Fund Architects Commentary
THE NIFTY FIVE HUNDRED
History tells us that by the time everyone in the financial markets spots a trend, it’s over. Success becomes a fad and a fad inevitably becomes a failure. So what’s up with the unremitting march into index funds? Word’s going around that indexing has become so popular it’s threatening the efficiency of the markets. Continue reading »
HEDGE FUND, DOFF THY NAME
What’s in a name? That which we call a rose
by any other name would smell as sweet.
According to the abstrusely-named research outfit HFR, Inc., there were more than 8,000 hedge funds in operation at the end of 2014. Allegedly, said funds were responsible for a staggering $2.8 trillion in assets under management, a threefold increase in the cumulative number over the last ten years. Puzzlingly, though, less than 1,200 of these firms use the term “hedge fund” in the “about us” section of their SEC investment adviser registration. And of the other 6,800? “O! be some other name.” Continue reading »
IT’S ABOUT TIME
Ever heard of David Blitzer? We hadn’t either. Probably should have though. He has the altogether cool job of running the S&P Dow Jones Index Committee, the group responsible for picking stocks in the Dow Jones Industrials Average. Last week, the good Dr. Blitzer had the altogether cool job of announcing that, for the first time in its seemingly timeless history, the Dow’s panel of listed companies will be including…a watch maker. Continue reading »
IS THERE A DOCTOR IN THE HOUSE?
In case you missed it, what with “Professor Oil” falling so spectacularly off his lectern, ol’ “Dr. Copper” has been stumbling pretty badly himself. Indeed, spot price on the red metal has fallen nearly 10% since the start of the year, trading somewhere around $5,672 a ton for those keeping score. Continue reading »
“MAGIC ON THE FLOOR” NO MORE
All that noise you’re not hearing is what used to be the organized chaos of the Chicago commodity pits. Seems the parent company of the Chicago Board of Trade is quietly ending the practice of traders establishing prices by yelling at each other.
The CBOT -- the world's oldest futures and options exchange -- was established in 1848
Some say the practice of “open outcry” trading goes back to the ancient world, when the Phoenicians, Greeks, and Romans traded options against ship cargoes. Others point to the 12th century, when European merchants gathered during fairs to loudly negotiate for the future delivery of merchandise. Still others trace the practice back to 1730 Japan, where feudal lords formed the Dojima Rice Market. Continue reading »
YOU WANT FRIES WITH THAT?
McDonald’s CEO Don Thompson “retired” last week. A cynic might infer that his forced departure had something to do with the 21% drop in fourth-quarter earnings for the universe’s largest restaurant chain. Or maybe its truck-stop-class bathrooms. But we’re willing to be a bit more charitable. After all, the good Mr. Thompson, who’d been in charge of flipping burgers and maintaining sanitation at the Golden Arches for less than three years, claimed it was “tough to say goodbye to the McFamily.” Continue reading »
SMOKE ON THE WATER
So, the Swiss National Bank “scrapped the cap” on its franc last week, and within minutes global currency markets were virtually up in smoke. Like firing a flare gun into a rattan ceiling, the SNB’s move ignited things pretty quickly, and by Friday’s close currency brokers around the world were facing hundreds of millions of dollars in foreign-exchange losses. Continue reading »
U.S. equity indices recorded impressive positive results for the fourth quarter 2014 (4Q14) led by smaller capitalization stocks. International equity indices priced in U.S. dollars (USD) were negative for the quarter as many international currencies weakened relative to USD. Long-term bonds maintained surprisingly strong marks as investors continued to favor the relatively attractive yields and safety of U.S. Treasuries. Commodities persisted with another extremely weak quarter of results dragged lower by the energy complex. Continue reading »
CHINESE PUZZLE GAME
O, what a tangled web we weave
When first we practise to deceive!
In case you missed it, yet another oddly named Chinese company has become the world’s most valuable technology startup. At least Alibaba was pronounceable.
This time it’s smartphone maker Xiaomi Corp. True enough, while the rest of the world was maxing out its figurative credit card on the holidays, Xiaomi was collecting enough cash from investors to value the absurdly fast-growing company at more than $45 billion. The funding party was led by an outfit called “All-Stars Investment,” a tech investment fund run by a former Morgan Stanley analyst. Big players in the event included DST Global, a Russian investment firm, GIC, a Singapore sovereign-wealth fund, and, of course, Yunfeng Capital, a private-equity firm affiliated with Alibaba. Nice group. Continue reading »
So, how do you make $2 billion in the hedge fund business? Easy, start with $4 billion! Yeah, it’s an old joke, and it’s not that funny to most folks to begin with. But it’s not laughable at all to investors in Mattias Westman’s Prosperity Capital Management fund. With huge stakes in Russian oil companies, Westman’s fund really was cut in half by the recent crash in oil prices.
"Sweet crude” literally has a mildly sweet taste and pleasant smell
Fact is, oil of all flavor has been tanking since November 27, when OPEC announced its plans to keep the Mideast spigot open full blast. Brent crude, the major benchmark price for oil worldwide, has been sliding ever since, losing nearly 25% of its value in four weeks. While Westman appears to have descended all the way down the well, he was hardly alone for the ride Continue reading »