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January 27, 2014 Portfolio Adjustment on Global Macro Aggressive Portfolio Partially replacing at market open long OIL position (693 Shares) with short JJC [iPath Dow Jones UBS Copper Total Return ETN] of equal value (roughly $15,675) • Rationale for reducing OIL position: Ongoing tensions in South China Sea may remain near current levels and not quickly escalate. • Rationale for establishing JJC position: Economic weakness in China = “measurable” ongoing trend. Technicals imply further downside. • Risks to JJC position: U.S., Japanese, and European recoveries fuel global trade or Chinese officials take action to focus more on growth. Both scenarios could translate to transitory, not prolonged, economic weakness. Break of JJC 42.00-42.40 to the upside would support this view.

| Rodrigo C. Serrano, CFA | SIPA | Columbia University Master of International Affairs ’14 Candidate | New York City, NY | 01-305-510-0181 | rcs2164@columbia.edu !

Ongoing tensions within the South China Sea remain and threaten to disrupt waterways home to almost a third of global annual crude oil tradei. Interference would likely result in higher oil prices which would benefit the position to be sold. However, more signs of a slowdown in China, the world’s largest consumer of copper, recently emerged. On the whole, the effects of a global economic slowdown due to a Chinese downside surprise could prove the stronger trend, leading to declining, not rising, oil prices. HSBC’s preliminary manufacturing PMI was negative for the first time in 6 months, turning in a reading of 49.6ii. Sub-indices, such as new orders and backlogs of work lent support to the weak reading. Furthermore, growth of fixed asset investment continued its downtrend, posting its poorest reading, at 19.6% YoY, in more than a decade. Meanwhile, the upcoming FOMC meeting this week is likely to result in a continuation of the tapering process from $75 to $65 billion as per Jon Hilsenrath at the WSJiii. This may further affect investor sentiment. Finally, this week should bring a resolution to the worrying state of affairs regarding China Credit Trust’s Credit Equals Gold No. 1 trust product. While a bailout is likely, a negative surprise as Chinese leaders instead refuse to “hop on the moral hazard bandwagon” could give investors another reason to sell. Notwithstanding these recent bearish developments, the portfolio will still remain long 1735 shares in OIL, positioning it to offset the copper short and still provide a net benefit should the global economy reaccelerate on the back of stronger growth in developed markets. Indeed, a recent report by the IMF upgraded the organization’s global economic forecast to 3.7% from 3.6% on the back of strength in developed markets, particularly the U.S., Japan, and Europeiv. Bolstering optimism, economic news in Europe has surprised to the upside, while a firming job market in the U.S. has been noted by a recent publication of the Beige Book. A pick up in advanced economies would lead to firming global trade flows and provide export growth for emerging markets. In fact, the institution upgraded China’s growth forecast to 7.5% from 7.2%. Furthermore if tensions in the South China Sea become inflamed causing a strong move higher in oil prices the portfolio will benefit as well.

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!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! i http://www.eia.gov/todayinenergy/detail.cfm?id=10671 ii http://www.hsbc.com/news-and-insight/2014/flash-pmi-at-six-month-low iii http://rationalcapitalistspeculator.tumblr.com/post/74587778158/fed-on-track-to-cut-bondbuys-to-65-billion-at-coming iv http://online.wsj.com/news/articles/SB10001424052702304757004579334501285490872?mo d=WSJ_business_EconomyNewsBucket&mg=reno64wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB100014240527023047570045793 34501285490872.html%3Fmod%3DWSJ_business_EconomyNewsBucket&cb=logged0.2862 7536189742386!

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