Top-performing hedge fund manager Ashok Jacob says the Fed put is dead and that is “catastrophic for long-duration” technology stocks both here and in the United States.,” says Jacob, who is executive chairman of Ellerston capital and portfolio manager of the $500 million Global Equity Manager’s Fund, which returned 74 per cent in the year to June 2021, and 30 per cent in calendar 2021.
“On top of that, he says, I’m going to taper by March, I’m going to raise rates, I’m going to shrink the balance sheet, and you know what, I could raise rates a little bit faster.”Jacob says this bag of mixed messages was not good for the credibility of the US central bank. But this week Powell made it clear where he stands by “closing the door” on free central bank liquidity.
“This doesn’t mean the overall market is going to fall away because, you know, you’ve got plenty of short-duration stocks, you know, like real economy companies.“That’s why the BHPs of this world are up today because, you know, they are what I call short-duration stocks, and they’ve got gigantic cash flows, and they’ll be fine. I mean, that’s where the market is going to go to.
“Give me a break. She said value stocks are in a bubble – they’re clearing at single figure PEs and pumping out cash.He says her 150 per cent return in 2020 received a lot of attention, but that did not mean the fundamentals of investing had changed.“Her returns were so big that year that everybody thought that she was the Pied Piper of Hamelin, and she had a new way of investing.“Markets can only stay exuberant for so long. Now, the punch bowl is missing in action.
He says the combination of these indicators points to a “severe deterioration in liquidity conditions this year to levels last seen in March 2020”.“This poor liquidity picture raises the probability of large equity market moves either way, but it does not necessarily imply capitulation.”
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