Novogratz Says Macro’s Miss Was Shunning Long Treasuries

Michael Novogratz, principal at Fortress Investment Group LLC, 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 at a point where having a long position doesn’t make sense but betting against Treasuries does, he said.

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.

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.

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.

Marathon, Visium

Bruce Richards, chief executive officer of Marathon Asset Management LP, which has been hunting for discounted assets being sold by European banks, said today at SALT that the flow of non-performing loans has changed from a trickle to a flood. The $11 billion New York-based firm is finding opportunity in IVG Immobilien AG, once Germany’s biggest real-estate company, he said, and reiterated interest in the debt of bankrupt Energy Future Holdings Corp.

Marathon also bought Argentine government bonds that had been given to oil producer Repsol SA last week as compensation for the 2012 seizure of YPF SA, Richards said. Repsol sold almost all $5.3 billion of the securities to the secondary market through JPMorgan for about $4.8 billion.

China’s Growth

Jacob Gottlieb, founder of $6 billion New York-based hedge-fund firm Visium Asset Management LP, said today he likes Freescale Semiconductor Ltd. as the industry will benefit from China’s conversion to a fourth-generation network from 3G.

“This is an event that’s going on independent of whether China growth is zero, five or 10” percent, he said. “It’s a large trend that’s going to take place in the next few years.”

Gottlieb said he didn’t like handset makers because of rising costs and their lack of pricing power. He didn’t name a stock. Gottlieb said he saw opportunities to bet against healthcare and biotechnology stocks because of the rise in companies with unproven technologies that have sold shares to the public.

“Some of them are not going to make it,” he said. There will be reorganizations and bankruptcies in the future that will create opportunities to bet against firms.

Before it's here, it's on the Bloomberg Terminal.