Market Round Up: Hedged Poll Dancing 💃 Forever Blowing House Bubbles 🏡

by | 28 Sep, 2018

 

1. Hedged poll dancing

The accusation from UK’s chair of the Treasury Select Committee, Nicky Morgan, that hedge funds paid polling companies for access to pre-Brexit opinions in order to short the market, stirs up a legally grey and moral area.

According to a Bloomberg report, information sold by pollsters gave hedge funds an indication of the leave vote ahead of time, putting them in the perfect position to profit from the ensuing turmoil and the falling pound. Polling companies that sold data included YouGov, Survation, ICM, BMG and ComRes, with about a dozen hedge funds buying the polling data, Bloomberg reported. Hedge funds involved included Rokos Capital Management, which made over $100 million, or 3% of its entire value, in just one day. Another hedgie, Brevan Howard, made $160 million in the hours after the vote closed.
While this practice is a bit of a legal grey area, it is still illegal for polling companies to give early release data to the public, and the hedge funds paid for the information privately. Polling companies also profited with YouGov selling a private exit poll to one hedge fund for $1 million, according to Bloomberg.

Meanwhile, Nicky Morgan has written to the British Polling Council president, Sir John Curtice, warning that this practice must not be repeated during elections or future referendums, especially considering the market’s sensitivity to Brexit, as it would pose a risk to the integrity of the financial markets. It will be interesting to see how hedge funds respond to this poll dance.

Related: The era of ‘easy money’ from central banks is coming to an end – what does this mean for investors?

2. Forever blowing house bubbles

According to the latest UBS Global Real Estate Bubble index, overvalued properties are increasingly at risk of bursting their bubbles in some of the top capitals round the world.

Top of the risk list is Hong Kong followed by Munich, Toronto, Vancouver, Amsterdam and then London. U.S. cities susceptible to a burst, and considered overvalued, include San Francisco, LA, New York and Boston. Other imbalances are found for Stockholm, Paris, Frankfurt and Sydney.

According to the UBS report, house prices have risen on average 35% over the last five years. However, this mis-pricing and ‘de-coupling’ from reality of low income, high rent and excessive bank lending, could see a correction, or ‘pop’.

Maybe, the old adage “as safe as houses” needs to be reconsidered. Perhaps stocks aren’t looking so bad as a safer hedge after all!

Related:  Market Round Up: U.S. shoppers, Brexit hard or soft, China housing

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