An interesting rally, it looks like people saw that after a 6% sell off in China and no significant reaction in US equities, it looks like the China scare is having diminishing returns and everybody loaded up the boat after the services PMI and CC index failed to give a reason to sell. I missed the move as a day trader but I gained a lesson
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Global Macro Trading Journal
- Thread starter Daal
- Start date
Its the old 'when a market fails to go down on bad news, its usually due for a bounce'. I thought the move would happen tomorrow into the meeting. Usually there is a seasonality edge of being long into the 2PM announcement
I guess the creation of the 2day meeting has made the use of that edge more difficult as you don't know when people will get in, whether its on day 1 or day 2
I guess the creation of the 2day meeting has made the use of that edge more difficult as you don't know when people will get in, whether its on day 1 or day 2
http://assets.pershingsquareholding...re-2015-Annual-Letter-PSH-January-26-2016.pdf
Ackman put out annual letter where he talks about an index bubble. I agree with him. I talked about this in this journal before. I believe its more a 'benchmarking bubble'. Everybody is being benchmarked against the S&P500, this tends to push that index to levels higher than they would otherwise go because people chase it (or try to be similar to it) in order to keep their jobs. At some point the fundamentals play out and that index will struggle against other indexes and groups of stocks. I much rather own BRKB or another index than the S&P500
Ackman put out annual letter where he talks about an index bubble. I agree with him. I talked about this in this journal before. I believe its more a 'benchmarking bubble'. Everybody is being benchmarked against the S&P500, this tends to push that index to levels higher than they would otherwise go because people chase it (or try to be similar to it) in order to keep their jobs. At some point the fundamentals play out and that index will struggle against other indexes and groups of stocks. I much rather own BRKB or another index than the S&P500
This whole benchmarking against the S&P500 is a little nuts. I would argue that someone who can't beat that index can actually be a great manager and even deserve his fees in any of these cases
-If his drawdowns are significantly limited compared to the S&P500 and he still makes a nice return over the risk-free rate. If he tends to lose 10-15% in bad years, that's pretty good compared to the 30-50% of the S&P. A guy who compounds 6%-7% net a year with max 15% drawdowns will look pretty bad when benchmarked against the S&P500, yet I would argue he is a good manager who is doing good to his clients even though he doesn't beat the market
-If he has some personality or communication characteristic that helps his investors 'stay the course' even during bad times. This enables investors to achive returns above the risk free rate for the long-term, something they would be unlikely to do if they pilled in with 100% of their money on SPY. If they did that, they could be all selling at the lows in a panic. But with the manager, they might just stay the course. Specially if the manager is in communication regularly with investors. That's why I wouldn't knock on Whitney Tilson even though I don't think he can beat the market
-If his drawdowns are significantly limited compared to the S&P500 and he still makes a nice return over the risk-free rate. If he tends to lose 10-15% in bad years, that's pretty good compared to the 30-50% of the S&P. A guy who compounds 6%-7% net a year with max 15% drawdowns will look pretty bad when benchmarked against the S&P500, yet I would argue he is a good manager who is doing good to his clients even though he doesn't beat the market
-If he has some personality or communication characteristic that helps his investors 'stay the course' even during bad times. This enables investors to achive returns above the risk free rate for the long-term, something they would be unlikely to do if they pilled in with 100% of their money on SPY. If they did that, they could be all selling at the lows in a panic. But with the manager, they might just stay the course. Specially if the manager is in communication regularly with investors. That's why I wouldn't knock on Whitney Tilson even though I don't think he can beat the market
This whole benchmarking against the S&P500 is a little nuts. I would argue that someone who can't beat that index can actually be a great manager and even deserve his fees in any of these cases
-If his drawdowns are significantly limited compared to the S&P500 and he still makes a nice return over the risk-free rate. If he tends to lose 10-15% in bad years, that's pretty good compared to the 30-50% of the S&P. A guy who compounds 6%-7% net a year with max 15% drawdowns will look pretty bad when benchmarked against the S&P500, yet I would argue he is a good manager who is doing good to his clients even though he doesn't beat the market
-If he has some personality or communication characteristic that helps his investors 'stay the course' even during bad times. This enables investors to achive returns above the risk free rate for the long-term, something they would be unlikely to do if they pilled in with 100% of their money on SPY. If they did that, they could be all selling at the lows in a panic. But with the manager, they might just stay the course. Specially if the manager is in communication regularly with investors. That's why I wouldn't knock on Whitney Tilson even though I don't think he can beat the market
Large investors understand this. That's why so many large HF aim to earn 7-9% after fees.
ExcelleThis whole benchmarking against the S&P500 is a little nuts. I would argue that someone who can't beat that index can actually be a great manager and even deserve his fees in any of these cases
-If his drawdowns are significantly limited compared to the S&P500 and he still makes a nice return over the risk-free rate. If he tends to lose 10-15% in bad years, that's pretty good compared to the 30-50% of the S&P. A guy who compounds 6%-7% net a year with max 15% drawdowns will look pretty bad when benchmarked against the S&P500, yet I would argue he is a good manager who is doing good to his clients even though he doesn't beat the market
-If he has some personality or communication characteristic that helps his investors 'stay the course' even during bad times. This enables investors to achive returns above the risk free rate for the long-term, something they would be unlikely to do if they pilled in with 100% of their money on SPY. If they did that, they could be all selling at the lows in a panic. But with the manager, they might just stay the course. Specially if the manager is in communication regularly with investors. That's why I wouldn't knock on Whitney Tilson even though I don't think he can beat the market
Large investors understand this. That's why so many large HF aim to earn 7-9% after fees.
A very excellent point(s) made. (and timely for me) The manager would likely advise a diversified approach and periodic rebalancing to take advantage of those times of market exuberance , and to reduce the effect of the times of greater decline. This would give the average investor less volatility and perhaps the ability to stay the course and not attempt to Time the markets-This whole benchmarking against the S&P500 is a little nuts. I would argue that someone who can't beat that index can actually be a great manager and even deserve his fees in any of these cases
-If his drawdowns are significantly limited compared to the S&P500 and he still makes a nice return over the risk-free rate. If he tends to lose 10-15% in bad years, that's pretty good compared to the 30-50% of the S&P. A guy who compounds 6%-7% net a year with max 15% drawdowns will look pretty bad when benchmarked against the S&P500, yet I would argue he is a good manager who is doing good to his clients even though he doesn't beat the market
-If he has some personality or communication characteristic that helps his investors 'stay the course' even during bad times. This enables investors to achive returns above the risk free rate for the long-term, something they would be unlikely to do if they pilled in with 100% of their money on SPY. If they did that, they could be all selling at the lows in a panic. But with the manager, they might just stay the course. Specially if the manager is in communication regularly with investors. That's why I wouldn't knock on Whitney Tilson even though I don't think he can beat the market
since most average Investor timing often comes late at a point of pain, and the Investor fails to get back in early- underperforming even the basic buy and hold approach. a rebalancing strategy over the long term smooths the fluctuations-
With robo strategies gaining in popularity and AUM at the expense of traditional financial institutions- The individual manager can combine the best of both strategies for a win-win situation- Clients can rest easier, stay the course, and the manager gets paid a ' fair fee' to implement the strategy. And provides that essential personal communication! You mentioned that point and i think it is essential- particularly for those that don't have 20 years ahead-; to get that 2 way- communication. I think this is the way of future investing- Some will OPT to reduce fees to the absolute minimum and simply choose strategy A,B,C that will be age modified depending on Risk comfort. Others- like myself- will opt for hiring someone to manage the strategy for them-and be willing to pay a modest fee for the chore of unemotionally rebalancing on a -as needed basis.