A lot is made of relative returns and how one strategy or fund does against the SP500.  While not the best benchmark for something like Global Macro it is nonetheless the benchmark that everyone is most familiar with and that is used the most on CNBC and in magazines.  So how does global macro stack up to the SP500?

The chart below shows how $1000 invested in the SP500 and the Barclays Global Macro Index would have done for YTD for 2009.  As you can see the SP500 while getting off to a rocky start is now leading the macro index by 9.68% so far.  While the performance of the SP500 has been impressive the other side of the story is that to get the 18.04% return in the SP500 you first had to go through a -19.56% drawdown in January and February to get it.  Contrast that to

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Gimme fuel, gimme fire, gimme that which I desire,

Can’t fight the need for speed,

I’m loose, I’m clean, I’m burning lean and mean, and mean.

Ignite the open trail,

Excite, exhale, comin on, hot from hell, yeah hot from hell.

-Metallica “Fuel for Fire”

Where has all of the money gone? We know that the world should be running out of green ink any day now due to the Treasury printing money 24/7, but with all of this money coming into the economy we would have expected runaway inflation.  Up to now we have seen, for the first time in decades, steady deflation.  In fact as you can see in the chart below, since 3/1/09 YoY CPI has been negative. (click on chart to enlarge)

CPI 12-Month % Change

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In our last post we discussed how we at The Macro Trader think that risk is vastly under-priced.  We looked at several different volatility indexes as well as Bill Luby and VixandMore.com’s JunkDEX.  The JunkDEX shows how well stocks like AIG, FNM, C, CIT, and BAC are doing.  As you can see in our previous post “Volatility Indexes, Risk Appetite, Mispriced Risk, And Where We Think We Are Headed” the JunkDEX  has had a monster rally.  Usually this would signal at least a short term top as speculative fever burns out.   Obviously the rally was not done and we are up since then.

To more quantitatively show the huge run up in risky assets we went looking for some factor based indexes that would show the performance of “good” and “bad” companies.  In our search we came across some custom stock baskets from Goldman Sachs that use Edward

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If over the past six months or so it has seemed as if you were partying like it was 1999 it might be time to reevaluate your stance.  One thing that we have been taking a closer look at lately is the pricing of risk.  Obviously when investors think that risks are low they will demonstrate risk seeking behavior.  We have seen this as the SP500 has climbed 56.6% from the March lows to the highs on 8/28/09.  With a rise like that you would think that 2008 never happened, of course if you believe that then you also believe  in a land of make believe with money trees, the fountain of youth, and SI models for all of us.

Of course some investors counter saying that while things could be better we are seeing the beginning of a recovery.  They then say that while the market will likely climb slower,

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After being the largest hedge fund strategy in 1990 representing 71% of the overall hedge fund assets global macro has shrunk and now only represents about 15% of total assets.  While most people assume that this dropoff in assets was due to poor performance the numbers actually show a totally different story.  In fact according to the Credit Suisse/Tremont Hedge Fund Indexes, global macro has been the number one investment strategy with a total return of 502% from 1994 through June 2009.  Compare that with a total return of 335% from long short equity or 321% from event driven funds.

Of course most investors also have a misguided perception that every trade is like the trade that “broke the Bank of England.”  That trade in 1992 made Soros and his Quantum Fund over $1 Billion in a few days and garnered a lot of publicity.  The funny thing is

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July 22, 2009 ndash; Analyst Comments ndash; Yesterday Caris amp; Companyrsquo;s Ben Pang weighed in on MEMC Electronics (NYSE:WFR), maintaining his 3*/Average rating and a $13 price target. nbsp; Key Takeaways middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Expects MEMC to meet Pangrsquo;s Q2 estimates of $240M and $0.02 per share. Estimating 13% gross margins. middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Critical that MEMC hasnrsquo;t been providing guidance middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Semi business should ramp, but solar may lag on pricing middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Shares trading at 11.4xnbsp; FY10 EPS estimate of $1.70 and price target of $13 based on 1.3x projected book value.

July 22, 2009 ndash; Analyst Comments ndash; Caris amp; Companyrsquo;s Ben Pang said he expects SunPower (Nasdaq:SPWRA) to meet estimates. He maintained his 2*/AA rating and $29 price target. Key Takeaways middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Expects SPWRA to meet estimates of $270M and $0.22 per share (non-GAAP), though revenue guidance may miss estimate for Q3 (estimate of $450M). middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Channel checks indicate conditions became more stable, including module pricing middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Maintains 2*/Above Average rating and $29 price target. Shares trading at 8.6x FY10 EPS estimate. Price target based on 10.8x FY10 EPS of $2.69. Expects project announcements in 2H09 to lead to upward revisions.

Energy Conversion Devices (Nasdaq:ENER) is moving to become more vertically integrated, announcing the acquisition of Solar Integrated Technologies (SIT.L), a solar integration firm. ENER will pay about $11.2 million, and will assume SITrsquo;s debt obligations. Including the debt, the total purchase price is about $16.3 million. The closing date for the transaction is August 20. Credit Suisse served as the financial advisor on the transaction to ENER, while Thomas Weisel served as the financial advisor to SIT. It has been interesting to watch midstream solar firms, who have been suffering from significant margin pressure due to falling ASPs on modules, react. Energy Conversion Devices is just the latest to move downstream. Last week, LDK Solar (NYSE:LDK) announced that it has taken a 70% stake in an Italian integrator. Others, like First Solar (Nasdaq:FSLR), have moved to acquire projects. Many are doing both. The rationale is easy enough to understand ndash; ...

Interest in emerging market ETFs is exploding. But considering how illiquid and inexpensive these stock funds are to own, it’s not all that surprising.

As pointed out in our recent Q&A with emerging markets whiz Brad Durham (see story here), ETFs now have jumped to capture nearly a third of the assets in funds focused on those countries.

His breakdown of the world’s money flows between ETFs and mutual funds really makes me question the widely held view that investors coming into ETFs are largely ex-stock pickers.

Many fund industry veterans have been contending for years that ETFs’ gains aren’t coming at the expense of mutual funds. Perhaps that is true. Each year, I’ve taken a look at fund flows between active mutual funds, index mutual funds and ETFs. The last one, done in 2008, showed that ETFs were by far the percentage growth leaders.

But over an extended period, such research has

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Crystal Properties Holdings Inc. (Pinksheets:CPHG - News) ANNOUNCES EXCITING NEWS! The Illinois Governor Pat Quinn signed into law the, “Jobs Now Economic Recovery Act” in the amount of $31 billion. The County in which the Crystal Properties River District Project is located, will be receiving over $400 million for Capital Improvement Projects.

Newspaper publisher and TV station owner Media General Inc. MNI said Wednesday that cost cutting helped deliver a profitable second quarter despite tumbling ad revenue.

Nephros, Inc. (OTC Bulletin Board: NEPH - News), a medical device company developing and marketing filtration products for therapeutic applications, infection control, and water purification, recently reported that is has received 510k approval from the U.S. FDA to market its Dual Stage Ultrafilters (DSU) for in-line purification of dialysate water and bicarbonate solution.

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