Heard this from a reader about LINTA, Liberty Media Interactive : “LINTA, in case you had not heard , is being added to S & P. Proposed net buy 14 million today is the add.”
Mutual-fund company stocks are defeating the funds they manage. You can take a look at the 20.8% gain posted by an index of 20 fund?manager stocks from January 1 through the end of second week of October. That gain was double the 10.2% advance of the average stock-mutual fund tracked by Bloomberg.
The Russell 3000 Investment Management Company Index has gained 15.6% a year over the past five years, outrunning the average stock-fund’s annual return of 10.4%.
According to John Bogle, retired chairman of the Vanguard Group, hired managers have arrogated to themselves an excessive share of the rewards of investing. He says one key reason this has happened is due to public ownership at fund companies.
Some critics say that when a fund manager has to answer to its own stockholders, as well as to shareowners of its funds, conflicts of interest arise. The fund company starts viewing itself more as a marketer working to attract new money than a steward of the assets already entrusted to its care. This starts a lively argument. A fund manager may feel he deserves some extra rewards for doing the home work and concentrating on a single business rather than owning a diversified portfolio of securities, as fund investor does.
The three largest US fund groups, namely Fidelity Investments, Capital Group’s American Funds, and Vanguard are all closely held. So are the several others among the fast growing up?and?comers, including Dimensional Fund Advisors, Dodge & Cox, and Davis Selected Advisers. A financial research by Boston consulting firm says these six groups together attracted almost $99bn of new money in the first eight months of 2006. That is more than half the $168 bn that was invested into stock and bond funds of all types.
Few investors or their advisors have made an obvious cause out of favoring private fund managers. They do naturally drift towards managers they perceive as able, consistent and reliable. Another choice that remains with every investor is to buy the fund managers’ shares instead of the funds. However, it should be kept in mind that individual fund?company stocks are prone to greater volatility than shares of a typical broad-based fund.
With the Fed still somewhat unclear on the interest rate issue, it may be a good idea to stow away cash in longterm CD or money market accounts. Bankaholic has the best bank interest rate and scoop on bank deals.
As an investor, do you know how can you avoid the next Amaranth? As more and more individuals are investing directly in the hedge funds, it is essential to calculate risks since the Securities and Exchange Commission (SEC) offers slight oversight. Recently, a federal appeals court cancelled the SEC’s right to register funds and check their books.
It is not hidden now that Amaranth Advisors lost $6 billion in a wrong bet on natural-gas prices in September. The impact of that trading disaster goes far beyond the industry. For example, the San Diego County pension fund is reported to have invested $175 million in the fund and lost an estimated $45 million.
The industry’s opacity has often upset regulators and big investors. Even private watchdogs have failed to spot the next wreck. There are a lot of dark corners to the industry, yet how to spot a risky portfolio, before it is too late? Here are some things to do and questions to ask before investing in hedge funds.
First, search for a due-diligence consultant. If independent, they will be able to dip into offering statements and other documents to identify potential problem areas. Some consultants have modeling software that can show you the weak areas of a particular portfolio. However, even with software, the complexity of some funds makes it hard to spot trouble areas. Evaluate liquidity, credit, and market risks. Try to find the answers to these questions. How much leverage is the portfolio using? Do the funds you’re considering have highly illiquid or hard-to-value investments? Can you get your money out in a short time? Many funds set the condition of an initial ‘lock-up’ period that prevents easy redemption.
Predicting the next hedge-fund blowup is similar to forecasting the next devastating hurricane. You cannot predict when it will occur, but you may know where storms are likely to hit. Although, it is a matter of probabilities, it helps extremely if someone can give you some odds.
Denis brought up an interesting conspiracy theory.
D. Lam (10:54:30 AM): Hey… Thought u might be interested
D. Lam (10:54:50 AM): A friend says that republicans are manipulating the market big time now to show that they’re good with with economy and that inflation is under control.
D. Lam (10:55:08 AM): And that oil is also being manipulated
D. Lam (10:55:00 AM): So after elections in November, there should be a big correction.
Dunno if its true, but just something to keep in mind.
I mentioned ORCL, Oracle Corp., about 2 weeks ago when I pointed out the stock chart breakout. ORCL is moving big after hours today. Oracle Corp. said Tuesday its first-quarter profit jumped 29 percent, easily exceeding expectations on record sales across most business lines and geographic regions.
Hey,
I hope you guys like the new design. I’ve been working with a CSS designer to give the blog a refreshed look. Please let me know your comments on the look while we continue making adjustments.
I got this email from someone at a TV production studio in New York. They are hiring a stock market TV show host.
We are currently looking for a knowledgeable and charismatic day trading/stock market expert who would be interested in hosting a game show in New York. Because of your experience in the field, I thought you would be the perfect person to recommend someone. Our ideal candidate is in his 30s, and has the personality to be on television, but also has enough expertise to provide the play-by-play of day trading. I appreciate any help you might be able to give me, either by suggesting people I should contact or having people contact me directly.
We’re looking to cast a strong male personality with Wall Street/Day-trading expertise. Think Alec Baldwin in Glengarry Glen Ross and Ben Affleck in Boiler Room. He’ll serve as host and commentator of a game show in development for a cable network. Must have the knowledge and the personality. Dry delivery will not suffice. Age range: late 20s-late 30s.
If you are interested, leave a comment with your email and I’ll forward you the details.
Fidelity Investments has been deeply wounded by the bear market, but it retains one big edge over everybody else: Will Danoff.
Danoff is to the 21st century Fidelity what Edward C. Johnson III and Peter Lynch were to the organization in the 20th century: master portfolio managers, sui generis, brand names who showered riches on their investors.
Danoff’s Fidelity Contrafund (FCNTX) shot up 17% in the year ended June 30, and that was less than its average return in each of the two prior years. Despite being the largest actively managed equity fund guided by a single individual, with $64.9 billion in assets, it behaves more like a sprite than a behemoth.
Does anyone have any connection on how to get into the Contrafund?
Winner of Welcome to My Trading Room: Chris L (Minneapolis, MN)
Winner of Getting Started in Chart Patterns: Paul T (Mishawaka, IN)
Winner of UCLA Trader Stock Picks Newsletter: Manohar R (Dallas, TX)
Winner of FallondPicks Stock Picks Subscription: James O (Fremont, CA)
Winner of Stock Insight Subscripiton: Brian K (Wilmington, DE)
Winners of High Chart Patterns Stock Picks Newsletter: Jeff K (Chicago, IL); Dave A (Danville, CA); Nathan L (Westhope, ND)
Thanks everyone for joining the giveaway. In total, we had over 188 entires! I hope to talk to some companies to get some more sponsors for the next stock trading book giveaway.
Last weekend, I had the site moved to Steadfast Networks, our new hosting provider.
thebulltrader.com is now hosted at the prestigious Equinix datacenter in Chicago, IL. I hope this move will fix all the downtime problems that the site has been having lately.
To celebrate the blogiversary of thebulltrader.com, I am going to give away stock trading books to my readers! I already have all the prizes in my possession, and I am ready get this giveaway going!
The team at High Chart Patterns, which writes stock picks newsletters, wrote in with their thoughts on getting to know your stocks.
"Without a doubt one activity that many professional traders share is that they get to know their friends. Stock friends, that is. One of the most valuable things that we have learned over the years is how important it is to become familiar with the behaviour of your stocks.
For example, you have been watching stock HCPG for a break of 50 for over a week, 50 representing new highs. For days you have followed the stock approach 50 from different angles, with different volumes, at different times of the day, only for it to be rejected near the buy point. The next day HCPG is sitting at 49.5 in a flattish market. Then, however, you notice the way she starts to climb up towards 50 this time is somehow different — this time you know that most likely it will successful. How do you know? Because you have become familiar with your friend and you note a behavior change. At some levels it has to be sub-conscious; if a buddy sitting beside you asks what exactly was different, often it's difficult to pin down. But from our own experience, we have no doubt how well it works.
This is the reason that we also place stocks whose patterns are not completely formed or are too far away, in the "secondary list" of our High Chart Patterns; so that subscribers can start watching them days before and familiarize themselves with the stock's behavior. It is also the reason we like to stick to a core group of stocks, around 200 of them, instead of scanning each night through a 1500 stocks looking for patterns. As a rule we never trade a stock that we are not familiar with. If there is a new stock that is gaining attention from momentum traders, we immediately add it to our core group of stocks so that it too can become our friend."
With interest rates so high, and the markets so exasperating, many traders are staying in cash.
Bankaholic lists some no-risk, fully liquid, high-yield money market and savings account rates that offer interest rates ranging from 5.25% APY to 6.00% APY. If the market continues to deteriorate, you might even want to think about locking away some of your cash at the current high interest rates in laddered CD accounts.
Stocks surged across the board Wednesday as investors rallied around upbeat remarks from Bernanke that implied policy makers may finally take a breather after two years of interest rate increases. Aside from the Fed Chairman's seemingly dovish commentary that sent short sellers fleeing for cover following weeks of market losses, signs of a potential pause pushed bond yields to session lows and allowed equity investors to look beyond a disappointing CPI report, using solid earnings news and another pullback in oil as additional catalysts to get back into a market that was showing signs of being oversold.
