-old founder of Greenlight Capital told his investors last month at a dinner in New York that he was doing away with the fixed return target and replacing it with relative goals to account for lower interest rates and the record prices of stocks, according to two people with knowledge of the matter. Einhorn’s annualized return fell below 20 percent in 2012… Instead of targeting a net gain of 20 percent, Einhorn said at the event investors could reasonably expect 15 percentage points of “alpha” – or returns exceeding certain benchmarks – and to get 30 percent of the S&P 500’s gains before fees, one of the people said, asking not to be named because the information is private.

A couple other interesting links:


  • Reuters: “Officials are debating a historic shift in one of its core economic gauges that could lead the central bank to move even slower than now thought once it lifts its rates from rock bottom levels. According to interviews with half a dozen current and former Fed policymakers and staff, the concept that the economy can produce far lower levels of unemployment without stoking inflation is being built into Fed models and becoming increasingly entrenched in the central bank’s views. The shift may not delay the timing of the Fed’s first rate increase, still expected in mid-year. But it does offer Chair Janet Yellen a good reason to move at a snail’s pace from then on to bring as many people as possible back to work and to push inflation back up to the Fed’s 2-percent target.”
  • JPM: Greece – the 2/16-17 Eurogroup meeting will prob. wind up being more important than the one coming up on 2/11. ECB’s Moscovici says the Eurogroup meeting on Feb 16-17 will be more "decisive" than the one coming up on Wed 2/11. Note that Germany has an important state election this weekend (2/15) and the thinking is Merkel may be more willing to provide concessions once that event is out of the way. The real deadline though is prob. the end of Feb. That is when the present bailout expires and recent press reports suggest the country is starting to feel acute financial stress and will need cash by early Mar (economic growth and tax collections have suffered as a result of the political uncertainty and banks are still bleeding deposits). Keep in mind that if 3/1 comes around w/o any deal in place (either a bridging or permanent one) the ECB could technically shut off ELA assistance to Greek banks (note that the ELA is the only option left for Greek banks following the ECB action on 2/4). There is growing talk of Greek capital controls as an option to staunch a deposit outflow although a Breaking Views article warns that such an action would do a lot more damage than was the case in Cyprus
  • Greek finance minister Varoufakis maintains his strong rhetoric: "We are not negotiating the bailout; it was cancelled by its own failure I want to assure you that there is no going back. Greece cannot return to the era of bailouts.” “We’re not seeking a clash. We will do everything to avoid it….but if you’re not willing to even consider a clash, you’re not negotiating.” "If a debt can no longer be paid off then that leads to a haircut.”
  • Greece to unveil 4-point strategy for overhauling the country’s finances at the Wed meeting. Greece will likely propose new reforms and ask for a "bridge program" to cover the government’s funding needs. Athens also will reiterate its request to lower Greece’s primary surplus target from 3% of GDP to 1.5%. The meeting starts at 11:30am eastern time.


  • Wed: UK RICS Housing Balance, Australia Employment,
  • Thu: BoE Inflation Report, US Retail Sales, Jobless Claims
  • Fri: EU GDP, US UMichigan Sentiment
  • Mon : US holiday, NZ House Sales, Retail Sales, Japan GDP, RBA minutes
  • Tue: UK CPI, German Zew, US Empire Mfg, NAHB Survey
  • Wed: UK Employment, Earnings, BoE Minutes, US Housing Starts, PPI, FOMC minutes,