Steven J Cohen CFA Newsletter Q2 2022

Economy & Capital Markets:

On June 15h the effect Federal Funds Rate was raised to an average of 1 5/8ths %, with its projection for the year-end raised to 3.4%. US 10 year bond yields are now hovering around 3% after the bond price had fallen 17% from its highs, whilst the S&P 500 has fallen 25%. Belated quantitative tightening of $95bn per month will only make a small dent in the over ample money supply that would allow growth and employment to be maintained. If the Federal Reserve Bank were to increase further projections it would reflect badly on stock-markets.

Irrespective of inflation expectations, global governments’ social program, to removed self-reliance by, encouraging the labour force to abstain whilst borrowing from their children, have made a serious dent in productivity that make recession probable.

Expectations of Republican gains in the November 8th mid-term congressional elections, remain.

On 24th February, Russia launched a large-scale invasion of Ukraine, several significant trading partners imposed varying financial restrictions on Russia. Crude oil prices remains elevated but are still half of 2008 highs.

In April, the Peoples Bank of China reduced the reserve ratio for financial institutions by 0.25% leaving it at a weighted 8.1%. In May, the reserve requirement ratio for foreign currency deposits was reduced by 1% leaving it at 8%. A RMB200 bn facility at 1.75% to finance 60% of loans by banks for sci-tech innovation was launched. A RMB 40bn facility at 1.75% was launched for financing the loans to elderly care institutions. A further RMB100 bn was released making a total RMB300m facility, to finance clean and efficient coal for electricity.

The ECB intends to raise interest rates by 0.25% in July and again in September. The asset purchase program will only invest maturing principal payments. 3mth EIBOR is expected to rise to 1.6% by 2024, and EU10 year bond yields to 2.1%. Real GDP growth is expected above 2% though to 2024, with unemployment above 6%.

Kings’ Portfolio (Global Mega Cap Long/Short Equity Investing):

Following a disastrous first quarter, the strategy has now outperformed US & Global equity market indices in both absolute and risk adjusted returns for the year. Year to date, the strategy has fallen 16%, with unfortunately 10% occurring in the last 10 trading days of the quarter. In the last quarter long pound sterling contributed a 4.95% a loss to the portfolio, long Valaris (offshore – energy) 1%, long RPC (USA – energy) 0.89%, long Paladin Energy (Australia) 0.85% and long CNX Resources (USA – energy) 0.64%. A residue short position in Brilliant Motors (China automotives), that is held is at profit, was removed from exchanges in the USA and awaits the lifting of suspension in Hong Kong to liquidate. A position in Everaz & its spin off Raspadskaya (Russian steel & coal) is suspended in London, although most of the value has already be depreciated.

Belsize Strategy (Macro & Global Futures Trading):

In May 2021, with the advancement of the firms AI abilities, this long-standing strategy that provided excellent returns during the 2007/8 financial crisis restarted. Following calibration of the artificial intelligence, in the final third of 2021 the strategy eked out a profit but, Q1 2022 had a small loss. Further refinement have led to sustained profit generation in Q2 2022.

Private Equity Strategy (Illiquid Investments):

In 2021 Q2 the firm added five position (including reservations) to its first venture capital investment in 2019. Sector breakdown now stands at: 29% media & entertainment, 22% communications, 18% real estate, 18% finance and, 8% food and beverage. The technology breakdown in the portfolio consists of 60% apps, 20% hardware, 10% sharing economy and 10% e-commerce. The firm makes no positive discrimination except for the combination of good ideas and teams, however the initial investment was to a female managed business and, we have further invested in one black and two Latin managed businesses. The female managed business was found to be providing false sales reports and, was acquired for stock in a company with a larger consumer base at an unknown valuation.

Crypto Currency Strategy (Inter-day Trading):

Due to the rapid development of the firm’s proprietary AI, in June 2021 a crypto trading strategy was initiated, across 11 currencies each with a market capitalisation over $1Bn. In the second month of 2022 a loss was recorded that erased the profits from the previous 10 months. The strategy has been trading flat since then.

Artificial Intelligence & Technology Development:

The firm continues refinement of existing techniques and adoption of best practice. Human language analysis to identify non quantifiable impacts on capital markets, is in further development. The firm also looks to develop consultancy and possibly software offerings to non-financial firms. A huge database to assist with venture capital and private equity investment opportunities is being processed.

Firm Operational Update:

Since 2015 the firm has been maintained as a Californian Registered Investment Advisor (RIA) within FINRA and SEC USA government oversight. The firm will seek to establish a US firm to provide a regulatory umbrella for existing clients. Until that time client assets will be managed on a casual non-professional basis, with reduced contractual liability.

Steven J Cohen CFA Newsletter Q1 2022

Economy & Capital Markets:

On March 16th the Fed raised: the effect Federal Funds Rate to an average of 3/8th %, with a projection for the year-end of 1.9% and, 2.8% by end 2023. The long end of the bond market sold off in response.

On 24th February, Russia launched an large-scale invasion of Ukraine, several significant trading partners imposed varying financial restrictions on Russia. Since the middle of the March, it appeared that Russia’s initial military expectation would not be met and that it would seek to reduce its incursion, stock markets recovered.

Following no major policy win the Democrats are introducing a new Legalisation of Cannabis bill that would increase tax revenue although, it may not clear the Senate. The capabilities of the US President is questioned even in supporting media-platforms therefore, the Vice-President could be promoted. There are expectations of Republican gains in mid-term congressional elections.

The PB of China sees domestic: shrinking demand, supply shocks and waning expectations. M2 is expected to growth at the pace of GDP with, corporate loan rates falling. There will be more support for smaller businesses, sci-tech and greener industry. Whilst the country maintains a zero Covid approach lockdowns will continue.

For 2022 the ECB signals: 3.7% GDP growth, 7.3% unemployment rate and 5.1% inflation rate. 3mth EIBOR in not expected to rise to 0.3% until 2023. Pandemic net asset purchases are indicated to continue through 2024. Non-pandemic net asset purchases are indicated to continue at EUR 20 bn per month. The 3rd target longer-term refinancing operations are signalled to end in June 2022. Key interest rates will be maintained until consistently expected 2% underlying inflation rates.

Kings’ Portfolio (Global Mega Cap Long/Short Equity Investing):

In a career threatening quarter the portfolio lost 14.3%, as it’s risk adjusted return (Sharp Ratio) since inception crashed below that of both the US and World Equity Indices. Long positions: Lasertec (Japan semi-conductors) contributed 2.42% to the portfolio loss in the quarter, LPP (Polish clothing)1.97%, Great Wall Motor (China automotives) 1.61% and, Mercari (Japan media-platforms) 1.47%. In addition, a residue short position in Brilliant Motors (China automotives), that is held is at profit, was removed from exchanges in the USA and awaits the lifting of suspension in Hong Kong to liquidate. Further, as well as several closed long losing positions in Polish stocks, a position in Everaz & its spin off Raspadskaya (Russian steel & coal) is suspended in London.

Losses were influenced by a coincidence of pivotal moments including: (reversal of) monetary policy that has been unnecessary for 10 years, (reversal of) martial law due from unwillingness to quarantine an insignificant but vulnerable part of the population, fiscal expansion at a time of full employment, humiliating EU & US foreign policies encouraging war in Europe. Whilst the strategy had performed at an excellent risk reward level since the end of the Great Recession (2009), absolute performance was impacted by political unwillingness to allow poorly allocated assets to be redeployed. As the artificial intelligence employed in this strategy seeks to allocated under rational (non-political) criteria, it has therefore suffered.

The does strategy continually looks to improve the economic fundamental techniques employed and, learns from its own historic mistakes. If responsible politics return the portfolio can provide outsized absolute returns, if they do not, only adequate risk adjusted returns can be expected. However, artificial intelligence looking for shorter term indicators based on capital market information, are now in development to enhance returns.

Belsize Strategy (Macro & Global Futures Trading):

In May 2021, with the advancement of the firms AI abilities, this long-standing strategy that provided excellent returns during the 2007/8 financial crisis restarted. Following calibration of the artificial intelligence, in the final third of 2021 the strategy eked out a profit but, in the last quarter had a small loss due to the coincidence of pivotal moments (above).

Private Equity Strategy (Illiquid Investments):

In 2021 Q2 the firm added five position (including reservations) to its first venture capital investment in 2019. Sector breakdown now stands at: 29% media & entertainment, 22% communications, 18% real estate, 18% finance and, 8% food and beverage. The technology breakdown in the portfolio consists of 60% apps, 20% hardware, 10% sharing economy and 10% e-commerce. The firm makes no positive discrimination except for the combination of good ideas and teams, however the initial investment was to a female managed business and, we have further invested in one black and two Latin managed businesses. The female managed business was found to be providing false sales reports and, was acquired for stock in a company with a larger consumer base.

Crypto Currency Strategy (Inter-day Trading):

Due to the rapid development of the firm’s proprietary AI, in June 2021 a crypto trading strategy was initiated, across 11 currencies each with a market capitalisation over $1Bn. In the second month of 2022 a loss was recorded that erased the profits from the previous 10 months. The strategy has been trading flat since then.

Artificial Intelligence & Technology Development:

The firm continues refinement of existing techniques (above) and adoption of best practice. Human language analysis to identify political impacts on capital markets, is in further development. The firm also looks to develop consultancy and possibly software offerings.

Firm Operational Update:

Since 2015 the firm has been maintained as a Californian Registered Investment Advisor (RIA) within FINRA and SEC USA government oversight. At present the firm’s administrative headquarters are in London, UK; if global travel restrictions return to pre-Covid levels we expect this to be more fluid.

Impact Investing:

The firm looks to develop infrastructure for the deployment of capital in impact investing over the next five years.

Steven J Cohen CFA Newsletter Q4 2021

Economy & Capital Markets:

On December 15th the Fed indicated that: Treasury and mortgage bond purchases are to end in mid-March 2022, and its benchmark interest rate will rise to 0.9% by the end of 2022 and then onto 1.6% by the end of 2023. Both the stock market and treasury yields maintained their range. Unnecessary promised massive fiscal expansion, due to both high inflation and low unemployment, stalled in the Senate.

Governing bodies have panicked over a virus that has a high transmission but low and known mortality victim profile, causing increased inequality. Governments have relied on an unskilled general population to provide specialist medical procedures on themselves, instead of providing specialist procedures by the medical profession to high mortality profiles. Without restrictions the virus would have had minimal effect on both the economy and social structures. Economies and capital markets therefore remain enthralled by government medical policy.

Also on December 15th the PBC cut the required reserve ratio for financial institutions to an average 8.4% to support supply-side structural reform, at the same time it increase the foreign exchange reserve requirement to 9%. The PBC expects the RMB exchange rate to remain stable, to utilise a further RMB300 bn central bank lending for micro and small business and, to further bing down actual loan rates.

The ECB expects in 2022: 4.2% GDP growth, a 7.3% unemployment rate and 3.2% inflation rate. 3mth EIBOR is not expected to return to zero (from -0.5%) until 2024. Pandemic net asset purchases are expected to continue through 2024. Non-pandemic net asset purchases are expected to continue at EUR 20 bn per month from October 2022. The 3rd target longer-term refinancing operations are expected to end in June 2022.

Kings’ Portfolio (Global Mega Cap Long/Short Equity Investing):

In Q4 the portfolio gained 0.70%. For the year the portfolio gained 7.96% after reaching a return high of 13.77% in June. Since inception the Sharp (risk adjusted return) is 1.02, matching the world equity index and S&P500. Winning positions for the year included: long positions Nippon Yusen KK (Japanese industrials) contributing 2.6%, JPY 1.62%, Danieli (Italian industrials) 1.48% and, short positions Canopy Growth (Canadian healthcare) 2.27% and Ping An Healthcare (Chinese consumer non-cycl) 2.01%. Losing long positions included: GBP 1.30%, Tokai Carbon -1.40%, Ube Industries (both Japanese basic materials companies) -1.10% and, Clinuvel Pharmaceuticals (Australian healthcare) -1.08%

Belsize Strategy (Macro & Global Futures Trading):

In May, with the advancement of the firms AI abilities, this long-standing strategy which provided excellent returns during the 2007/8 financial crisis restarted. Following calibration of the Artificial Intelligence calibration, in the final third of the year the strategy eked out a profit, although adversely effected by blanket economically/socially restrictions for a novel illness that effects a very focused group.

Private Equity Strategy (Illiquid Investments):

In 2021 Q2 the firm added five position (including reservations) to its first venture capital investment in 2019. Sector breakdown now stands at: 29% media & entertainment, 22% communications, 18% real estate, 18% finance and, 8% food and beverage. The technology breakdown in the portfolio consists of 60% apps, 20% hardware, 10% sharing economy and 10% e-commerce. The firm makes no positive discrimination except for the combination of good ideas and teams, however the initial investment was to a female managed business and, we have further invested in one black and two Latin managed businesses.

Crypto Currency Strategy (Inter-day Trading):

Due to the rapid development of the firm’s proprietary AI, in June a crypto trading strategy was initiated, across 11 currencies each with a market capitalisation over $1Bn. In the first eight months of the strategy, low double-digit returns were recorded.

Artificial Intelligence & Technology Development:

Early in Q1 2021 the firm completed its software development target for the year. Apart from further improved accuracy of decision making, a surprising offshoot was increased speed. This has allowed far greater diversification across instruments and time horizons. The firm now looks to improve its human language analysis to identify political impacts on capital markets. The firm also looks to develop consultancy and possibly software offerings.

Firm Operational Update:

Since 2015 the firm has been maintained as a Californian Registered Investment Advisor (RIA) within FINRA and SEC USA government oversight. At present the firm’s administrative headquarters are in London, UK; if global travel restrictions return to pre-Covid levels we expect this to be more fluid.

Impact Investing:

The firm looks to develop infrastructure for the deployment of capital in impact investing over the next five years.

Newsletter Q3 2021

Economy & Capital Markets:

In September the US Fed, revised expectations of 2021 growth down to 5.9% and inflation up to 4.2% whilst, indicating the Federal Funds rate will rise to 0.3% in 2022 and then to 1% in 2023.

The Peoples Bank of China views: contact-based consumption constrained, problems for small businesses and manufacturing and, fiscal imbalances for several regional governments. However, in a refreshing contrast to western bureaucrats, will maintain money supply in-line with economic growth and leverage stable. It will manage the RMB with reference to a basket of currencies, currency flows and balance of payments. It also seeks to improve bond default resolution and to stabilise land and house prices. The 14th Five Year Plan commenced in 2021 and, in Q2 2021 monetary policy returned to normal as before the pandemic.

Kings’ Portfolio (Global Mega Cap Long/Short Equity Investing):

In Q3 2021 the Kings portfolio returned 1.6% (7.2% ytd) with a 0.66 Sharp (0.69) out-performing both the World & US indices on a risk adjusted basis (Sharp). Relative out-performance was due to contribution from our short positions. Top contributors were long Paladin Energy 1.21% (Australian uranium), short Brilliance China Automotive 1.08%, short Fibrogen 0.86% (US pharmaceuticals). Biggest detractors were our legacy long position in GBP -1.93% and a long position in Xtep International -0.63% (Chinese sportswear).

Belsize Strategy (Macro & Global Futures Trading):

In May, with the advancement of the firms AI abilities, this long-standing strategy which provided excellent returns during the 2007/8 financial crisis was restated. Results are steady improving inline with trading, risk limitation and machine learning calibration, and they finally overcome some expected short term fluctuations to produce a profit in the last month.

Private Equity Strategy (Illiquid Investments):

In 2021 Q2 the firm added five position (including reservations) to its first venture capital investment in 2019. Sector breakdown now stands at: 29% media & entertainment, 22% communications, 18% real estate, 18% finance and, 8% food and beverage. The technology breakdown in the portfolio consists of 60% apps, 20% hardware, 10% sharing economy and 10% e-commerce. The firm makes no positive discrimination except for the combination of good ideas and teams, however the initial investment was to a female managed business and, we have further invested in one black and two Latin managed businesses.

Crypto Currency Strategy (Inter-day Trading):

Due to the rapid development of the firm’s proprietary AI, in June a crypto trading strategy was initiated, across 11 currencies each with a market capitalisation over $1Bn. Trading, risk limitation and machine learning calibration is a continuous process. The fist two months of the quarter provided excellent results whilst in the last month these were reduced due to adverse news flow and the growing sophistication of market participants.

Artificial Intelligence & Technology Development:

Early in Q1 2021 the firm completed its software development target for the year. Apart from further improved accuracy of decision making, a surprising offshoot was increased speed. This has allowed far greater diversification across instruments and time horizons. The firm now looks to improve its human language analysis specifically truth and deception. The firm also looks to develop consultancy and possibly software offerings.

Firm Operational Update:

Since 2015 the firm has been maintained as a Californian Registered Investment Advisor (RIA) within FINRA and SEC USA government oversight. At present the firm’s administrative headquarters are in London, UK; if global travel restrictions return to pre-Covid levels we expect this to be more fluid.

Impact Investing:

The firm looks to develop infrastructure for the deployment of capital in impact investing over the next five years.

Steven J Cohen CFA Newsletter Q2 2021

Economy & Capital Markets:

In June the US Fed, improved expectations of 2021 growth to 7% and inflation to 3.4% and, indicated that they expect to increase interest rates to 0.6% in 2023, a long way off.

The PB of China views: resident consumption constrained, problems for small businesses and fiscal imbalances for several regional governments. However, in a refreshing contrast to western bureaucrats, will maintain money supply and leverage in-step with economic growth. It will manage the RMB with reference to a basket of currencies, currency flows and balance of payments. It also seeks to improve bond default resolution and to stabilise land and house prices.

Kings’ Portfolio (Global Mega Cap Long/Short Equity Investing):

In the first half the dollar portfolio returned 5.48% with a 0.7 Sharp, whilst the S&P500 returned 14.42% and the ACWI 12.34%. The portfolio suffered a 6% decline in the last month impacted by market rebalancing to accommodate the US Fed’s interest rate expectation. Japanese basic material companies: Tokai Carbon and Ube Industries contributing -1.4% and -1.1% to the fall. US healthcare company Evolent Health and shorting UK technology company Micro Focus also contributed -0.75% and -0.63% with, the portfolio’s natural US dollar short position adding -0.98%. At the end of the period the portfolio held a very conservative 65% in cash.

Belsize Strategy (Macro & Global Futures Trading):

With the advancement of the firms AI abilities, this long-standing strategy which provided excellent returns during the 2007/8 financial crisis was restated in May. A small loss was reported, inline with expectations that were impacted by the US Fed’s acknowledgement of a need to bring forward interest rates increases. Operational procedures are developing.

Private Equity Strategy (Illiquid Investments):

During the period the firm added five position (including reservations) to its first venture capital investment in 2019. Sector breakdown now stands at: 29% media & entertainment, 22% communications, 18% real estate, 18% finance and, 8% food and beverage. The technology breakdown in the portfolio consists of 60% apps, 20% hardware, 10% sharing economy and 10% e-commerce. The firm makes no positive discrimination except for the combination of good ideas and teams, however the initial investment was to a female managed business and, we have further invested in one black and two Latin managed businesses.

Crypto Currency Strategy (Inter-day Trading):

Due to the rapid development of the firm’s proprietary AI, in June a crypto trading strategy was initiated, across 11 currencies each with a market capitalisation over $1Bn. Operational activities are being fine-tuned to accommodate the AI decision-making within the firms risk limitations. The results were inline with expectations given market conditions, with a small profit. This strategy is not expected to be available for external parties.

Artificial Intelligence & Technology Development:

During in the first month of the quarter the firm completed its software development target for the year. Apart from further improved accuracy of decision making, a surprising offshoot was increased speed. This has allowed far greater diversification across instruments and time horizons.

Firm Operational Update:

Since 2015 the firm has been maintained as a Californian Registered Investment Advisor (RIA) within FINRA and SEC USA government oversight. At present the firm’s administrative headquarters are in London, UK; if global travel restrictions return to pre-Covd levels we expect this to be more fluid.