Our sole concern is the Preservation of Capital.  Always.

When markets rise, everyone’s wealth increases. The upside will always take care of itself. We concern ourselves with preserving capital on the downside, when markets fall. The investment community often uses phrases such as “risk management” and “potential upside”. In reality, many investors’ portfolios will benefit from neither of these.

Whilst financial jargon always sounds impressive, the implementation of a multitude of strategies that desire to both manage risk and create performance returns is, of course, difficult for even seasoned investment professionals to implement in practice across varied market conditions and time horizons. They are often hampered by conflicts of interest, a sales-push mentality and the lure of performance fees.

Einstein is rumoured to have once said that “the greatest invention of the 19th century was compound interest”. In casual passing, many investment professionals will say that 10% per annum is “easily achievable”. Perhaps – for any one given year – but ask them to return 10% per annum, every year, year in, year out and their response will be that it is “highly unlikely in practice because markets always correct” or that “it is nearly unachievable”. You can then worry about inflation (and tax) eroding your capital base further each year. Making a “mere” 10% every year will double your capital base every 7 years (every 7.27 years to be precise). Generating returns annually whilst not eroding your capital base is not as simple as merely diversifying a portfolio. It requires both tactical and strategic asset allocation across every asset class.

It requires downside protection. Without downside protection, the ability to stop the capital base being eroded away (at worst, a return of zero for the year) or the ability to generate positive returns in a falling market, is an intensely daunting proposition. Yet, Yale can do it. Harvard does it. The Ontario Teachers Pension Plan has been doing it for 24 years. All these globally invested, multiple asset class endowment funds have averaged more than 10% per annum across 20 years. But it is not a domain exclusive to the likes of $100 Billion+ endowment funds. It is “simply” a matter of a global portfolio construction and strategic asset allocation. Global asset allocation will result in smoother positive returns, lower risk and lower volatility.

Arminius Capital Advisory provides investment solutions to generate portfolio performance across a range of asset classes whilst providing downside protection to the seemingly increasing frequency of inevitable market corrections.

JOIN US ONLINE

Click on the below “Subscribe” button to select your mailing options and receive our content & reports:

Australian-based “Arminius Capital ALPS Fund” ranked 10th place internationally in the BarclayHedge ranking for Global Macro hedge funds in March 2020, with a performance of +2.76%.

1Q2020 ALPS returned +5.33% vs:

ASX200 -24.05%

STOXX600 -23.03%

S&P500 -20.00%

NIKKEI225 -20.04%

GSCI -41.76%.

The BarclayHedge Global Macro Index was comprised of 126 international funds as reported in March 2020.

Arminius Capital ALPS Fund 2020 USD$ return was +9.19% vs Credit Suisse Global Macro Index 2020 YTD return of -7.55%.

 

 

Marcel von Pfyffer
Marcel von PfyfferManaging Director
“the greatest invention of the 19th century was compound interest. 10% per annum will double your capital base every 7 years”

Geldzug: SITTING ON THE MOUNTAIN, WATCHING THE TIGERS FIGHT

January 12th, 2022|Comments Off on Geldzug: SITTING ON THE MOUNTAIN, WATCHING THE TIGERS FIGHT

11 January 2022 According to the Chinese zodiac, 2022 is the Year of the Tiger. Tigers are bold, powerful and dangerous, but in Chinese astrology they are also impulsive, short-tempered, and have difficulty getting on [...]

 

Arminius has always advised its clients to stay out of cryptocurrencies/Bitcoin. Every boom has “new opportunities” which promise wonderful returns! We’ve seen this movie before & it always ends badly. It was no surprise to us that speculators have lost half their money this year

China may be buying less coal and iron ore, but it’s buying more food. Agricultural purchases hit new heights this yr = natural disasters have exacerbated China’s permanent shortage of farmland. Food security is one of Beijing’s top priorities. Great for Aussie ag exports!

World capital markets rebounded in July because investors decided the Fed would only raise interest rates to 3.3%, then start ⤵️ in '23. This assumes that inflation will vanish without a recession! Fed officials are trying to introduce some reality, warning rates could 4%. ☠️⛈️

Chinese property markets were already frozen when the mortgage boycotts exploded 3 months ago. Now Chinese steelmakers are forecasting that lack of construction demand will cause a 5-year production slump. Of course, this means collapsing demand for Aussie coal & iron ore (⬇️25%)

China’s property downturn's not stopping. When property developers started going bust in 2021, optimists who couldn’t speak Chinese assumed that the govt would spend big to save the housing market. The govt said it wouldn’t, and it didn’t – so property sales went into reverse.

Amid inflation fears, most investors have overlooked the COVID-driven spike in global debt. A recent JP Morgan report says govt+private debt is 352% of GDP, 28% points above 2019. Rising interest rates = seriously impact highly-geared companies: watch out for corporate crashes!

China’s mortgage revolt is spreading! Now affecting >320 projects in >100 cities. Borrowers who got stuck with unfinished properties after developer collapses are using social media to co-ordinate, in defiance of official censorship. Consequences for China’s banks & GDP growth!!

2

China’s leaders are quietly retreating from their target of 5.5% growth in 2023. Recent statements call 5.5% a “guideline” & officials have been told it won’t be used to judge performance. China’s COVID lockdown policy caused this self-inflicted wound. World growth in '23-24 ⤵️🆘

1st half 2022 results of the Arminius Capital Product Suite. A timely nudge for alts & hedged products!

IMA SAA models’ performance ranged from +4.7% to +9.77% for 1H2022.

Any of our 3 SAA models were… a bit better… than the average 60/40 portfolio.

https://arminiuscapital.com.au/funds/

With inflation at its highest level in 40 yrs, the world risks re-running 1970s stagflation. But there is one BIG difference: DEBT.
In the 70s Corporate debt was 75% of US GDP, now it's >100%. Govt debt has ballooned (GFC + COVID). Inflation's going to be MUCH harder to control.

China's sales of new homes have fallen 39% year-on-year, -28% MoM. Buyers look at the mortgage strike (our 24 July tweet) & prefer to wait until the market stabilises. As we keep saying, China’s GDP growth will continue to disappoint: bad new for Aussie exports and world growth!

Worried about Europe? And people wonder why the French just nationalized EDF. France derives 70% of its energy from nuclear power; it has 56 nuclear reactors. One could almost be forgiven for thinking they don’t trust wind & sunlight to supply baseload electricity requirements.

Falling Russian gas supply have forced German chemicals giant BASF to slash production of ammonia, an essential feedstock for many fertilisers. Less fertiliser = problems for growing crops in 2023. Not enough, or not in the right place at the right time. Global food crisis coming

The US is in recession. Negative GDP growth in the March & June qrtrs. The definition of a recession is 2 negative qtrs...except now apparently in America! A high-level committee of 8 distinguished NBER economists will ponder before declaring a recession – about a year later.

EU’s rolling crises – heatwaves, oil prices, coal prices, gas supplies – panics followed by temporary relief. Gas prices (chart) move 200-300% as Putin cuts supplies like a lion playing with a zebra. It may only take 1 more surprise to tip the EU economies into complete disaster.

Capital markets are still too optimistic. Interest-rate futures imply the Fed will raise rates to 3.5% by early 2023 & this "will be enough to kill off inflation without a recession". Um, history: Fed raised rates from 1% to 5.25% in 2004-2006 & still created the housing bubble!

The EU overnight agreed to a -15% reduction in gas usage. Politicians (some of which were even elected) can now decide whether they let people freeze or let the economy freeze. Hungary was the notable dissenter & you can see why, from the IMF’s projections of gas cut-off = GDP☠️

US yield curve is a reliable forecaster of recessions. It’s forecasting one now. It measures the difference between the yields of short-dated & long-dated bonds. 50 years of data: when 10yr bonds yield more than 2yr bonds, a recession (or two) follows in a matter of months

During Europe’s heatwave & energy crisis it’s easy to forget that much of the continent is also in drought. Ultra-low river levels are reducing hydro power generation, preventing navigation on Rhine, limiting water intake to cool nuclear plants. EU recession solutions, Christine?

Chinese banks are facing an A$400B mortgage revolt. Developer collapses left millions of borrowers with incomplete properties so they stopped paying mortgages on 91 projects, 301 cities. Officials & bank regulators are lost. Yet another sign that Chinese growth will disappoint!

Load More...

 56,126 ,  56 views today