Interesting Hedge Fund Story - Clarium Sees "Long Goodbye"

I am not so interested in the returns, although they are great - but more interested in the "why", which dovetail with a lot of what I write. I am just glad that some smart money with real stakes in the game (i.e. investors cash) are thinking like me. It is so easy for TV pundits who have nothing at stake to constantly blabber junk.

Interesting blurb on CBSMarketwatch.com

• Clarium LP, a $4 billion hedge fund run by PayPal co-founder Peter Thiel, surged 24.4% in January as bets against leveraged U.S. companies and the dollar paid off, according to an update that the firm sent to investors recently.
• Clarium's positions in U.S. equities contributed most to the gains, while bets that overseas currencies would appreciate against the U.S. dollar also boosted returns, the firm said in the update, a copy of which was obtained by MarketWatch.
• Clarium tries to make money from distortions in global markets created by the collapse of the 1990s technology bubble. The firm's main $4 billion hedge fund returned 40.3% in 2007, enjoying a particularly strong surge in the fourth quarter. It's gained more than 400% since it was set up earlier this decade.
• Clarium sent a gloomy assessment of western economies, real estate and stock markets to investors in August. The firm argued that the developed world has entered a period of lower returns in which interest rates and economic volatility increase while growth in corporate profits and global expansion decline. This "Long Goodbye" follows two decades of falling rates and reductions in economic volatility that Clarium calls the "Long Boom."
• "We have begun a post-Long Boom phase that can be called the Long Goodbye," Clarium wrote in its August letter. "Returns during the Long Goodbye will be lower -- perhaps half as much -- than those of the Long Boom."
• To adjust to this new reality, the firm explained that people must work more, consume less and compensate for lower returns by using more leverage -- borrowing more, that is. The prudent response would be to work longer and cut consumption, but so far the reaction has been just to borrow more, Clarium said. (Bingo! How sad! Wouldn't be prudent to consume less or save, would it?)
• That higher leverage has made markets much more vulnerable to outside shocks that will force "painful" de-leveraging and a reduction in liquidity, Clarium predicted in August.
• The firm put that outlook to work in early October, building short positions -- effectively betting that the price of a stock will go down -- against highly leveraged financial-services companies.
• At the end of January, Clarium exited its short U.S. equity positions, leaving the fund with a long position in U.S. stocks.

Interesting to see they have exited short US equity positions, whereas I've remained bearish now that the technicals are such a disaster. But I feel less like an outlier now that I see stories like this... p.s. where were these stories in September? October? I guess when the market is up we can't be bothered to read about the other side of the trade.

Anyhow Cisco (CSCO) guidance out poor... they saw a sudden downturn in January as the negative psychology effect turns on itself. Ralph Polo (RL) also said the same thing about the consumer - how swift and dramatic the shift has been...and it's now heading to London.

COO Roger Farah said that "the change in consumer spending patterns from fall are unprecedented." In the Q&A, he said that he picked the term "unprecedented" carefully, saying that he was looking at the swiftness of the December decline and how it affected all income groups. He said that he did not see what could stimulate the consumer to buy and sees no reason for a consumer upturn 12 months from now. He has seen weakness from the financial market-related spending in London during the holiday shopping season.

No consumer upturn for 12 months? But Cramer says buy the early cycle stocks - retail stocks - BUY BUY BUY! Hmm, listen to CEO and COO of the companies themselves...or TV pundit. But hey MBIA (MBI) got a $750M (peanuts) injection of capital through yet another stock offering tonight and that made people happy. Well all people except people whose stock just got diluted yet again...

So tomorrow AM we can look forward to a total overreaction to a weekly jobs number that again, means little. These data points week to week mean little alone - the trend is so very clear. If the weekly jobs claim comes in "great" tomorrow, does it change a thing in the "real world" of job losses? Hardly. But like a room full of 3 year toddlers the market banshees will wail one way or the other and overreact. And we have to deal with this EVERY Thursday folks - joy joy joy. A number given little attention to will now take on huge magnitude every week as people strive for every clue ... about a very obvious situation - yes Dorothy, we're in recession. But they'll keep looking for data points to say we are not... and tomorrow is yet another.

Well let's see if the fertilizer companies can pull through this morass - always a bull market somewhere as a great philosopher of our time likes to say.