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Net Net: Promoting innovation and managing change

The Ackman Trade: Reactions

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Bill Ackman's idea that the Hong Kong dollar will appreciate by as much as 30 percent against the US dollar got a strong reaction at the Delivering Alpha conference and on Twitter this afternoon.

"My only worry is that it's too late now that Ackman told this crowd," a younger hedge fund trader said immediately after Ackman's talk. There is something like $2 trillion of assets under management represented by firms attending the conference.

Two hedge fund managers I spoke with were most interested in the reliance on the health of China on the trade. Ackman himself admitted that "if China implodes it will be bad for this trade."

"The thesis is that Hong Kong moves away from dollar toward China's currency, moving all the way by 2015. If China blows up, this US dollar peg becomes a lot more attractive," one said.

The other trader was also skeptical.

"The US has a uniquely long history of a well-managed currency and a well-run economy. China has a very short history of economic success. Do Hong Kong's central bankers, already exposed to China risk in all sorts of ways, want to increase that risk," he said.

A third manager pointed out that Ackman's trade could work even if the eventual move away from the dollar never happens.

"All it requires is a rational decision that they cannot afford to stay pegged to dollar with The Bernank saying we'll be at zero rates for two more years," he said.

Ackman's talk immediately preceded a panel on China with well-known China skeptic Jim Chanos of Kynikos Associates.

On Twitter there was quite a reaction to the very idea that Ackman was now touting an international currency trade.

"This is perfect. Ackman becomes a global macro guy as stocks hit highest ever correlation. Time to go long stock dispersion," Joe Weisenthal of BusinessInsider said on Twitter

"Ackman is now a Global Macro guy?" Keith McCullough of HedgeEye wrote on Twitter. "Ackman has jumped the shark."


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