MUST READ PETER THIEL PROFILE: MACRO MAN
Excellent read here from Bloomberg Markets. Thiel runs global macro hedge fund Clarium Capital. The article not only details Thiels impressive background, but also details his macro bets. Specifically, Thiel is expecting deflation to drive bonds higher, inflation to send oil soaring and the dollar to strengthen against the euro. As for risk management – it doesn’t sound like Thiel is a big fan as leverage is often 3x -8x and positions are focused solely on a few macro themes.
Thiel, by contrast, is a throwback to the days when managers like Soros and Robertson made—and sometimes lost— vast fortunes by staking everything on their views of the world economy. “We are trying to pursue a systemic view of the world like that which Soros and others said they pursued,” Thiel says.
Thiel has wagered all of his clients’ money on his conviction that aftershocks from the go-go ’90s will jar the U.S. His vision of the future isn’t pretty. The housing bubble will collapse and economic growth will stall, he says. An oil shock will add to the pain.
Few money managers are prepared for the turbulence ahead, Thiel says. Clarium is ready, he says. “The hedge fund’s mission is to make sense of an extraordinary moment in time in the world—a time of retail sanity amid wholesale madness,” Thiel says.
Er, isn’t this article from January 2007?
Well, Thiel fucked up in September. They went very, very long on domestic equities (particularly a Financial Sector ETF, Google, and Yahoo). Perhaps they thought McCain was going to win and the bailouts will pass and that will put the equity market higher in the short run. At least they got short commodities correct.
Are you going to get more information about Clarium’s June performance? I collect these things because it is my favorite hedge fund. I am big fan of Peter Thiel. I guess I find global macro to be a high octane strategy that requires lots of risk, although one has to be very flexible. They need to have the ability to read the sentiment of the market, have an understanding of macroeconomics, the securities market, and politics, some comprehension of technical analysis, and the ability to change one’s mind. BTW, Clarium uses three-sigma volatility as their main risk control. They assume all their positions have a correlation of 1, and add up the individual volatility of each position and 3-sigma volatility of their portfolio cannot exceed 15% of NAV. Clarium follows George Soros, and they believe diversification is bullshit in some cases. To quote Stanley Druckenmiller:
“Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig…As far as Soros is concerned, when you’re right on something, you can’t own enough”
Well, another score for non-diversification. Jim Rogers has been talking up his farmer and non-diversification as well:
“Diversification is overrated because you can go broke trying to diversify. Henry Ford never diversified, Bill Gates didn’t diversify. The way to get rich is to put your eggs in one basket, but watch that basket very carefully. And make sure you have the right basket. ” – J. Rogers
I like the “feel” of this strategy better. Diversification sometimes feels like spreading eggs into baskets that I dont really care for. Rogers says here and Thiel implies that you can be a successful disciplined focused investor. Interesting thoughts in light of the money management discussions on this site/forum.
Head Like A Rock – Yeah, old article, but not much has changed in Thiel’s mind. He’s still of the deflation/inflation view and is betting big on oil.
Good stuff Aki. You can see some of Thiels latest portfolio moves here: http://www.marketfolly.com/2009/07/peter-thiel-clarium-capitals-huge-oil.html
Tyler, I don’t totally disagree, but Soros wouldn’t be around today if his bet against the pound hadn’t worked. Let’s say the british government had implemented a buy pound program when Soros was short. Even though his fundamentals were correct he would have been killed when other traders piled on (sort of like we’re seeing in the treasury bonds today). No one would know who he is and he’d be chalked up as another rogue trader. I’m totally against diversification that puts your entire portfolio at risk of an overnight beheading….
Do you know what are Clarium’s current commodity positions, prag? Sure, they might be bullish on oil in the long term, but the global macro strategy forces one to think like a “trader” at sometimes instead of an “investor”. Right now, I am bearish on copper and oil although I do not know how to trader the former except with shorts on Freeport McMoran; short USO is for oil, I do not liked inverse or levered ETFs. I am glad my parents followed my suggestion of opening a margin account and initiating a large short position on the S&P 500 index, although there is a stop on that position.
I like long dollar vs. sterling and euro too, and long treasuries,