We think the fund of hedge funds business is bust (though I am on the board of a successful fd of HF called Culross Global) and we think that hedge as an asset class (if it has ever been one) also has problems. So whilst Bruce and I pioneered long short screening models in Pictet in the early 90s to get a hedge fund going, we now feel that ship has sailed. Clients will not tolerate high fees for mediocre returns when the contractual promise of a hedge fund is to produce annual positive returns (overall, industry numbers are bracing, as I am sure you know)

Eoin Treacy's view The classic long/short strategy is based on the assumption that there is always something going up and something going down. If one can match one against the other then the opportunity exists for a hedged trade where one can pick up the difference. However, with the advent of successive bouts of quantitative easing coupled with high frequency trading, the market environment is now described as “risk-on, risk-off”. Since the tendency now is for every risk asset to rise and fall together the availability of hedged trades has decreased substantially.

More and more hedge funds are choosing a long only strategy and adapting their methodology to cater to occasional bouts of high volatility. Running such funds without the aid of leverage requires a different skill set to those honed in the long/short market and there is considerable competition from the mutual fund industry.

At Fullermoney we follow a thematic approach on the basis that the most important call is to appreciate what type of macro environment prevails at any given time. Once we have a clear idea of what the macro environment is, we begin to filter down until we find the themes that best reflect the mood of the crowd.

In this decade, the greatest urbanisation in history and associated rise of the middle class is an abiding theme. The remonetisation of precious metals in the eyes of investors is another important theme. The continued support for Treasuries in response to continued economic weakness is a third important theme. In our eyes, the first represents a fledgling bull market. The second a bull market that could eventually climax in a mania. The third is probably the most obvious bubble in the world today which has yet to pop.


Nano-SIM cards for the iPhone5 – This article from Extreme Tech highlights the issue most news outlets in China were talking about last week following the launch of the iPhone5. Here is a section:

Apple's winning design is much more an evolution of the micro-SIM. It basically trims off all the excess plastic around the contacts, but keeps the same shape. Because this is essentially just the contacts with no plastic, there is no space for the catch needed for push-push mechanisms. The size of the Apple nano-SIM is a more serious concern. The ETSI originally wanted to make sure that the 4FF standard was shaped in such a way that consumers would not be able to cram it into a micro-SIM slot, making it virtually impossible to remove. The Apple nano-SIM that eventually won out is small enough to do this, and if you turn it sideways, it even looks like it should fit into a micro-SIM slot. It's exactly what the ETSI didn't want.

My view – If my understanding is correct, no mobile carriers in China will be using the Nano-SIM card for quite some time. In addition China will not have 4G capability for at least a couple of years. This means that while there is still likely to be demand for the iPhone5 installing a SIM card will require retrofitting a micro SIM and waiting for new functionality to become available.

It appears that Apple's growth strategy in China rests on making its products available on more than one network. At present the iPhone is only available via China Unicom. Once the phone is available on other networks, sales are likely to receive a boost.

Apple had become quite overextended relative to the 200-day MA when it hit $700 last week and has entered a process of mean reversion. (Also see David's comment on September 19th).