Apex Predators
Sharks are well-known for their unpredictable, aggressive behavior. Bull Sharks are among the most dangerous to humans, traveling into fresh water to strike those who least expect it.
Last March a whale we know was ruing a long position in Google, which was getting ripped to shreds. He thought SAC had disposed of their position at the top, but would likely buy it back at a similarly opportune time...taking 500 points out of the long side of the stock by the time the year was over.
We have no idea if our friend was on the money about SAC’s trading moves in Google (GOOG-NASDAQ). But they clearly got something right last year.
You might question Steve Cohen’s taste in art. But there is no disputing his performance.
If you see blood in the water...it is probably your own
Jan. 16 (Bloomberg)—Hedge funds run by Steven Cohen and Kenneth Griffin gained more than 30 percent last year, the industry’s best performance since 2003, while Goldman Sachs Group Inc.’s flagship fund declined for the first time in seven years.
Cohen’s SAC Capital Advisors LLC returned 34 percent and Griffin’s Citadel Investment Group LLC also topped 30 percent, helped by energy bets it took over after Amaranth Advisors LLC collapsed in September, according to investors in the funds. Goldman’s Global Alpha Fund ended the year with a 6 percent loss.
The average hedge fund rose 13 percent last year, up from 9.3 percent in 2005, according to data compiled by Chicago-based Hedge Fund Research Inc. Funds investing in developing markets including China and Brazil and companies involved in takeovers beat those that tried to predict broad price movements in bonds, currencies and commodities. Bets that stocks would fall were hurt by a buyout-fueled bull market. Bloomberg via Trader Daily
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. Underthecounter has no positions in securities mentioned above.
Large-Cap Value Dog
Part Two of Worst in Show:
For generations Saint Bernards have been a welcome sight to travelers in distress. The dog is famous for coming to the aid of stranded adventurers and the breed has become an icon to children of all ages. The Straight Poop
Large-cap value funds are the Saint Bernards of the fund world; investors seek comfort in this style box when cold winds blow on Wall Street. An overweight allocation here can be as as invigorating as a shot of brandy from a Saint Bernard’s cask.
Putnam Classic Equity (PXGIX) is a value fund in a growth stock shop. Classic is a misnomer in this case...with bottom decile numbers against its large-cap peers over the last decade it is a wonder this fund has not been merged out of existence. Survivorship bias is no myth.
Don’t blame the managers..they have only been at the helm of this sinking ship since ‘04. But you can pin last year’s stinky performance on them.
Putnam’s problems have been well publicized and parent company Marsh & McLennan finally bit the bullet.. Assuming a transaction is consummated, Putnam’s next challenge will likely be cultural. While its possible lucrative retention packages keep its employee’s focused, integration issues are likely to keep Putnam’s fund manager’s on edge.
If you have paid your dues on Wall Street you know the drill; they spend more time talking to headhunters than performing due diligence on their portfolio holdings.
We have no idea what is going on at Putnam...but we hope the new regime will treat Main Street a little better.
It is long overdue.
Next up: Mid-Cap Blend Dog
Small-Cap Growth Dog
Dog fanciers gather every year in Manhattan to crown a best-in-show at the annual Westminster Kennel Club Dog show.
We will also crown a Grand Champion in a month’s time.
Jack Russell terriers are eerily similar to small-cap growth managers. They both have trouble sitting still, and are constantly on the move. Energetic to a fault, both breeds enjoy a good tussle.
Small-cap growth funds have perhaps the highest turnover of any breed of funds, constantly turning over rocks and stocks in search of adventure.
Our small-cap growth dog is a real contender for worst-in-show…
Exhibit A)
The fund started in 1999. $10,000 invested at inception is now worth roughly $8,000.... Dividends reinvested
Exhibit B)
This dog has has trailed its category every year since inception
Exhibit C)
The fund’s skipper has been the manager of record since inception. He has never finished a year in the top half of his peer group since the fund was started over 7 years ago...ie. 50th percentile of better.
Exhibit D)
Some people improve with age...this fund underperformed its category average by over 1000 basis points last year and finished in the bottom decile of its peer group. Unlike fine wine, this manager is not getting any better with age
We cannot figure out why anyone would have money invested in the Legg Mason Partners Small Cap Growth Fund (SBSGX)?
Please contact us if you see a reason to own this fund…
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. Underthecounter has no positions in any mutual funds mentioned.
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The Good, the Bad and the Ugly
Wall Street’s gain is often Main Street’s pain
Feet on the Street are constantly hunting for buried loot. But the mad scramble can get a little messy. The stories are similar on the buy and the sell-side.
Wall Street houses have traditionally been some of the worst-managed organizations in corporate America. Shops in the City are probably not much better. Tribal warfare can leave organizations dead in the water.
Record profits at Goldman Sachs, Lehman Brothers and the rest might be a cyclical phenomenon, but these places are run differently than they were five years ago. Best-practices are beginning to reach into every nook and cranny...although the internecine squabbles will never go away.
Even some of the most vilified Wall Street firms are getting their heads together. Have you noticed a resurgence at Janus? Two-faced jokes were all the rage in 2002...right at Janus’ nadir.
But Janus might be a phoenix...Have you ever seen a fund with a first-percentile ranks in the trailing one-day, one-week, one-month, three-month, year-to-date, one-year, three-year and five-year periods?
Now you have
Damn
That dawg knows how to hunt
But there are plenty of mangy dogs roaming the Street
The next few months we will introduce you to The Good, the Bad and the Ugly on Wall Street.
Some fund managers might want to put their boots on.
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The content contained represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
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The Eric Bolling Diaries: Life in the Pits
Did you read Part One of The Eric Bolling Diaries?
A Trader is Born
Ready for more?
There are many ways to skin a cat on the Street...traders approach things much differently than investors
What is your time frame?
Players on the Street are opinionated. Quants think they hold all the keys...Value investors mock their growth stock counterparts...analysts deride traders. Technicians ignore fundamentalists. They meet every day in the markets and place their chips. It can get a little hairy.
And split second decisions need to be made when you are trading size
Freezing up in the pits can be deadly ...
“For every winner there’s a loser. All these clichés work. But down there they’re not clichés,” Zawaski says about the trading pits, adding that fear is a constant on each of Chicago’s three exchanges. “I saw one guy about a year ago, froze on some order. Lost about a million dollars. A million bucks, just like that.” He snaps his fingers. “He froze. He froze for an hour. Once he missed [the trade] he realized, ‘I’m in shit. I’m in trouble.’”
Tom Baldwin/Hedging Stress
You better bring a little swagger to the game...if you don’t you are likely to get run over
Nobody wants to end up as roadkill.
Eric Bolling has figured out what works for him…
This is the second installment of our series…
The Eric Bolling Diaries
Part Two: Life in the Pits
Traders and market pundits often talk about the role of ego in trading...there is an old saying “no one is bigger than the market” How do you feel about this?
Generally, most of the good traders I know are confident people. I think you need the attitude “I am going to be right with this trade” to enter them. Then, you need the ability to say “hey, I was wrong” to get out the bad ones. And, that ability to say you are wrong and get out is the secret to making money. The problem is...you can’t teach that. That is why trading with charts helps you get out when you are wrong...even if you can’t admit it.
What did it take to get you started in the business?
I remember thinking...I really love this trading floor (CBOT) and the idea of being a professional trader but had absolutely no way of coming up with the $50,000 treasury bill deposit required at the time.
Why did you leave the pits in Chicago to come to New York?
I was only a summer runner in Chicago. I was trying to play baseball at the time and the 1:30 closes allowed me some flexibility.
How much money do traders need to get started?
I am not sure what the minimum is to be a floor trader. I think anyone can start trading with whatever they have. Just be aware that you can, and probably will, lose it. At least the first time around. So if you understand that trading is a two-way street, it will better prepare you for the one thing that torpedoes new traders...unexpected losses.
What contracts did you first trade?
My first trades were in the crude oil pit...I traded the Gulf war a a relative rookie, and what an experience that was. I only wish I had a few more years experience under my belt by then.
