Currently, the fund is positioned for higher gold prices, stronger Asian emerging-market currencies and lower yields across high-quality government bondmarkets, Mr. Prince says.
In 2011, it profited from owning gold, but cut back on that position during the third quarter. It correctly pivoted from being bearish on U.S. Treasuries early in the year to positioning for a rally. It also benefited from rallies in core European bond markets and avoided ugly losses sustained by other macro funds that had bet the euro would fall against the dollar. Instead, it rightly bet that the euro would fall against the Japanese yen.
… points to the example of Japanese government bonds. An investor who was leveraged three-to-one and bought Japan’s bonds at a 2.5% yield in themid 1990s would have earned a compound average annual return of 12% a year for 15 years, he says.
… thinks stocks are attractive from a long-term perspective, especially compared with bonds or cash. Broadly, discounted earnings-growth rates, which reflect the expectations about future earnings implied by current prices, are negative.
A moribund economic outlook “is pretty priced in right now,” he says. “If we have a long, drawn out deleveraging process without substantial air pockets, chances are equities are a pretty good bet, ironically.”