It’s kind of playing out the way it did for Michael Burry in the Big Short but Russell Clark’s Horseman Global is right about the base case:
Why is the fund so volatile? Mainly because it’s obvious to me that growth is slowing globally, and risks are all to the downside. But what is obvious to me, is also obvious to policy makers and other investors. We are seemingly in a never ending cycle of markets beginning to price in a slowdown, and then pricing in stimulus and policy response. And so, after a successful May for the fund, we have two down months, and now what is shaping up as a successful August.
If I believed that this was all we had to look forward to (endless volatility) then I would probably not even bother to run the fund, let alone have most of my money invested. But, obviously, I do run the fund and I do have most of my money committed to it. So what am I seeing? Well, we continue to see weakness in semiconductor pricing, leading to weakness or stagnation in major Asian semiconductor stock prices, and we continue to short this area.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
