Existing Home Sales 12-20-12

TRADEX GLOBAL INTERNAL COMMENTARY

Existing home purchases increased 5.9% to an annual rate of 5.04 million!  This is the best number since November of 2009 and was way above most forecasters’ projections of an annual rate of 4.9 million.  Property values have risen 10% over the last 12 months as inventories dropped to the lowest levels in 11 years.  These numbers bode very well for our Liquid Real Estate Portfolio, as the underlying mortgage securities will benefit from rising home prices and improving severities when a home does need to be foreclosed upon.  Keep nimble – Michael Beattie

EXTERNAL RESEARCH COMMENTARY

Sales of previously owned homes rose more than forecast in November to reach a three-year high as lower borrowing costs sustained the U.S. housing rebound. Purchases of existing houses increased 5.9 percent to a 5.04 million annual rate, the most since November 2009, the National Association of Realtors reported today in Washington. The median forecast of 82 economists surveyed by Bloomberg projected an increase to a 4.9 million rate. Property values climbed 10.1 percent over the past 12 months as inventories dropped to the lowest level in 11 years. Record-low mortgage rates and an improved job market are boosting sales and cutting inventories, giving the market the opportunity to absorb foreclosures. Prices are rising as a result, which will probably draw more buyers seeking to take advantage of current affordability in housing, helping retailers such as Pier 1 Imports Inc. (PIR) and Lowe’s Cos. Inc. “The housing market is staged for continued improvement,” Anika Khan, senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, before the report. “Underlying fundamentals are continuing to improve despite uncertainty. We’re seeing better labor market numbers, and that’s also reflected in better consumer confidence. Sales activity is going to be volatile but the underlying trend is still improving.” Economists’ estimates in the Bloomberg survey ranged from 4.59 million to 5.15 million. The prior month’s pace was revised to 4.76 million from a previously reported 4.79 million.

Tradex Global Advisory Services, LLC

investorrelations@thetradexgroup.com 

203-863-1500

@Tradex_Global

Press Release: Tradex Global Advisors adds Veteran Investor Leonard Chaikind to its Investment Advisory Council

FOR IMMEDIATE RELEASE:

Tradex Global Advisors adds Veteran Investor Leonard Chaikind to its Investment Advisory Council

Greenwich, CT – December 17, 2012 – Leonard Chaikind was one of the first ever large institutional investors to invest both in Private Equity and Hedge Funds in the 1980’s.  During this period, he was the Administrator of all Shell Oil’s Savings and Retirement Programs.  “It is with great honor that Len has accepted this role with Tradex.  We are very lucky to have someone with decades of investment experience under his belt,” said Michael Beattie, Chief Investment Officer of Tradex.  In addition to advising Tradex in many areas, Len will also be involved with helping implement and launch a new product line.  This will include small, sector-focused, multi-manager funds targeting very specific investment opportunities, a single-strategy, short-biased high-yield credit fund and Tradex’s traditional, multi-manager, Liquid 50 Portfolio that focuses on very liquid trading opportunities within equity, volatility and mortgage strategies.

Leonard Chaikind founded Institutional Investors Consulting Company (IICC) in 1991 after retiring from the head position of Shell’s multi-billion dollar Pension and Benefits Programs.  Prior to this assignment, he was Treasurer of Far East and Australasia for Royal Dutch Shell where he coordinated over US $35 billion in major project financings.  Len enjoyed a wide variety of positions with Royal Dutch Shell and the Shell Oil Companies from 1957 to 1991.  After serving as the Finance Manager for both Shell Chemical and Shell Oil Products, he was appointed Regional Treasurer for Royal Dutch Shell in the Far East and Australasia, working out of Shell’s head office in London.  When Len headed up the Shell Savings and Retirement Programs, approximately 50% of the Pension Plans were managed internally by Len’s staff, with the rest being outsourced to various investment managers and consulting groups.  During this period, the Shell Funds were widely recognized by the industry to be one of the best.   In 1985, Len was one of the key founders of the Committee on Investments of Employee Benefit Assets (CIEBA) which currently represents approximately 115 of the country’s largest Pension Plans with assets well over $1.4 trillion and over 16 million participants.  Len was also one of the founders of the New York Stock Exchange Institutional Advisory Committee in 1987.  Both of these groups continue to be very active to this day.

Len likes to think of IICC as a “do good” investment bank, whose dual mission is 1) To help Institutional Investors, i.e. Pension Plans, Foundations and Endowment Funds operate more effectively, i.e. make better investment decisions, and 2) “To make the world a better place to live.”   In addition to being actively involved in the Private Equity arena, which includes hedge funds, IICC is also working on a number of major projects in places like Haiti, West Africa, China and Mexico, in addition, of course, to the USA.

Len holds a MBA from Harvard Business School and a BA from Harvard University in Economics.  Len graduated from the Loomis Institute in Windsor, CT and served in the US Navy (LTSG) during the Korean War.

About Tradex Global Advisors

Lead by Chief Investment Officer Michael Beattie and Director of Research Richard Travia, the principals at Tradex have spent 10 years together analyzing, evaluating and investing in small, niche hedge fund managers.  Tradex Global’s advisory services include proprietary due-diligence covering manager competence and ethics, performance monitoring, liquidity assessments, investment policy evaluations, manager selection, fund-of-funds, customized managed account portfolios and single hedge fund services.  Opened in 2004 by Michael Beattie, Tradex Global Advisors is part of The Tradex Group. Headquartered in Greenwich, CT, The Tradex Group manages assets for institutional investors which include some of the largest pension plans in Europe.

For more information:  Please contact Richard Travia at richard@thetradexgroup.com or 203-863-1537.

MBA Mortgage Applications 12-19-12

TRADEX GLOBAL INTERNAL COMMENTARY

The Mortgage Bankers Association reported that application totals (re-fi and new home applications) fell 12.3% in the week ending December 14th. The refinancing component fell a larger amount, 13.8%, while new home applications fell 4.8%. The re-fi share of total applications also fell to 83% from 84% in the prior week. Fixed 30-year conforming rates rose slightly to 3.50% from 3.47% the week before. These weekly numbers can be volatile and slightly misleading, but we do believe that the re-fi wave is cresting and re-financings will slow in the first half of 2013. This is a good report and gives us greater confidence in our IO (interest only derivatives) portfolio that we plan on increasing. An underappreciated statistic is that banks have approximately 265k employees to work with borrowers that want to refinance their existing loans or to get a new mortgage, down from a peak of 500k employees.  A good amount of employees at those banks are doing ‘workouts’ and foreclosures. This may be intentional on the banks part to slow down the whole business and wait for higher rates. That is not fact, but I would not discount it. Keep nimble – Michael Beattie  

EXTERNAL RESEARCH COMMENTARY

Applications for home mortgages fell to their lowest level since early November last week and the purchase index fell after a five-week climb, an industry group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 12.3 percent in the week ended December 14. The MBA's seasonally adjusted index of refinancing applications fell 13.8 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 4.8 percent, dropping from its high point on the year. The refinance share of total mortgage activity fell to 83 percent of applications from 84 percent the week before. Fixed 30-year mortgage rates averaged 3.50 percent in the week, up three basis points from 3.47 the week before, which was the lowest in the history of the survey. The rise in rates came even with the Federal Reserve's announcement last week that it would purchase more Treasury securities each month. "Rates increased in the second half of the week," said Mike Fratantoni, MBA's Vice President of Research and Economics. The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

Tradex Global Advisory Services, LLC

investorrelations@thetradexgroup.com 

203-863-1500

@Tradex_Global

Housing Starts 12-19-12

TRADEX GLOBAL INTERNAL COMMENTARY

Building applications issued in November rose to a four year high. Permits climbed 3.6% to 899k annually, the most since July of 2008. The forecast by economists was for 875k, so this was a pleasant surprise. Housing starts fell 3% to an annualized rate of 861k, but the 3 month average rate of housing starts was the strongest since August 2008. Record low mortgage rates and a slightly improving jobs market will probably make 2013 the best year for builders since 2007. The one variable is the lack of private mortgage origination.  The GSEs are making 9 out of 10 of every mortgage origination. Private banks need to start lending to keep this trend alive. This is positive news for our Liquid Real Estate Portfolio (up 14% ytd), as improving fundamentals will decrease defaults and severities will improve on properties that do end up falling into foreclosure. Also, we believe that we are close to the end of the refinance wave that have put some IOs (interest only derivatives) under pressure this year. This asset class may be the biggest winner in 2013 and we will watch closely and increase allocations as pre-pays start to slow. Keep nimble - Michael Beattie

EXTERNAL RESEARCH COMMENTARY

The number of building applications issued in November rose to a four-year high, a sign the U.S. housing-market recovery will extend into 2013. Permits, a proxy for future construction, climbed 3.6 percent to an 899,000 annual rate, the most since July 2008 and exceeding the 875,000 median forecast of 58 economists surveyed by Bloomberg, Commerce Department figures showed today in Washington. While housing starts fell 3 percent to an 861,000 pace, the average rate from September through November was the strongest since the three months ended August 2008. Record-low mortgage rates and an improving job market are giving Americans the confidence and wherewithal to buy a house, boosting builders such as Toll Brothers Inc. (TOL), which are now able to raise prices. Gains in housing will help shore up economic growth this quarter as businesses curb spending on concern lawmakers will fail to avert the tax increases and spending cuts slated to take effect in 2013. “We’re headed higher and next year is going to be the best year for housing starts that we’ve seen since 2007,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh, who projected starts would drop to an 865,000 pace. “Housing is coming back.” Stocks were little changed as President Barack Obama and Republicans continued budget talks. The Standard & Poor’s 500 Index fell 0.2 percent to 1,443.52 at 10:36 a.m. in New York.

Tradex Global Advisory Services, LLC

investorrelations@thetradexgroup.com 

203-863-1500

@Tradex_Global