“Emerging Markets Are On The Verge Of Liquidation” Top Performing Hedge Fund Manager Warns; “QE4 Is Coming”
Until recently, John Burbank’s Passport Capital was one of the top 15 performing hedge funds in 2015. Recent events have only led to an even higher YTD P&L making Burbank one of the top performing managers of 2015: the $2.1bn Passport Global fund was up 14.6% at the end of August and the concentrated “special opportunities” fund was up 30.6%. The reason: in recent months Passport placed numerous commodity and emerging market shorts: trades which have generated substantial returns even as the rest of the “hedge” fund peanut gallery blamed either Bridgewater, or – in the case of Bridgewater – blamed the Fed.
Burbank did not blame anyone, and instead shorted the one company we said in March of 2014 would be the best bet on China’s collapse: Glencore. He has made a killing since, with both GLEN CDS soaring, and its stock price crashing 55% in 2015 alone to all time lows.
More apropos, having accurately foreseen the current events instead of just levering up on even more beta and praying the BTFDers return and bail out his underwater positions, Burbank’s opinion actually matters as does his outlook on what happens next.
What he foresees is not pleasant.
In an interview with the FT, Burbank said years of QE had caused a misallocation of capital across the world, while the end of QE last year triggered a dollar rally with consequences that were only now beginning to be realized.
“The wrong people got the capital — emerging markets countries and corporates and a lot of cyclical companies like mining and energy, particularly shale companies — and this is now a major problem for the credit markets,” he said.
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