Novogratz Says Macro’s Miss Was Shunning Long Treasuries

Photographer: Chris Goodney/Bloomberg

Michael Novogratz, principal at Fortress Investment Group LLC. Close

Michael Novogratz, principal at Fortress Investment Group LLC.

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Photographer: Chris Goodney/Bloomberg

Michael Novogratz, principal at Fortress Investment Group LLC.

Michael Novogratz, principal at Fortress Investment Group LLC (FIG), said most macro hedge-fund managers missed the biggest trade this year -- buying long-dated U.S. Treasuries -- and now there’s an opportunity to bet against the debt.

“There’s only one great trade in macro this year we missed, most macro missed -- buying duration in the Treasury market,” Novogratz said at the SkyBridge Alternatives Conference in Las Vegas today. “Yields are getting to an area where being long doesn’t make sense and having a sizeable short makes sense.”

Long-dated U.S. Treasuries have gained 11.9 percent this year, beating stocks and junk bonds, as the U.S. economic recovery showed signs of slowing. Novogratz said Ben S. Bernanke had hinted at a dinner event about a worsening economic picture after he stepped down as Federal Reserve Chairman.

“Bernanke did a dinner circuit and in dinners gave credence to the idea the Fed believed in lower potential GDP and inflation,” Novogratz said. “That got through the market and that was the giant trade in fixed income that happened.”

Monetary Stimulus

Bears are sticking to their call that bond prices are going to collapse even as recent evidence points to the opposite. The short trade remains popular with individuals and professional speculators who believe they will profit as the Federal Reserve pulls back on monetary stimulus.

Novogratz is co-chief investment officer of Fortress’s macro funds, which seek to profit from broad economic trends by trading everything from bonds to commodities. Fortress’s main macro fund, which invests across products and geographies, lost 6.3 percent this year through April 30, according to a regulatory filing.

Novogratz joins money managers, celebrities and former politicians including ex-U.K. Prime Minister Tony Blair, actor Kevin Spacey and basketball Hall of Famer Earvin “Magic” Johnson among the conference speakers this week at SALT, which is in its sixth year.

David Einhorn, manager of $10 billion hedge-fund firm Greenlight Capital Inc., said in a Bloomberg Television interview he attended a dinner with Bernanke in March at New York’s Le Bernardin. Einhorn said he found the conversation “sort of frightening” and criticized him for saying he was 100 percent certain there would be no hyperinflation and that it generally occurs after a war.

To contact the reporters on this story: Kelly Bit in New York at kbit@bloomberg.net; Saijel Kishan in New York at skishan@bloomberg.net

To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net Pierre Paulden, Josh Friedman

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