Spare a thought for the spouse of hedge fund manager Mike Hart, for she has lost her husband to an obsession with the yuan and by night he sits at a desk in a closet (wardrobe to Britons), filled with clothes.
Hart has spent the past eight years living John Maynard Keynes’ famous adage that markets can stay irrational for longer than a man can stay solvent. As Bloomberg outlines in a long article about Hart’s (mis)fortune, he was one of the first hedge fund managers to predict a dramatic devaluation in the Chinese currency. The problem? He did so several years too soon.
Hart was successful, once. In 2006 he made a 30% return from ‘trend driven investing.’ Then he cleaned up on the U.S. subprime crisis. Then he correctly called the European government bond near-meltdown. Then, he found China.
Hart’s thesis is simple: he thinks the yuan will be subject to a one-off devaluation of at least 30% and that this will trigger a new financial crisis. The trouble is, he’s thought this since 2008 – and with the exception of last August’s surprise devaluation of the yuan by around 2% – there haven’t been any sudden to moves to devalue the Chinese currency after all, although it is down nearly 10% against the dollar since 2014.
As a result, Hart has lost his fund, much of his fortune, and – nearly – his sanity. In 2009, he was waking up every half an hour to monitor markets and call Hong Kong: “I wouldn’t say it was an obsession. It’s a lot of hours, a lot of work. You have to be completely committed.” Later, the yuan rose instead of falling, just as Hart was also losing money on his European funds: “I felt like I was under siege. I was working harder and not having any results…I’ve certainly broken a few phones.”
Nonetheless, things have come right. These days, Hart doesn’t manage a big fund; he’s been partially vindicated by the yuan’s (gradual) fall and he’s involved with getting his kids to school. But when his wife and children are asleep, 44 year-old Hart retreats into the wardrobe/closet and “talks to Hong Kong.” The “chill surfer dude” in the cupboard is still certain a big devaluation is coming. Basically, life with a hedge fund manager is hard – especially when he/she is waiting to be vindicated by a long-term losing strategy which requires engagement with a totally different time zone.
Separately, Millennials theoretically want to do good in the world, so maybe they should work for J.P. Morgan. Politico reports that the U.S. bank is positioned at the forefront of yet another socially valuable, state-supportive, banking bailout. This time it’s the Italian bank Monte dei Paschi. J.P. Morgan is the lead bank on a deal to help Monte dei Paschi raise the €5bn it needs to stay solvent and enable the Italian prime minister Matteo Renzi to win a forthcoming autumn referendum. JPM is even rumoured to be kindly extending a €7bn bridge loan to help the Atlante Fund buy Monte dei Paschi’s bad loans. Needless to say, the U.S. bank will earn handsome fees from this process, but it may also help stabilize the European political system at a crucial juncture around the time of the U.S, election. Millennials should clearly be queuing up to work for Jamie.
Liz Myers, global head of equity capital markets for JPMorgan, says the bank has more than 20 IPOs lined up for “September alone.” (Bloomberg)
Meet the hairdresser and online investment manager at the forefront of a court case to force the British government to hold a ‘Brexit election‘. (Bloomberg)
Why monetary policy is easier than fiscal policy: “More easing only drives down the currency, which simply steals demand from a trading partner.” (WSJ)
Brexit psychology: The EU might come to the conclusion that since any deal is going to fall short of the extreme promises made in the UK, it is not worth giving any special concessions at all. (HBR)
Maybe Deutsche Börse will move its holding company to Frankfurt after merging with the LSE, but also have a headquarters in a neutral second location. (Handelsblatt)
UK law firms rushing to register in Ireland. (Financial Times)
Deutsche Banks’ elicit trading floor hoots. (Financial Times)
Goldman Sachs thinks Deutsche needs to raise $2.2bn in capital. (Bloomberg)
Donald Trump would repeal Dodd Frank and have a moratorium on new financial regulations. (Bloomberg)
Why junior bankers deserve a bigger pay rise. (Telegraph)
Forget moving to PE in London. Private equity investments in the UK have slumped 95% since the country voted to leave the European Union. (Financial News)
In which Mark Carney goes to a festival, gets an eye tattoo, buys a Marxist revolutionary t-shirt. (Daily Mail)
Hilary Clinton wants to hike taxes on bankers. 63% of Americans say the distribution of money and wealth is unfair, and just over half favor higher taxes on the rich. (Atlantic)
Have a great summer. Hit the beach. Don’t worry, be happy. Visit a pet store. (Bill Gross)
Maybe you should’ve been working for a trade union. The hours are short, the work is non-existent, the perks are great. (Guardian)