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In Search for Alpha, Hedge Funds Focus on the (Really) Short Term

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Dove satellites built by Planet Labs Hedge funds and market speculators are known for focusing on the short-term. Guessing whether or not a company "beats" or "misses" it's quarterly earnings guidance numbers, and by how much, has become a parlor game critical to the strategies of many funds and traders. But with a digital revolution that has produced a cascade of data for investors, hedge funds and others are focusing on very short-term information to paint a broader picture. A new venture called Planet Labs is capitalizing on the short-term data trend by launching a group of … [Read more...]

The Trouble at DoubleLine Was Predictable

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Fortune breaks the bad news to readers that Jeffrey Gundlach's DoubLine Total Return Bond Fund is having its worst year ever. Jeff Wieczner writes: DoubleLine CEO Jeffrey Gundlach’s flagship DoubleLine Total Return Bond Fund (DBLTX) is having its longest streak of underperformance on record, lagging most of its peers as well as the Barclays Aggregate Bond Index. After ranking second among comparable funds in 2015, the $61 billion fund now ranks in the bottom 7% so far in 2016, according to fund research firm Morningstar. The poor returns come after years of stellar returns for Gundlach, … [Read more...]

Avoid “Unpleasant Bumps” in Retirement

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The Wall Street Journal's Mia Lamar has written a profile of the high-risk Singaporean hedge fund, Quantedge Capital Pte Ltd. The fund has had wild success, raking in 27% average annualized returns since inception in 2006. No one can scoff at the those Madoff-like returns. But it's something the fund wrote in its August investor letter that stuck out to me. “…Our investment model delivers high returns over time, at the cost of unpleasant bumps along the way.” Investors nearing retirement, or those already enjoying their life after work, don't have the time or tolerance for "unpleasant … [Read more...]

Have More Money, Save More Money

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Writing in The Wall Street Journal, Jason Zweig (one of my favorite financial writers) drives home a powerful message to investors around the world. This is a message that must be heard loud and clear. Worldwide, $13 trillion in debt yields less than zero; in “normal” times, when those bonds might have yielded 3% or so, investors would have earned roughly $400 billion on them annually. Now investors are spending, rather than earning, tens of billions of dollars a year to hold those bonds — much as you might pay a storage company to keep your heirlooms safe for you. Nevertheless, even at … [Read more...]

Big Money, Big Costs

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Great piece by Jason Zweig of the WSJ on the trouble with private equity funds: Trying to get your money out. For years now, big banks and brokerage firms have been urging their wealthiest individual clients to get into private-equity funds. Buying such a prestigious fund can make you feel like a big cheese with privileged access to the high returns corporate deal making can generate. Trying to sell one, however, can make you feel like a tiny mouse in a giant glue trap. Consider J.C. Flowers II L.P., once one of the most glamorous of the buyout funds. By July 1, investors must decide … [Read more...]

Computers Beat Hedge Funds in Rout of Risk Takers

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Hedge funders and traders made big mistakes around the Brexit (more on this here) referendum because they bet on the outcome they preferred, not the reality of the vote. Computer based trading strategies did quite well however, because they tuned out the emotion of vote and focused on actual market trends. The Wall Street Journal reports: Equity hedge funds fell 2.1% on Friday alone, according to data from Chicago-based Hedge Fund Research. The losers generally appear to have been hedge funds too heavily weighted toward cyclical stocks such as airlines or financial stocks that were hard hit … [Read more...]

Hedge Funds, Pensions and their Union Handler

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Hedge Fund managers are under pressure from Randi Weingarten, president of the American Federation of Teachers (AFT), for supporting charters schools and pension reform. Some pension funds have withdrawn money from hedge-fund managers criticized by the teachers union. And some hedge-fund managers stopped making donations to advocacy groups targeted by Ms. Weingarten. Hedge funds, reluctant to buckle to the pressure, say Ms. Weingarten is doing a disservice to the teachers she represents, because funds should aim solely to earn the highest possible return on their assets. The personal … [Read more...]

One Simple Trick for Beating the Collapse of Social Security

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Social Security is underfunded, and in one way or another, your retirement is going to be affected. There are two solutions, 1) more money goes into the system, meaning a tax hike or 2) less money comes out of the system, meaning a reduction in benefits. In the first instance, you'll have less of your own money to invest as you see fit, and in the second you'll need to invest more of your disposable income to make up for the loss. Either way there's bound to be pain. Stephen Entin of The Tax Foundation writes: Social Security retirement programs (Old Age and Survivors Insurance, and … [Read more...]

My Favorite Stock-Market Gauge

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In constructing the RAGE Gauge, I’m using the dividend yield. I will not buy a stock unless it pays a dividend. Plain and simple. Take a look at the dividend yield today compared to any other point in post WWII history and you get an idea for why I chose the name: RAGE Gauge … [Read more...]