It was good while it lasted, but Goldilocks never lasts for very long. China’s combination of accelerating economic momentum and policymakers’ focus on decreasing leverage has led investors to abandon their previous views of China as either a coming asset bubble or imminent hard landing candidate. The next logical step was to believe in the “not too hot and not too cold” view of China that we had expected investors to move to for some time. This has now happened. At the same time an increasing number of people across the globe have started to believe in a “real recovery” where previously the best they dared hope for among the developed economies was anaemic growth, if not a “double dip”. Recently we have heard more than one investor describing expectations of higher than expected growth in the near term. If global investors had not begun this process then China might possibly have stayed in a “Goldilocks bubble” for longer.

But while investors have been busy changing their views, the reality on the ground has been changing too. China is now well past Goldilocks. From the top to the bottom of Chinese society, we have never seen » Read more: Jeff Coggshall – March 2010

Tiburon Terra posted positive performance for March, up 3.0%. The portfolio had 44 positions at month end. Net long exposure was increased during the month to 41%.

While the Fund performed adequately with relatively low volatility and protected capital during the significant downturn in the clean energy sector – down 24% between January and end of March – market conditions have become more supportive of increased risk appetite, which in turn is supportive of a re-rating of the natural resources asset class. As a result, during March the portfolio steadily increased the net long exposure to take advantage of investment opportunities which we believe are very under valued.

Several factors converged during the month to increase investor appetite in global equity markets. The first is the market’s belief that EU Finance Ministers have arrived at a consensus of support for dealing with Greece’s debt crisis which would also involve the IMF. The second was higher commodity prices, which in turn led to support of higher stock valuations. Oil, base metal and bulk commodity prices have all increased during the month on the back of continued evidence that the US economy is gradually recovering, albeit slowly, while demand for commodities from China remains strong. » Read more: John Payne & Steven Miller – March 2010

Supportive US economic data and a consequently weaker Yen, provided significant impetus to the Tokyo market as optimists continue to highlight the high operational leverage of Japanese manufacturing companies. As confidence in the equity market continued to improve, attention turned to low PBR stocks which were suddenly aggressively sought after, a pattern all too often repeated prior to a near term peak in the index. With expectations for markedly higher TO March 2011 corporate profit levels and crucially a market where international investors remain underweight, share prices can probably move higher in the event of further improved economic data. However as highlighted in previous months, momentum carries risk and we sense that expectations of a weaker yen, through the Y100 level, will be required in order to preserve the earnings growth story in the manufacturing sector beyond September 2010 given tougher hurdle rates on capacity utilisation and input costs. The BOJ remain an important variable in this debate and judging on past history, there is a risk that » Read more: Rupert Kimber – March 2010

Pensions are now a hot topic, and the recent deal that British Airways has come to with its unions provides an interesting data point. In order to preserve currently promised benefits, employee contributions have to rise to a level equivalent to taking a 5% pay cut. This does nothing to ameliorate the extent of the current deficit – it just helps to stop it getting bigger. This (material) hit to individual income is not going to be unique to employees of the World’s favourite airline. The front page of Barrons recently focused in gory detail on the deficits of the gold-plated pension regimes of the U.S. states, and the numbers are not only gargantuan; they do not appear in any future estimate of the States’ funding requirements. This is something of a blow as California, Illinois and several others appear to be functionally insolvent already. We therefore view Moody’s decision to UPGRADE the ratings on 70,000 instruments issued by US municipalities as continuing their dream run of forecasting over the last few decades, and find it genuinely impossible to understand why anyone takes these organisations seriously – yet their prognostications over the UK’s potential loss of its AAA status, or Greece’s ‘stable’ ratings still get headline treatment in the press. The reality is that » Read more: Mark Fleming – March 2010