I was looking through the list of the sovereign pension funds and perhaps it’s not surprising to see it heavily weighted toward countries recycling petro-dollars, but still the size of some of these funds are truly mind-boggling. Abu Dhabi’s SWF manages close to $1T, which is slightly less than the total economic output of South Korea, 15th largest economy in nominal terms. I understand that GDP is flow and assets (financial or otherwsise) are stock, but the comparison puts the scale of these funds in perspective. Abu Dhabi’s GDP is near $200B, so their SWF is 5x the size of the entire economy. Japan’s Pension Investment Fund, though not a sovereign wealth fund, is the largest of such entities at $1.2T. In terms of size, after Japan and Abu Dhabi, it’s Norway, Saudi Arabia, Singapore, Kuwait, Qatar, Russia and China.
I was reading the Leon Cooperman’s and Steve Einhorn’s interview in Barron’s and collected a few interesting tidbits.
- in the post-WWII era, the average stock market decline in a bear market was ~25% and lasts 10 months
- during the average recession, real GDP goes down 2% from peak to trough
- the average economic expansion lasts about 5 years
- average monthly gain for the S&P is about 7/10th of 1%
- traditional HY buyers have migrated on to structured credit to follow yield
The Economist had a great article on cross-border defense contracts, and how many of the arrangements have a side-deal where the winner of the deal invests in the local technology, economy or financing. These are called counter-trades or offsets. It is tracked by the Countertrade and Offset magazine, published twice a month. Total offset obligations are roughly $300B as of today, according to Avascent.
I was reading the Martin Value Focused Fund commentary, in which Frank Martin talks about the increasing leverage in the market, as measured by NYSE Margin debt, which is now near the top (which is admittedly a naturally rising indicator like GDP, in the current mercantile fractional-banking construct). I am not knowledgeable enough to say that this definitely signals the nearing top of the market, especially because I have stopped understanding it (see my market valuation rant), but the chart that Frank Martin shares no doubt looks ominous.
I was reading a short paper on PIMCO on role on cash, and it was interesting to see that holding cash was talked as akin to holding an option to buy other securities as opposed to locking in your returns with securities and maturities for which the returns are presumably abysmally low. I really like this way of thinking though I wonder how supportive will the investment committee and the investors in the vehicle will be (of course, it’s a moot point when you’re managing your own money).
Prasad Capital 
