This is 50

The FED 50 basis point cut was the biggest news of the week. So I had to go deep to find a song that helped tell the story of the week. I had quite a few options, but chose this banger from rapper 50 Cent. I really can't share any of the lyrics here, but basically 50 tells us all that he ain't playin, he's a tough SoB, and he's going take control of the situation by any means necessary. This is a typical gangster rap song, but Jay is trying to muscle up and get things in control. Some think it's unnecessary as there are many areas of inflation still not under control. Some think it's forced to provide air cover for incumbent Democrats. I personally don't care why. I just try to react.

I'm putting this episode of The Macro Trading Floor up front. Alf and Brent do a great job of discussing the Fed and sharing some charts around it. Meeting was a bit ambiguous according to ALF. He feels Powell dragged the others into the 50 bps cut. This two level cut was to make up for not doing something in July. There was one dissenter in Michelle Bowman. As Reuter's notes, she's the first since 2005. I thought Alf nailed it, the message is non-consistent, the Fed is not in control, there's no forward guidance and they're not ahead of the curve. This all equals a market in control and will likely lead to higher volatility. Below are a couple of charts on data the guys mention. The first is the dot plot and the second is non-commercial positioning in US Bond futures. The second half of the episode discusses China and the broader macro market environment. If you're interested in China, I'd also recommend this episode of Goldman Sachs' Exchanges. Watch time: 36 minutes

The Chinese Economy Is Imploding (Here Is Why)

Performance was mostly strong for equities and risk assets like Bitcoin. Commodities were mostly up, aside from some ags. The Dollar is at a pivotal point and Brent covered it a bit in the above podcast, but it traded slightly lower on the index. High Yield bonds were up nicely and spreads continue to remain tight there. Some of the wider government and investment grade indices traded lower.

Here I took a look at a bunch of indices and ETFs measuring different assets post the Fed announcement. You can the volatility immediately following the meeting. The markets opened higher on Thursday but then mainly traded lower. The two negatives here are BND and VNQ. GLD was the best performer up 2%.

Best of the Week

I knew this was going to be a good one right off the bat. Bill Nygren is a legendary value investor. He's not value in the way you might think either, and that's part of what makes this such a great conversation. Bill starts off with how he got into investing, but the meat and potatoes of the interview is on his process. For example, when looking to add a new holding, they look at three major things. The first is trading at a significant discount to intrinsic value. The second is expected shareholder value growth, which can be cash flows or EPS growth. This one is pretty open to interpretation. The third one is good management. Good management owns shares and acts as owners. Bill also covered the research process, which was my favorite part. I liked the ideas meeting where an analyst presents a buy and others will try to poke holes in the argument. I also loved the process of calling in a relief analyst if another analyst remains positive on a declining stock. A final point I'll share from this one is that Oakmark Funds are NOT afraid to own big growth stocks, IF they see value. He thinks P/E is an overvalued metric and that GAAP numbers are not fully relevant for companies investing in the future. Listening time: 66 minutes

The Optimizer

Best of the Rest

This one might seem a like a bit of a homer pick, but deal with it. It's VERY good though. Probably my favorite one we've done. I promise you'll find this worth your time. Jamie McDonald is joined in this episode by Nell Mooney Mackenzie , EMEA Hedge Fund Correspondent, Reuters and Will Wainewright , Head of Research, Hedgeweek and Host, AFI podcast. This episode, as you might guess, covers how people cover hedge funds in journalism. What's the difference between on/off the record? How do they develop stories? Sometimes it's a quick one and sometimes they take months, or as Nell points out you need to be a truffle hunter. As Will points out, people are interested in these stories, because these firms are at the forefront of moving markets. Hedge Funds today are slightly more open today for many reasons, but it's not all of them. They also touch on short selling and where hedge funds provide value to the industry. The conversation about how hedge funds impact media organizations was thought provoking. Jamie noted that more than half of Americas newspaper are owned by hedge funds. Listening time 43 minutes

On the Record: A journalistic view of hedge funds

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Keeping on the hedge fund topic. A new study out from law firm Seward & Kissel highlights some stats around their established hedge fund clients. Established here are 5 yrs old and $1B+ AUM funds. Here are the highlights:

• 50% of their clients in this bucket were equities focused, 2% each for macro & credit
• Management fees were down to 1.8% for traditional strategies (1.9% in '22) & 0.9% for bespoke
• This compares to their earlier new manager study where fees were 1.48% for equities & 1.4% for non-equity

Incentive rates:

• 25% didn't charge any, this up from zero last year
• Of 75%, avg was 22% for traditional (20% in '22) and 0% for bespoke (16.5% in '22) & 20% of funds charging incentive had a hurdle.
• New managers charged 18% with 40% having a hurdle

Withdrawals:

• 25% of funds offer monthly with 15 days' notice
• Remaining avg 55 days' notice with quarterly liquidity
• Structure - 75% of the funds use a master-feeder structure, 25% are standalone

Seward & Kissel - 2023 Established Manager Hedge Fund Study

One for the Road

Erin Wade was a lawyer and somehow got to making macaroni and cheese, as a business. In this conversation Erin and Shane discuss workplace culture and open book management. She also shares a break through method for dealing with sexual harassment at work. The color code system is now used by thousands of firms in the restaurant industry now. This episode provides great thoughts on leadership and culture. Watch time: 63 minutes

Mac & Cheese Millionaire: Quitting Law, Getting Rich & Enjoying It | Erin Wade

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