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Argonaut: Only Matter of Time Until Spain is Bailed Out

Greece Riots

Argonaut Capital Management is a hedge fund manager based in New York that offers investment vehicles using global macro and long/short equity investing strategies. Argonaut was founded in August 1993 by David Gerstenhaber, the firm’s President and Portfolio Manager. It was one of the first Tiger Cubs.

The flagship fund was up 0.1% for the month of March. As we noted last month, the fund appreciated 0.3% for February.

The biggest gainers were short positions in U.S. interest rates and a long position in U.S. equity markets. In addition, the fund’s short position in the yen and the long position in Japanese equities helped contribute to the positive returns.

Gerstenhaber sees the global economy is in a period of transition, with the markets are only slowly adapting to these changes. The US should have modest growth but there are headwinds. The fund manager notes the upcoming ‘financial cliff’ as cuts and tax raises could cause the economy to contract by more than $600 billion (or 3% of GDP).

China should grow but its rate of growth will slow as will their stature in the world economy.

The fund is even more bearish on Europe than it was last month. Recent  economic data suggests that the Eurozone recession has deepened, with France being a particular concern.  They think it is only a matter of time until outside assistance from Spain’s Eurozone partners is required.

Upcoming elections in France, Greece, regional elections in Germany, and the
upcoming referendum in Ireland all have the potential to unleash nasty surprises on the market if anti-European political parties outperform expectations. In Greece this has the greatest possibility of occurring.

Short positions in bonds of the EFSF itself, and the Euro should pay off.

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