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lien complet :http://www.scribd.com/doc/21753600/Tudor-Third-Quarter-Letter
extraits :
liquidity Race:  Wall of Money Climbs Wall of Worry  The forceful policy response to avert depression tail risks posed by the financial crisis has likely unleashed a wave of liquidity which is probably greater than that of 2001-2003.  Our job is to identify the best performing assets of this “Great Liquidity Race.”  At present, it appears those assets are gold, emerging market equities denominated in local currencies, and commodity related stocks.
 
  Liquidity is making its way into bond purchases by banks, into equity markets, into capital flows to emerging markets and into international reserve accumulation and related diversification away from the dollar.
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This will be the trend over the next quarter—or two—even before discussing potential portfolio shifts within it.   The liquidity race is taking place in a macro back-drop punctuated by a growth impulse—at least through 10Q2—by the return of global current account imbalances over the medium-term, and by a desire to maintain supportive fiscal and monetary policies for a considerable period by the majority of central banks.   Through 10Q2, global growth will be strong, driven by a monetary and fiscal impulse, by a reduction of inventory de-stocking rates, and by a weak dollar.
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It is possible that 10Q2 could be the strongest growth quarter.  Our simulations suggest that domestic demand contribution to GDP growth in the US (excluding net exports) could reach around 4.4% in 09Q3, about 3.0-3.5% in 09Q4-10Q1 and about 5.5% in 10Q2, before tapering off substantially to about 1.5% in 10H2.  This cliff effect could have a profound impact on markets.  Similar patterns, although different levels, are expected in Europe and Japan.  In most emerging markets, domestic demand also is expected to rise over the next year and will probably sustain beyond 10H2.  This will be driven by lagged effects of monetary and fiscal stimulus, income gains from higher commodity prices in several countries, strong real income growth in US dollar terms and by largely intact banking systems and credit creation mechanisms.  In the case of China, sequential 30-35% and 20-25% of GDP credit creation in 2009 and 2010, respectively, will also remain a contributor.
A return to global current account imbalances means global recycling of money and upward asset price pressure anew.  The recession has temporarily narrowed the global imbalance by about half.  But recovery in growth, demand and trade patterns means further imbalance reduction is unlikely from here.  In fact, it is more likely that imbalances increase prospectively.  This, together with reserve accumulation and increasing diversification by emerging markets (for self-insurance), means the recycling of liquidity, and associated upward asset price pressures, are returning to the old patterns of 2003-2007, at least for the moment.   Politicians and policymakers will err on the side of caution and will maintain supportive monetary and fiscal policies for a considerable period.  It will be very hard to explain withdrawing policy stimulus early in a recovery with slowly declining, or increasing, unemployment rates and with low consumption and capital spending growth.  The asymmetric political risk is large, and if an early withdrawal mistake is made, it would be difficult to launch a new wave of stimulus.  Policymakers in the US have said they don’t want to repeat the mistakes of the Fed in 1937 or the Bank of Japan in 2000 when policy rates were prematurely hiked.  Also, coordination of policy withdrawal across countries is overplayed.  Different countries will tighten at different points in time, at a differing pace and by different total amounts.  This presents relative opportunities in currencies and fixed income, as further discussed below.  As you may have noticed from our recent monthly Attribution and Transparency Reports, precious metals exposure has been increasing and is currently the largest commodity exposure.  As a result we have included, for this quarter, a separate discussion on gold as an appendix.  I have never been a gold bug.  It is just an asset that, like everything else in life, has its time and place.  And now is that time.  The economic and political comparisons to the late 1970’s are too numerous to ignore.  And, as such, gold is at the center of our thinking as a store of value during a period of potentially large and persistent global portfolio shifts. The temptation to directly, or indirectly, monetize rising and persistent fiscal deficits globally means gold could have a bid for the foreseeable future.     Bond Markets.  Faced with historically large output gaps and low levels of inflation, central bankers are ready to wait until they can be convinced of the sustainability of the recovery before hiking rates.  However, we believe it won’t be possible to reach any conclusion about such sustainability before 10Q1.  Overall, central banks will be in tightening mode by late summer of next year.  Yes, the unemployment rate will be high but, unless core inflation falls below 1%, after several quarters of above potential growth the Fed may be pressured to show its anti-inflation credentials by 10Q3, especially if the US dollar continues its secular decline.  The BoE may be facing a similar situation, given the sizable decline in sterling that is putting upward pressure on inflation, although it is unlikely to change its policy stance before the election in May 2010.  The ECB may struggle with the opposite problem, a strengthening currency that puts downward pressure on inflation.  However, the ECB's stealth easing via full allotment auctions will be slowly reversed and Eonia rates will converge toward 1% by mid next year.   The BoJ may be the only central bank that remains on hold next year, as persistent deflation will likely require a prolonged period of policy stimulus.  ets remain sluggish, income growth is likely to stay weak in the near-term, and the risks of economic relapse post-stimulus and post-restocking favor a bullish fixed income view.  On the other hand, the risk of higher inflation expectations, the perception that risky assets have moved higher too fast—and this may require a policy reaction—and concerns about a disorderly dollar collapse would point toward a more bearish view on rates.    In this mixed environment we are hard pressed to find attractive risk/reward opportunities, except for yield curve flatteners.  The current liquidity induced bubble supports all assets and we view duration as yet another  ”risky asset.”  Given the steepness of the term structure of rates, investors’ desire to deploy their cash toward higher yielding instruments should push fixed income investments further out the yield curve.  Such a move over time should flatten the term structure of rates.     Curve flatteners also provide tail risk insurance against long gold, short dollar and long equity positions and, as such, marry well with other market views presented here.  As deflation recedes to the background, market participants will start expecting a removal of policy accommodation.  If the markets begin to price early, fast and large tightening before inflationary expectations are allowed to take hold, then curves could bear-flatten significantly from current historically high levels.  Currencies.  The US dollar will continue its path lower as global flows seek high yielding assets and sovereign reserve managers diversify their growing US dollar-based reserves.  A recovery in international trade and an acceleration of portfolio investments into emerging markets have left reserve managers with an overweight dollar position.  Reserve accumulation and diversification trends will be persistent and mutually reinforcing with the direction of the US dollar:  The weaker the US dollar the more likely reserve managers are to diversify, particularly as year-end approaches.  The speculative community represents the key counterbalancing force which has been building formidable short positions since mid summer.   In the near-term this tension will be resolved with reserve managers having the upper hand to drive the dollar lower against the euro and a group of commodity currencies.  The euro is still perceived as the default alternative to the dollar, but fundamentals are less than fully supportive.  Europe has several countries that will undergo profound deflationary and quantity adjustment.  Europe is lagging the US on banking system loss-recognition capitalization.