Weekend Linkfest

From Bespoke – the second worst month for commodities ever.

If you remember from this earlier post, after an asset class takes a big dump it is usually ripe for a two month bounce after waiting for a month. I will track the performance of GSG and DBC from September 1-October 31st.

All of the below had an awful June, and a strategy would be to buy these with a two month hold.

I’ll track the performance with SPY and IWR, EFA and EEM, and IYR and RWX. Other particularly awful performers that could see a bounce are:

Financials (XLF)
Netherlands (EWN)
Sweden (EWD)
India (INP)
Infastructure (MG)
Private Equity (PSP)
Foreign Private Equity (PFP)

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Maybe I should have done this with “The Ivy Portfolio” – novelist sells shares in his new book.

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What does Intrade know that Gallup doesn’t?

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Stockscouter likes Qualcomm too.

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The top 25 documentaries of all time.

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The market got you down? Feel good movie of the day, “Where the Hell is Matt (2008)?”:

WikiInvest Embedable Stock Chats

Not bad. You can click, drag, pan, and zoom all without a page refresh.

Here is one for GOOG:

LinkFest

Everyone is jumping in the ETF boat. PIMCO files to join the fray.

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Latest from GMO:

(Free to access, but you have to register.)

“The Global Competence Crisis”
7-Year Asset Class Forecasts (still gloomy)
Quarterly Review

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Some great posts over at AllAboutAlpha:

Can US retail investors fend for themselves?
Betafication of alpha
Is regulation of hedge funds a contradiction in terms?

It is too bad Meb (Keflezighi) will not be competing in the 2008 Olympics…

Silver medalist in 2004.

http://www.runmeb.com/

(Picture from an old cover of RunnersWorld)

Speaking of Volatility…

a fairly moderate earthquake here in LA of 5.8. Since the Richter scale goes exponential (a 6 is 10 times worse than a 5), things get really scary when the numbers get up above 6 or 7.

The description for an 8:

“Total destruction. Ground surface waves seen. Objects thrown into the air. All construction destroyed.

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Looks like that I am going to scratch off the idea of a surf trip to El Salvador or fishing in Los Roques. . .

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There are two new books coming out focusing on how the super rich got that way. I can’t say I am too terribly excited about either.

Ken Fisher’s The Ten Roads to Riches: The Way the Wealthy Got There (And How You Can Too!):

    • Learn what Mark Cuban, Rupert Murdoch, and rapper Jay-Z have in common, and how you can copy them.
    • Find out the right questions to ask when starting your own business—the richest road of all!
    • Discover how to avoid high profile flameouts like the Enron guys, Paris Hilton, and super-villain Kirk Wright—who stole from his own mom!

and Gladwell’s Outliers: Why Some People Succeed and Some Don’t

“In this stunning new book, Malcolm Gladwell takes us on an intellectual journey through the world of “outliers”–the best and the brightest, the most famous and the most successful. He asks the question: what makes high-achievers different? His answer is that we pay too much attention to what successful people are like, and too little attention to where they are from: that is, their culture, their family, their generation, and the idiosyncratic experiences of their upbringing. Along the way he explains the secrets of software billionaires, what it takes to be a great soccer player, why Asians are good at math, and what made the Beatles the greatest rock band.”

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Look who is back! This presentation showcases the top 35 charts with commentary. Woth watching.

Here is one of the many great charts from Perotcharts.com:

Volatility Clustering

“Statistics are like bikinis. They show a lot, but never everything.” – Lou Piniella, Cubs Manager

I am always surprised as to the posts readers find most interesting. This post on Volatility Clustering was one of my favorites, but didn’t elicit a single comment. I think it is fairly timely with the pickup in volatility in the stock markets now that we are below the 10-month moving average.

Notice the only market where the volatility is higher when above the moving average – commodities – which makes sense given that commodities are much more likely to spike up due to supply/demand issues. Take a look at a chart of wheat or corn for an example. Volatility for asset classes, on average, is about 25% higher and returns about 60% lower when under the moving average.

Reminds me of the behavioral reasons listed by Lo in this earlier video.

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A new book on the way soon from Robert Schiller – The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It.

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KKR is going public by merging with their listed fund in Amsterdam. Hopefully (albeit unlikely) this will bring some needed attention to the listed hedge fund and private equity fund space.

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I don’t use the mean reversion technique I mentioned in an earlier post, but it would buy US Stocks, Foreign Stocks, and REITS in August for a two month hold. I’ll track the performance with SPY/IWR, EFA/EEM, and IYR/RWX. Other particularly awful performers that could see a bounce are:

Financials (XLF)
Netherlands (EWN)
Sweden (EWD)
India (INP)
Infastructure (MG)
Private Equity (PSP)
Foreign Private Equity (PFP)

Macro Links

Some macro commentary from Epoch:
The Perfect U.S. Economic Storm: Asset Deflation, Commodity Inflation and the Expiration of the “Greenspan Put”

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From Carpe Diem:

The Big Three of Entitlements and

it is now cheaper to buy a house than a car in Detroit.

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The Economist has been publishing the Big Mac Index since 1986. Has anyone ever backtested their index for performance (ie long 10 most undervalued currencies, short the 10 most overvalued)?

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Huge fan of Marc Faber, and not just because he has a great name:

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I recently read Ron Paul’s “The Revolution: A Manifesto” on the plane coming back from NYC and really enjoyed it. I don’t think I have seen a book with 600 reviews and 5 stars before. It was interesting, because as I read it I thought “I bet Jim Rogers would really like this guy”, and it looks like I was right.

Below is a video from Candidates@Google:

Everyone Loves Qualcomm Part II

Hedge fund favorite Qualcomm is up big today (about 18%) to a new 52 week high.  I have written about the stock a few times in “Everyone loves Qualcomm” and “Hedge Fund Masters“.  The next update to the tracking portfolios will be in about a month, but so far the two dummy clone strategies are killing the stock indices since inception (beginning of 2007).  If you recall, they historically outperformed the indices in backtests to 2000 by about 5-12% a year.

Sign up for the ucoming AlphaClone beta here.

There are a ton of hedge funds that own this stock, and it reads like a who’s who of the best hedge funds:

Highfields
Viking
Tiger Global
Lone Pine
Perry
TPG
Shumway
Duqesne
Maverick
Tudor
Galleon
Glenhill
Alson

Reader Questions

I need a blog redesign – leave a comment with the best designed blogs or news sites.

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Ahhh, Web 2.0.  Click here and vote on a name for my company and get paid if yours is the best.

NameThis (by Kluster).

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Advisor Perspectives interview with El-Erian. I am still waiting for someone to ask him why his allocation in his book only adds up to 98%.

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Correlations can, and do, change.

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Attack of the Clones

This is really a great overview of alpha, beta, and alternative beta.  Also reviews hedge fund clones and listed hedge funds, errr I mean “Permanent Capital Vehicles”. 

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Below is a reader question:

Meb, I’d like to hear your thoughts on this statement by Paul Tudor Jones:

“Commodities have been the worst-performing asset class behind stocks, bonds and real estate for the past 200 years, but Wall Street doesn’t highlight that long history when selling commodity index instruments today. Instead, it shows a chart of the bull market of the past 12 years to rationalize why some pensioner should be long cattle futures in the derivatives markets as part of a basket. I am sure they were using similar logic about tulips three centuries ago.”

PTJ probably knows a lot more about commodity returns than I do, and some of that knowledge helped build our alma mater a new basketball stadium.

I think there is a very simple answer – there wasn’t much inflation in the US from the founding of the country until the last 50 years or so. Blame it on what you want, but wars and going off the gold standard are two good theories. Interestingly, Hussman believes that an increase in the money supply is not a good indicator of increasing inflation, but unproductive government spending is.

In a somewhat related note, here is a PDF “Core Inflation as a Predictor of Total Inflation“.

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Blogging is hard – which is why I am sad to see Mangan go. . .

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I had a hard time getting through Bernstein’s new book, “A Splendid Exchange”, although some parts were brilliant. I found this table particular interesting. The reason Bernstein gives for African descendants increasing their numbers so much America and Canada, who made up for a very small part of the slave imports, was that North America for the most part didn’t grow sugar, which was a particularly deadly crop to grow and refine. (The slave trade was also outlawed in the US in 1808.)

Proportions of New-World Slave Imports 1500-1880

US & Canada 4.5%
Mexico and C.America 2.4%
Caribbean Islands 43.0%
Brazil 38.2%
Other S. America 11.8%

Proportion of New-World African Descendants in 1950
US & Canada 31.1%
Mexico and C.America 0.7%
Caribbean Islands 20.0%
Brazil 36.6%
Other S. America 11.6%

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Does the Stock Market Fully Value Intangibles?

  • Fortune magazine’s “Best Companies to Work For” earned an annual four-factor alpha of 4% from 1984-2005.
  • Employee satisfaction is associated with higher shareholder returns, rather than reflecting unnecessary expenditure.
  • Even when intangibles are made visible by a publicly available survey, they are not incorporated into stock prices, supporting for managerial myopia theories
  • Socially Responsible Investing screens need not reduce, and may even enhance investment returns

Beta Bear Market, Alpha Bull?

“All night he check, check, check.” Teddy KGB in Rounders

In poker you fold a majority of the hands, and it can be pretty boring for amateurs to play that way. Most end up playing far too many hands for entertainment value. Sometimes it simply makes sense to sit out.

Following the GTAA model I published is pretty boring, and it only makes about one round trip per asset class per year. But hey, boring this year is not bad. Personally, I’ll just follow my model when it gives a signal, whether it is next month or two years from now. If you were following the model as published you would be up on the year, mainly due to the atypical allocation of 20% to commodities. Most of world betas are down around -15% YTD and -20% from their highs. REITs are getting clobbered down around -40% from the highs.

Anyways, here is an updated list of asset classes through 7/15 and listed alternatives. Gold stars go to the market neutral funds, managed futures, and of course the bear funds. Is GRZZX really up 40% YTD? That is pretty amazing work Mr. Leuthold. Heebner continues his outperformance, up over 10% in 2008.

(You still have to click on the chart to zoom in – Blogger has not made resizing images a feature yet.)

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