letsmakemoney's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/287090/comments http://seekingalpha.com/article/123172-economic-crisis-good-luck-europe-you-ll-need-it?source=feed#comment-406931 406931
Seeking Alpha has a good currency ETF/ETN guide:
seekingalpha.com/artic...

]]> Sat, 28 Feb 2009 10:18:31 -0500
Seeking Alpha has a good currency ETF/ETN guide:
seekingalpha.com/artic...

]]> http://seekingalpha.com/article/113131-where-s-the-spac-attack?source=feed#comment-345986 345986
Each SPAC is different, carries unique risks, and should be researched thoroughly before investing. As an example, you buy a SPAC at $9, no deal is announced over 12 months, you receive your liquidation value of $10. This $1 dollar equals an 11.1% annual return, just for waiting it out. This is an oversimplification, but it is more or less the reason hedge funds with longer time frame lock-ups are investing in these SPACS today, and they are likely applying 2-3x leverage to juice returns. They are in fact betting that no deals are announced, and that cash is returned to investors. Hedge fund are more or less capitalizing on this illiquidity premium associated with the SPAC. They are buying them from market participants with weaker long-term financing mechanisms. ]]> Sun, 04 Jan 2009 23:17:15 -0500
Each SPAC is different, carries unique risks, and should be researched thoroughly before investing. As an example, you buy a SPAC at $9, no deal is announced over 12 months, you receive your liquidation value of $10. This $1 dollar equals an 11.1% annual return, just for waiting it out. This is an oversimplification, but it is more or less the reason hedge funds with longer time frame lock-ups are investing in these SPACS today, and they are likely applying 2-3x leverage to juice returns. They are in fact betting that no deals are announced, and that cash is returned to investors. Hedge fund are more or less capitalizing on this illiquidity premium associated with the SPAC. They are buying them from market participants with weaker long-term financing mechanisms. ]]> http://seekingalpha.com/article/111752-don-t-be-scammed-by-madoff-investor-sob-stories?source=feed#comment-335162 335162
This statement is technically incorrect. The SEC only imposes wealth and income thresholds in order to qualify to invest in a hedge fund. You make a huge leap of faith in assuming that wealth and income equals sophistication, and therefore entitles them to less protection from outright fraud. The majority of high net worth individuals who have amassed wealth generally have done so in non-Wall St professions (i.e., small business owners), so I do not believe that wealth translates to sophistication.

"Such a fund is less regulated and allowed to undertake a wider range of activities than other investment funds"

Again, technically incorrect. It is the fact that hedge funds do not REGISTER with the SEC that allows them to undertake a wider range of activities than other investment funds (derivatives, futures, short selling, etc). They forgo registration, are permitted to use the additional tools, and agree to limit the way they can market and accept limitations on the total number of investors they can take. These are simple trade offs, the motivation of which is not intended to shirk regulation, but to increase investment flexibility. I am so tired of this misconception that hedge funds are not regulated, or are less regulated. If a hedge fund manager breaks securities laws, he goes to jail, just like a mutual fund manager. The level of regulation is not a material difference, and is totally overplayed by sensational journalism.]]> Sun, 21 Dec 2008 16:10:46 -0500
This statement is technically incorrect. The SEC only imposes wealth and income thresholds in order to qualify to invest in a hedge fund. You make a huge leap of faith in assuming that wealth and income equals sophistication, and therefore entitles them to less protection from outright fraud. The majority of high net worth individuals who have amassed wealth generally have done so in non-Wall St professions (i.e., small business owners), so I do not believe that wealth translates to sophistication.

"Such a fund is less regulated and allowed to undertake a wider range of activities than other investment funds"

Again, technically incorrect. It is the fact that hedge funds do not REGISTER with the SEC that allows them to undertake a wider range of activities than other investment funds (derivatives, futures, short selling, etc). They forgo registration, are permitted to use the additional tools, and agree to limit the way they can market and accept limitations on the total number of investors they can take. These are simple trade offs, the motivation of which is not intended to shirk regulation, but to increase investment flexibility. I am so tired of this misconception that hedge funds are not regulated, or are less regulated. If a hedge fund manager breaks securities laws, he goes to jail, just like a mutual fund manager. The level of regulation is not a material difference, and is totally overplayed by sensational journalism.]]> http://seekingalpha.com/article/109094-tough-outlook-for-commodity-indexes?source=feed#comment-320369 320369

I don't believe you can simply add these up and call it a 21.56% annual headwind. You should calculate a weighted average number for each commodity, based on its % weight in the fund (i.e., 35% x 13.15% +20% x 3.49%..etc). So this 'headwind' would be much lower, somewhere under 6% just eye-balling the math.

Apologize if I'm missing something based on your methodology..thanks for the insightful way of thinking about this extra headwind though..]]> Wed, 03 Dec 2008 21:07:38 -0500

I don't believe you can simply add these up and call it a 21.56% annual headwind. You should calculate a weighted average number for each commodity, based on its % weight in the fund (i.e., 35% x 13.15% +20% x 3.49%..etc). So this 'headwind' would be much lower, somewhere under 6% just eye-balling the math.

Apologize if I'm missing something based on your methodology..thanks for the insightful way of thinking about this extra headwind though..]]> http://seekingalpha.com/article/107554-is-it-time-to-short-bonds?source=feed#comment-314196 314196 Mon, 24 Nov 2008 21:30:34 -0500 http://seekingalpha.com/article/102191-did-the-end-of-the-investment-banks-cause-the-latest-sell-off?source=feed#comment-292079 292079
This has impacted a number of markets, but what has become particularly interesting due to this massive de-leveraging are convertible bonds. Do your own research (type the word convertible in the Yahoo quote box), there are closed end funds and mutual funds out there that currently yield 10-20%, due, in my opinion, to convertible bond arbitrage (CBA) players being forced out of the game, in wholesale fashion.

CBA is (was) a heavily leveraged strategy (5-10x), reliant upon prime broker provided leverage. CBA happens to be the worst hedge fund strategy on the basis of performance YTD (HFR data), with both Sep and Oct being record disastrous months. Some funds are down 50%+ in just these 2 months alone. Citadel has been in the press refuting solvency rumors, likely relating to their convert exposure. They probably started buying a little too early in the selloff is my guess.

I do not believe these terrible CBA HF returns are a coincidence, and they have been greatly exacerbated by the changes taking place in the prime brokerage industry. There is no where else to obtain financing. The only bids out there for converts are long-only, non-leveraged participants, and they simply don't have the cash to absorb the sudden avalanche of forced convertible bond selling (as the arbs unwind, they sell the bonds and buy the stock back).

Buying converts seems like one of the more compelling risk-adjusted trades out there at the moment. They appear to be offering equity like returns, with bond like risk. Yes, they are subject to the economic troubles we are facing, and default risk is real, but equities are even riskier as they can go to zero. Why would a risk-averse investor buy stocks until this other market opportunity goes away? Downside protection is provided by the bond floor inherent in the convert, and they participate in upside market rallies due to the embedded call option they contain (they can be converted into stock, although the delta on them is now very low). The big risk seems to be further de-leveraging, so approach with caution and size your position accordingly.

Barron's finally picked up on this on Sunday, and has a full article on converts, but they barely scratched the surface on what's really going on.

online.barrons.com/art...



]]> Mon, 27 Oct 2008 22:36:52 -0400
This has impacted a number of markets, but what has become particularly interesting due to this massive de-leveraging are convertible bonds. Do your own research (type the word convertible in the Yahoo quote box), there are closed end funds and mutual funds out there that currently yield 10-20%, due, in my opinion, to convertible bond arbitrage (CBA) players being forced out of the game, in wholesale fashion.

CBA is (was) a heavily leveraged strategy (5-10x), reliant upon prime broker provided leverage. CBA happens to be the worst hedge fund strategy on the basis of performance YTD (HFR data), with both Sep and Oct being record disastrous months. Some funds are down 50%+ in just these 2 months alone. Citadel has been in the press refuting solvency rumors, likely relating to their convert exposure. They probably started buying a little too early in the selloff is my guess.

I do not believe these terrible CBA HF returns are a coincidence, and they have been greatly exacerbated by the changes taking place in the prime brokerage industry. There is no where else to obtain financing. The only bids out there for converts are long-only, non-leveraged participants, and they simply don't have the cash to absorb the sudden avalanche of forced convertible bond selling (as the arbs unwind, they sell the bonds and buy the stock back).

Buying converts seems like one of the more compelling risk-adjusted trades out there at the moment. They appear to be offering equity like returns, with bond like risk. Yes, they are subject to the economic troubles we are facing, and default risk is real, but equities are even riskier as they can go to zero. Why would a risk-averse investor buy stocks until this other market opportunity goes away? Downside protection is provided by the bond floor inherent in the convert, and they participate in upside market rallies due to the embedded call option they contain (they can be converted into stock, although the delta on them is now very low). The big risk seems to be further de-leveraging, so approach with caution and size your position accordingly.

Barron's finally picked up on this on Sunday, and has a full article on converts, but they barely scratched the surface on what's really going on.

online.barrons.com/art...



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