irondoor91

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118 Comments

    • Fri Sep 26th 17:45 PM | Rating: 0 0
      Commented on:
      The Commodities Hedge Fund Flap
      Answer to User 232593: Forget the word "hedge fund". The concept of a mutual fund that invests in the common stock of multiple companies has been around for decades. There are thousands of them. Check out the returns of stock mutual funds for the past 10 years. After taxes, they have earned generally less than the inflation rate. 80% of them can't even beat an S&P index fund, but they still get to charge more than 1% on total assets. They hold trillion of dollars worth of stocks and they dwarf hedge funds. Same for bond funds. Same for money market funds (which actuall serve a useful purpose these days as a convenient way to buy t-bills).

      Take the concept of the mutual fund a step further. Allow the fund manager to purchase, sell and short any publicly traded stock, bond, ETF and to also buy mutual funds as well, if he wants. Wrap the concept in a limited partnership that is privately owned, where the manager has most of his personal net worth invested alongside his partners. The investors must be "sophisticated&qu... and have a minimum net worth. They can receive daily reports on partnership holdings, gains and losses, performance and any other information that they want to demand.

      For this flexibility, they are willing to pay the manager a few basis points more to cover his higher overhead compared to a mutual fund, since the partnership will by design hold much smaller level of assets than a mutual fund. In addition, the partners are willing to share a percentage of the profits earned with the manager.

      What's the problem with this arrangement? It seems much more personal and under the control of investors than that of a mutual fund run by a faceless manager that an investor will never see or speak to.

      But why would anyone want to, given their miserable investment track record.

      I will ask you the same question. What good are mutual funds that charge high fees but can't beat the market? Those fund mangers will continue to earn very high salaries, benefit and perks even though their funds have lost billions of dollars in the past year (and will continue to lose as long as we are in a bear market).
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    • Thu Sep 25th 11:04 AM | Rating: 0 0
      Commented on:
      Profiting from the $700 Billion Bailout
      Re: logicalthought. You are correct and that was what I observed when reading through the piece. I haven't thought through all the ramifications of the bailout yet (who can know the future?), but at some point the government is going to own a lot of homes. Until the average price of those homes (now around $215,000) declines to 3x the median family income ($50,000) there is not going to be stabilization. That would be with stabilized employment, which isn't happening. In addition, we know that the free flow of mortgage money is shut down now and if banks are going to avoid this disaster in the future, they have to demand more downpayment, higher FICO scores, higher income to debt ratios, etc from borrowers. It seems to me that all those good people are probably already in homes. Why would they want another one? Do you really believe that there are millions of folks just sitting around in apartments with $40,000 in the bank, no credit card or auto debt and good secure jobs who are patiently waiting for home prices to come down? I don't know of any, but maybe somewhere in Iowa. Not in California, Nevada, and Florida where the problems are. People are leaving those states for financial survival.
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    • Thu Sep 25th 10:36 AM | Rating: 0 0
      Commented on:
      Tracking 9 ETF Portfolios
      Wonder why none of these guys would consider any of the inverse funds, be they stock, bond, currency, commodity, etc.? When you are in a Bear market, you should be either short, hedged, or out. I assume most would agree that we are in a Bear market. Could it be over? Yes. Could it get better? Yes. Could it get worse? Yes. Could it get much much worse? Of Course.
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    • Mon Sep 22nd 11:27 AM | Rating: 0 0
      Commented on:
      Active vs. Passive Investing - Some Thoughts
      Roger,

      I am in the business as both a RIA and manager of a small hedge fund. I have been reading your posts for a while and generally agree with your approach for investors and especially those approaching retirement. It is very hard to make money in the markets, and it is very easy to lose it and lose it quickly. Using a moving average technique to allocate assets into or out of the equity or bond markets is as good as any "rocket scientist" method devised on prop trading desks. Using individual stocks, ETF's or active mutual funds to implement is a matter of preference and the comfort level of the investor and advisor.

      You offer good, sound perspective. The best thing to do for yourself and your clients is to stick to your knitting and what got you to where you are today. It is very easy to get flushed out with these 300+ point moves on a daily basis.

      So diversify and consider using one of more of the new short or double short EFT's to hedge if you or your client is uncomfortable with volatility or direction.
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    • Mon Sep 22nd 11:11 AM | Rating: 0 0
      Commented on:
      Wall Street, R.I.P. Now What?
      Go back to early 1920's. Similar situation, except no Fed. They were playing with their own money, but the leverage was actually lower. Do you think they were dismissing the liklihood of depression? Probably didn't even come up in discussion as everyone was trying to get rich.

      I find your dismissal of depression foolish, just as you would have dismissed the likelihood of the complete destruction of 100% of the major investment banks one year ago. We must think the unthinkable and prepare for it. We must (though it is impossible) attempt to get threee moves ahead and hedge everything where possible. But there is no perfect hedge, since there is always counter-party risk.

      It is a new world order and the vast majority of the public is sleep-walking throught it today. Daddy Bush and Paulson have told them not to worry, go about their business as ususal, the economy is strong, strong, strong! Oh, and like after 9/11, please don't even think about saving or paying down debt. Go out and spend, spend, spend. Pay your taxes. It's the patriotic thing to do!

      Did you also notice the commentary on weekend television about whether your 401-k was "safe". The explaination was that 401-k accounts were insured up to $100,000! How stupid can you get. Show me a 401-k statement that contains CD's.
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    • Sat Sep 20th 15:49 PM | Rating: 0 0
      Commented on:
      Are Short Sellers to Blame for the Financial Crisis?
      Let's assume you own shares of GS. You see the stock going down. You have a few choices: You can sell and hold the cash. You can buy some other stock, helping the price go up. You can purchase a put option to protect your capital.

      If someone shorts GS, he is may profit from it. He covers, buy buying and helping the price go up. He takes his profit and either holds it in cash, shorts another stock or maybe even buys GS long if he now thinks the price is realistic. I don't see where the "loss" is except to GS shareholders who have been asleep at the wheel since last fall and have done nothing to protect their investment. After all, it is a free maket for sellers, isn't it?
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    • Sat Sep 20th 15:19 PM | Rating: 0 0
      Commented on:
      Longer Term Reversal Trigger
      Bailouts in Bull market = Bull trend resuming. Bailouts in Bear Markets = Bear trend resuming. Agree with your analysis of Possible short-term pop for a few days or weeks. If you're a Bear, you've got to cover above 2473 on Nasdaq or 1973 on NDX. If this is a continuation of the uptrend from July 15th, then it should reach at least above the August 11 high of 1313.15 on the S&P. If Monday and Tuesday turn out to be larger declines in the face of the breadth and volume on Friday, a selling panic could ensue. Remember that there are a lot of stocks not on the banned shorts list and people will seek protection. Market makers can also short any stock now to hedge their put options exposure.
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    • Thu Sep 18th 09:37 AM | Rating: 0 0
      Commented on:
      Being Contrarian and Thinking of Buying
      How do you know the "fundamentals&quo... haven't changed? And just what are the fundamentals, anyway? If the fundamentals haven't changed, what is the rationale for the stocks being down 10-50%

      In the aggregate, people aren't stupid. They know what they see, hear and feel. What they are seeing, hearing and feeling is fear about themselves and their security (not necessarily their portfolios). They know something just isn't right out there. And they want no part of it after years of irrationality.

      As they act on their feelings, the fundamentals you speak of will then change.
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    • Mon Sep 15th 11:27 AM | Rating: 0 0
      Commented on:
      When Can We Start Breathing Again?
      What's to stop the US Government from simply adopting all bad debts, keeping the credit bubble inflated? Well, the US Government's IOU's have a price, an interest rate and a safety rating. If mortgages have a price, an interest rate and a safety rating, so do Treasuries. If investors fear the government's ability to pay interest and principal, they will move out of Treasuries the same way they moved out of mortgages. The American financial system is too soaked with bad debt for a full-out governemnt bailout to work, and ultimately the market won't let politicians get away with assuming all the bad debts. It is going to continue to take some time for the market to figure out what to do about it, but as always, there is no such thing as a free lunch. The only question is who pays for it.

      The Fed and the Treasury have placed a call option on the future production and earnings capacity of the American public. Most of that public had nothing to do with the current financial crisis. They were merely going about their everyday business, paying down their mortgages, educating their children, saving for retirement and paying their taxes. Now the government is drawing on their future in amounts the size of which the people have no concept. Do you think their so-called "leaders" in Congress are going to tell them they truth? No, since Congressmen themselves don't know the answer. They believe in the Printing Press, since it has always worked. Do you think politicians will tell the people that they have to pay much higher taxes in order to bail out the system problems that they had not part in creating? No, because that politician would lose his job. The only way Washington sees its way out of the problem is to print dollars and inflate it away. But, that won't work this time, because it is DEFLATION, NOT INFLATION, that is coming.

      Does anyone honestly believe that the Government will ever be able to repay its debts and service all of its off-budget guarantees and unfunded mandates?

      There is a point coming when the People will say Enough is Enough!
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    • Fri Sep 12th 13:00 PM | Rating: 0 0
      Commented on:
      Who's Going to Bailout the U.S. Government?
      Can someone give me a name for any individual, either in government or outside it, who would be recognized by the citizens as honest, capable and willing to provide the truth and the leadership needed to resolve the situation?

      Didn't think so. We re-elect 95% of these idiots and will continue to do so as long as the checks keep coming. When they stop, we'll find somebody else to provide "stimulus".

      Obama seems like a nice young man, but he has not guts to do what needs to be done because he's in the wrong party. McCain has the guts, but not the smarts or stature. He'll end up fighting everybody and accomplish nothing but some investigations into corruption.

      Meanwhile, the ship is buring to the water level.
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    • Thu Sep 11th 15:24 PM | Rating: 0 0
      Commented on:
      Have the Limits of US Monetary Policy Now Been Reached?
      Sickening, but true. Excellent piece. Makes everyone just so happy to write out their income tax check, doesn't it? No politician or party has a clue about what to do other than deflect the attention of the American public away from these monumentaal problems and have them focus on a pregnant teenager, a candidate's age, race or some other surface issue. Anybody know a good country where the beer is cold and water drinkable?
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    • Thu Sep 11th 12:55 PM | Rating: 0 0
      Commented on:
      Factor Diversification Means Living To Fight Another Day
      My testing shows that its best to be neutral weights and position sizing. Also long the best value and short the worst. Recognize that positions will become mis-sized the longer you hold them over time. Cut losses and let winners run by use reatively wide trailing stops. (which addresses the issue you bring up about "in too early and out to early").

      I always have some capital (usually 10%) allocated to a trend-following trade (either long or short) on the S&P based on intermediate term Elliott Wave analysis implemented by SDS or SSO.
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    • Thu Sep 11th 10:32 AM | Rating: 0 0
      Commented on:
      Can Gold Be Suppressed Indefinitely?
      So, what does all that have to do with today's price of Gold?

      Gold is going down, like all other assets, because we are in a dis-inflationary environment. Not yet deflationary, but heading in that direction. Nothing can stop it until it runs its natural course, but the Plunge Protection Team will attempt it with the unlimited printing of dollars and a willing Congress that knows no limits on federal debt creation.

      Gold's next stop? try $600 as a way station. Silver's headed to $4.00, then we get to reassess.
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    • Tue Sep 9th 11:41 AM | Rating: 0 0
      Commented on:
      Will the Stock Market Continue Its Upward Trend?
      I assume you neglected to look at a chart that was longer than the last 3 hours of yesterday's data. Try starting with, say, October 11, 2007, when discussing trends.

      Dittos to CrossProfit and jlounsbury59.
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    • Tue Sep 9th 11:33 AM | Rating: 0 0
      Commented on:
      Just How Much Can the U.S. Government Guarantee?
      You mean, "How the people of the United States squandered their leading position in the world by borrowing too much". You realize that the people re-elect the same squanderers more than 95% of the time. You realize that one of the winning campaign promises of politicians is, "I'll bring home the bacon better than the other guy, and besides, I've been there a long time and have experience in how to do it".
      View article »
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