This is an update we do every once in awhile that lists some of the the alternative mutual funds and ETF/ETNs.  Most really fail to deliver any value, but a few do a good job.  I long ago gave up talking about the foreign listed hedge funds, there didn’t seem to be much interest.

We had an ETN that was going to launch with one of the top media groups in the world (which also would have gotten around the PFIC issues (which is also why PFP shut down)), but last Fall happened and they pulled the plug.  Shortsighted and a major shame.  (Not to mention the OTHER ETF we had a NYSE launch date for, I’m guessing you can figure out what strategy that was on?)

If there are any I am missing leave a comment and I’ll add to the table (I realize I’m probably missing a ton of the L/S guys…any good ones?).

I fixed one or two errors, then added gold stars to the funds that did well – mostly in market neutral, merger arb, and managed futures.  Note how poor long/short funds did… :

New site came across my radar:  HedgeHogs.

Reminds me of Albourne Village…

I have a full hour to yap at the upcoming Forbes i-Conference on December 9th.  Resigster here for free (whoops, apparently its $75) and come ask me some questions!

Agenda here.

Interesting title they chose for my speech!

What is the key to becoming a popular investment blogger?

Post

A LOT

I wanted to take a look at the top 50 or so investment bloggers, and see if there is any correlation between number of investment posts and traffic to the site.  (The end of the post includes the top 50 or so blogs I included off Newsflashr.)  My thoughts were that, regardless of post quality, traffic would be generated purely by posting frequency.  Kind of what I call the “CNBC throw as much useless information at you as possible” model.

Now, I certainly read most of these blogs, and derive a great deal of benefit from a few.  I certainly don’t have the time or desire to blog all day (good for my clients), and can barely manage about 3 posts a week.

So, I sent my assistant in India (via Brickwork) a project to count all the blog posts for these blogs, and then record the number of visits in the month of October.

Key findings:

-The correlation between # of posts and site visits is a very high .86.

-The four most frequent posters (including an astonishing 537 posts for #1 in October), account for over HALF of all traffic.

-A blogger needs to post at least twice a day to garner respectable traffic.

-Bloggers that post over 2 posts a day garner a whopping median traffic of 55k/month (and average visits of 140k/month).

-Bloggers that post under 2 posts a day garner a measly median traffic of 9k/month.

-Bloggers that post under 1 post a day garner a measly median traffic of 6k/month.

There are certainly exceptions to the findings.  The Kirk Report doesn’t post a ton, but has a subscription offering as well as lengthy aggregation posts.  dShort doesn’t post a lot, but his high quality charts more than make up for it.  On the other hand, a few of these blogs have multiple authors as well.

Below is a chart of traffic vs. posts (with a nice  R-squared of 0.74) for the month of October:

For some reason I couldn’t get data on these blogs (and also didn’t include Clusterstock boys because they have so many different sites):

Blogs in the study:

Well this is interesting….a new product out of Barclays Launches that uses, shhhh wait don’t tell anyone….technical analyisis (well they call it technical strategies).

For all the ranting that goes on around TA not working, there sure a lot of TA strategies that work with a lot of AUM.

Fact Sheet here

Prospectus here

FAQ here

IndexUniverse post

I spend a lot of time talking about asset allocation on the blog.  I’ve presented quant systems that focus on price based tactical asset allocation, cross-market momentum strategies, and mean reversion strategies (just to name a few).  Some older posts are:

A Quantitative Approach To Tactical Asset Allocation

Asset Class Rotation

Mean Reversion After Really Bad Months

Asset Class Returns Based on Fed Policy

Inflation and Asset Class Returns

Sector Rotation with Hedging

I was originally going to put this out as a white paper, but seeing that I have about 5 of those on the back burner (and this seems to be a pretty well known property), I thought a simple blog post would do.

Below we examine the effects of the yield curve on our group of asset classes.

(Data sources: Global Financial Data)

US Stocks – S&P 500

Foreign Stocks – MSCI EAFE

Bonds – 30 Year US Govt

Commodities – GSCI

REITs – NAREIT

Spot Gold

Buy and Hold is an equally-weighted, monthly rebalanced allocation to the above 6 asset classes.

First, we examine how the 10 year US Govt Bond – 90 Day Tbill rate affects the return of various asset classes.  We selected three modes, but by no means are these optimized or optimal. The table below presents the % of time spent in each mode, as well as the annualized returns for the annualized returns for the asset classes.

One could devise a simple timing system based on these properties.

When the yield curve is <0%, long commodities and gold.

When the yield curve is 0 – 2%, long us and foreign stocks.

When the yield curve is >2%, long bonds and REITs.

This simple system would have beaten buy and hold by over 4% a year over the time period with more volatility (mostly upside) and a similar drawdown.  Equity curve below:

And since you asked, here’s the chart with the momentum rotation system added with a simpler combo of both too:

I think most of the IndexIQ ETFs are silly, but they nailed this one.  Merger Arb ETF to hit the market, Convertible arb next?

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This looks like SumZero for the Distressed Investing field.

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I’ve wrestled with the best way for people to update the simple GTAA timing model.  I thought publishing a white paper and book would be enough to help the “do-it-yourselfers”, but that only generates more questions. I usually get about a few dozen emails every day asking how/where to update it, so originally I put a Stockcharts link on my blog, but Stockcharts keeps breaking it.  So, I’ve decided just to send out a simple monthly update of the five asset classes (using 5 ETFs) via email.

If you want to see the updates, just enter your email on the right. I’m still ironing out the kinks but it should be working smoothly soon.

Well, hopefully you do.

That is, if you are following either the Tiger Cubs or World Beta clone on AlphaClone you would own Priceline (PCLN).

Those two clones are up over 50% and 80% YTD.   Not a misprint.

Other funds with large allocations to PCLN are ParCapital , Lone Pine Capital, Shumway Capital, Tiger Global, and Viking Global.

If you haven’s signed up yet, you better soon – the price doubles next month.

Longtime readers know I have a serious reading problem.  I should probably go long AMZN to hedge my book buying issues (ordered 51 books so far in 2009).  I’m not sure if readers are interested in what I’m reading or not, but I figure I’ll pass it along anyways…At the rec of a good friend, these three are en route:

The Lady Tasting Tea: How Statistics Revolutionized Science in the Twentieth Century – David Salsburg

Labyrinths of Reason: Paradox, Puzzles, and the Frailty of Knowledge – William Poundstone

Logicomix: An Epic Search for Truth – Apostolos Doxiadus

I was scrolling through the list of best selling investing books Amazon.  My book wasn’t on there (I think I should have titled it “How to Time the Market and Get Rich in Five Minutes a Month!!!)  Honestly, almost every book I’ve read in 2009 has been a backwards looking narrative.  Heavy on what HAS happened and ranting about problems, but pretty light on how an individual or professional can cope with that going forward.

Most, like Bernstein’s new book, default to the old buy and hold and ride it out.   (I actually enjoyed his new book, lots of historical references sprinkled in, but still more of the same old same old.)

A few repeat authors have some new books coming out soon (and one Treasury head with his first!).  All are in pre-order.

The Elements of Investing – Burton Malkiel

The Little Book of Safe Money: How to Conquer Killer Markets, Con Artists, and Yourself – Jason Zweig

On the Brink: Inside the Race to Stop the Collapse of the Global Financial System – Hank Paulson

Below is my list of the top books that chat about stock distributions and rare events.  I also included some market history and bubbles lists too for comparison.  Is there anything important I’m missing? (I’ll have a follow up post with some academic papers on financial return distributions).  All from the Reading List:

Stock Distributions

• Why Stock Markets Crash: Critical Events in Complex Financial Systems – Didier Sornette
  
• The Misbehavior of Markets by Benoit Mandelbrot
• Fooled by Randomness and The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb
• Finding Alpha – by Eric Falkenstein
• Market Volatility – Robert Shiller
• Optimal Portfolio Modeling – Philip McDonnell
• Fractal Market Analysis – Edgar Peters
• More Than You Know: Finding Financial Wisdom in Unconventional Places – Michael Mauboussin
• The Failure of Risk Management: Why It’s Broken and How to Fix It – Douglas Hubbard

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Market Bubbles

• Manias, Panics, and Crashes by Charles Kindleberger
• Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay
• The Prize: The Epic Quest for Oil, Money, & Power by Daniel Yergin
• The First Tycoon: The Epic Life of Cornelius Vanderbilt by TJ Stiles
• Irrational Exuberance – by Robert Shiller
• A Short History of Financial Euphoria and The Great Crash 1929– John Kenneth Galbraith
• The Panic of 1907: Lessons Learned from the Market’s Perfect Storm – Mark Bruner

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History of Markets

• Triumph of the Optimists: 101 Years of Global Investment Returns by Elroy Dimson, Paul Marsh, and Mike Staunton
• Stocks for the Long Run by Jeremy Siegel
• Reminiscences of a Stock Operator by Edwin LeFèvre
• When Genius Failed by Roger Lowenstein
• Capital Ideas, Capital Ideas Evolving, and Against the Gods by Peter Bernstein
• Ibbotson Yearbook by Ibbotson Associates
• The CRB Commodity Yearbook by Commodity Research Bureau
• The Essays of Warren Buffett by Warren E. Buffett and Lawrence A. Cunningham
• Fortune’s Formula by William Poundstone
• The Myth of the Rational Market – Justin Fox
• The Great Game: The Emergence of Wall Street as a World Power: 1653-2000 – John Gordon