Flashback to 2000: Tiger Fund closes citing "irrational market environment"

M

makloda

A lot of the articles and posts I read these days ("bubbles", "overvalued", "top" etc.) remind me of what I read about Robertson's Tiger fund. A legendary hedge fund in the 90s, they got burned in the late stage of the Internet bubble by going long "value" stocks and shorting any type of grossly overvalued Internet companies. They were right of course, but not at the right time. They were killed, losing billions of dollars in those hysteric short covering rallies of 1999 and 2000 and finally capitulated on March 30, 2000 (ironically at the top of the market).

Quote:

"As you have heard me say on many occasions, the key to Tiger's success over the years has been a steady commitment to buying the best stocks and shorting the worst," he wrote. "In a rational environment, this strategy functions well. But in an irrational market, where earnings and price considerations take a back seat to mouse clicks and momentum, such logic, as we have learned, does not count for much." More: http://neumann.hec.ca/~p283/gpmba/Tiger.htm

My take away: Even if you're the smartest guy in the world (Julian Robertson definitely was up there with other legendary investors) the market can always turn out to be smarter than you and squeeze you until you're blown out of the market.

IMHO today's momentum stocks (China, the Nasdaq darlings etc.) could run way farther than many of us (myself included) can imagine. Anybody shorting these into these parabolic moves is stacking the odds against them IMO.
 
Exactly right mak. Joe sixpack has a short memory, and will do anything to get rich with the least possible work. They always get sucked in at or near the top. We do have a potential double top in the making. Next week will be interesting. I love how the mkt will do the opposite of reality. I wouldn't be holding my breath for a rate cut this year though. By the time we get the next cut, the market will be lower than it is now.
 
Great post. I remember those last words by Robertson and Tiger very well. At the time I was working for a major mutual fund company and giddy clients would call up asking for "The Tech Fund" or "whatever fund YOU think I should be in, but make sure it has some Tech in it." One guy asked for the Qualcomm fund...and was happy with any fund that I could name that had Qualcomm as one of its holdings. Still there was my favorite investor who proclaimed "The Nasdaq is going to 10,000 before the DOW!"

The ceiling crashed in less than 6 months later.
 
Ah the good old days of '99-00...I was a nasdaq mkt maker for an institutional firm. The funds would come in, you'd sell 'em 50-100k to get started, then try and buy 2x as much...My p&l on some days would be stroke inducing. And long only momo guys question how some people trade better from the shortside. I am much more comfortable shorting. It is just as easy to short broken stocks as it is to buy good ones!
 
Quote from pdwst33:

Great post. I remember those last words by Robertson and Tiger very well. At the time I was working for a major mutual fund company and giddy clients would call up asking for "The Tech Fund" or "whatever fund YOU think I should be in, but make sure it has some Tech in it." One guy asked for the Qualcomm fund...and was happy with any fund that I could name that had Qualcomm as one of its holdings. Still there was my favorite investor who proclaimed "The Nasdaq is going to 10,000 before the DOW!"

The ceiling crashed in less than 6 months later.
More...


Feels like just like 1999, doesnt it..

I heard DOW 18k the other day.

hmmm

Market getting just a bit ahead of itself.

Would be wonderful to know where the top was in this market.
 
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