thank you for posting , i learned more reading that than i have all year. i would guess you don't give explicit advise but i have a general question; if i believe in 'peak oil' and the inevitable collapse of the existing situation pertaining to americas gas and oil problems, would it not be prudent to buy say 100 shares of USO and 'park it' in an account? again thank you ...
marketfolly
· 10 months ago
hey richard thanks for the comment. You're right... I can't give specific investment advice and everything is for educational or entertainment purposes.
But, yes, to park USO for the long term would give you exposure to peak oil theory and its one of the few ways to play the commodity of crude somewhat directly. None of the ETFs to play crude are "ideal" for holding long-term. But, as a retail investor, you're limited to those options and so you've got to pick and choose. There are other options (OIL, DBO, etc) but each vehicle has its positives and negatives.
undislosed
· 10 months ago
Hey, nice job on the coverage. Any idea why one can't seem to find 13F filings for Kynikos/Chanos and Seabreeze/Kass ? (they can't be 100% short, what am I missing)
marketfolly
· 9 months ago
odd i just tried to look as well. it could be any number of reasons... could be doing securities in other countries, could be doing debt or non equities. will have to look into this further, as that is slightly peculiar as you'd think they would have some long hedges in place.
Undisclosed
· 9 months ago
Thanks for the response. I heard from a buddy that both are 100% short.
Howard
· 8 months ago
Hi, I'm a "Home Gamer" as Cramer likes to call his audience and I recently discovered your site while researching leading Hedge Fund holdings (those still around). I have a low six figure portfolio (stocks only) and am trying to learn how to trade Options. I've read a few periodicals, including free downloads from "Optionmonster" run by the Nagarian brothers (Fast Money fame) and the OIC.
Any thoughts on how I can find straight forward, easy to understand "basic" Option trading information.
PS, this site is great !
Thanks
PeterD
· 8 months ago
Hey, Howard. Mosey on down to the Chicago Board Options Exchange website at www.cboe.com and sign up for their free online options courses.
I'd like to also recommend three books: "Options and Options Trading: A Simplified Course That Takes You From Coin Tosses to the Black-Scholes" by Robert W. Ward; "Options: Trading Strategy and Risk Management" by Simon Vine, and an intermediate/advanced book: "Options as a Strategic Investment" by Lawrence G. McMillan.
Once you're done with the first two books (and only then!) visit Charles Cottle's excellent website www.riskdoctor.com.
Good luck!
Best,
PeterD
Mike Mah
· 8 months ago
Hi, Brian Shannon,
Did I work on your back at an airport in Guatemala, after a hurricane, Oct. 24, 2005? Mike
PeterD
· 7 months ago
Jay,
Are we permitted to discuss our investment picks? I am asking because since I first discovered marketfolly, I've been closely following Soros's portfolio and I've made a stock purchase lately that ties in well with Soros's increased interest in a certain sector. If Soros had not heavily increase his position in said sector I've would not have considered the purchase. I don't want to discuss the purchase per se; instead, I would like to discuss my reasoning behind such a purchase. I find it kind of exciting and would like to share it with others. And btw, my purchase was small so I am not sweating it, especially with this crazy market of late,
~PeterD
marketfolly
· 7 months ago
hey Peter, yea definitely go for it. We encourage community and discussions, so feel free to talk about whatever you please as it relates to markets. Maybe start the discussion under the Soros post since it relates to his portfolio somewhat?
PeterD
· 7 months ago
Thank you, Jay. It's done (see April 29, Soros Fund).
I look forward to the feedback,
~Peter
john
· 7 months ago
hey Jay, I might have the opportunity to have a little chat with a manager from Smith Stacey, a fund in Dallas, and was wondering if you would be so kind to do a little extra work and break down their portfolio for me...Love the site and any help would be appreciated!
marketfolly
· 7 months ago
hey john, why don't you drop me an email so I can send it to you privately rather than posting up a huge thing in the comments section haha. marketfolly@gmail.com
Also, I'm based in Dallas, are you as well?
PeterD
· 7 months ago
Wasn't sure where to post this, so I'll post it here.
Have you heard of the American futurist, inventor, scientist, and "world leader in pattern recognition techniques" Raymond Kurzweil? He's quite the amazing fellow. This guy makes quants look like high school dropouts. I think you'll find his website, http://www.fatkat.com/index.html, quite interesting, Jay.
"fat" by the way, is an acronym for "financial accelerating transactions"
Here's the company's overview from his site (sorry, it's past midnight and I'm a little tired to summarize it):
"Company Overview
Quant investing is a significant phenomenon. It is applied today to an estimated trillion dollars of market funds. In the near future, Quant technique are expected to play a major role across the broad scope of capital markets (a 20 trillion dollar arena).
FatKat's goal is to combine the best in financial knowledge with the best in mathematics and computer science to create a self-sustaining Quant system. Pattern recognition techniques (the hallmark technology of Ray Kurzweil firms) play a central role in finding predictability in the markets of today and the future. Our proprietary techniques are geared to find predictability wherever it exists, and to maintain that advantage in an automated fashion. We believe that the FatKat technology adds a unique dimension to the field of quantitative investment."
~PeterD
marketfolly
· 7 months ago
Very interesting stuff Peter, thanks for flagging this for me. I was unaware of him or his project. I will definitely have to read up more to see how he differentiates from typical quants. I've always been fascinated by quants, especially since they control so much of market activity these days... yet, I've not worked at one or been "on the inside" so I am lacking in true insight.
PeterD
· 7 months ago
Regarding FatKat, here's a piece from an article written by James M. Pethokoukis a few years in U.S. News & World Report titled "Robotrading 101":
Math whiz. If there's a wild card in this investing arms race, it may be FatKat. The company may sound like a villain in a James Bond flick, but it's really a fledgling investment firm in Wellesley, Mass., founded by inventor and AI evangelist Ray Kurzweil. Although he's currently mum on FatKat, Kurzweil has written about the potential of mathematical formulas known as genetic algorithms to beat the market. The Darwinist process would begin with software randomly generating a million sets of rules for buying and selling stocks. Each set is a financial organism with the rules constituting its DNA. The ones that can't beat the market are killed, while the stock-savvy survivors mutate and breed until the population is back to a million. Rinse and repeat 100,000 times. "The surviving software creatures should be darn smart investors," he writes in The Age of Spiritual Machines.
How smart might AI programs get? By the year 2050, perhaps, investment software programs may be able to "come up with their own investment hypotheses, test them out, and implement them," says Andrew Lo, director of MIT's Laboratory for Financial Engineering. For now, though, humans still have a big role to play in the AI investment process. While the numbers are being crunched, the world keeps spinning and you need humans to keep track of it. At AIT, it takes all weekend to download data and update investment models. You also need humans to monitor the world for events that aren't reflected immediately in the data, such as terrorist attacks. And what happens if supersmart computers eventually get so good at the prediction game that all investors are made of silicon rather than carbon? Then the computers, as Kurzweil puts it, "will be trying to outpredict each other."
Sophisticated computer programs take the human element out of picking winners on Wall Street
marketfolly
· 7 months ago
Wow, intriguing stuff, to say the least. Have you been researching them a lot lately?
PeterD
· 7 months ago
Hi, Jay.
Intriguing stuff to say the least.
Ray Kurzweil is an extraordinarily fascinating man. When you get the chance, read up about him in wikipedia and you'll see that the adverb "extraordinarily," if anything, is an understatement! And I kid you not when I say that Kurzweil is hoping and working for the day when he would be able to upload his brain to some sort of supercomputer and achieve---you're not going to believe this---immortality.
No, Jay I haven't been reasearching them. The reasons are twofold: First, I am a newbie when it comes to hedge funds, quant funds, and what have you---besides, I wouldn't know what to ask. Second, I've noticed that FatKat has a contact e-mail, and... well, I was kind of hoping you would contact them. You're not shy, are you? ;)
Cheers,
~PeterD
marketfolly
· 7 months ago
Haha no I'm usually not shy as I've spoken with many funds and managers before. However, quant is definitely not my area of expertise and I'm not even sure what to ask or where to start haha.
PeterD
· 6 months ago
Hi, Jay.
I just wanted to bring to everyone's attention an interesting essay I just read in the London Review of Books about the banking crisis(who says it went away). It's by John Lanchester, titled "It's Finished." Here is the link: http://www.lrb.co.uk/v31/n10/lanc01_.html
It is well worth the read.
Here's the first paragraph:
It’s a moment of confusion and loathing that most of us have experienced. You’re in a shop. It’s time to pay. You reach for your purse or wallet and take out your last note. Something about it doesn’t feel quite right. It’s the wrong shape or the wrong colour and the design is odd too and the note just doesn’t seem right and . . . By now you’ve realised: oh shit! It’s the dreaded Scottish banknote! Tentatively, shyly – or briskly, brazenly, according to character – you proffer the note. One of three things then happens. If you’re lucky, the tradesperson takes the note without demur. Unusual, but it does sometimes happen. If you’re less lucky, he or she takes the note with all the good grace of someone accepting delivery of a four-week-dead haddock. If you’re less lucky still, he or she will flatly refuse your money. And here’s the really annoying part: he or she would be well within his or her rights, because Scottish banknotes are not legal tender. ‘Legal tender’ is defined as any financial instrument which cannot be refused in settlement of a debt. Bank of England notes are legal tender in England and Wales, and Bank of England coins are legal tender throughout the UK, but no paper currency is. The bizarre fact of the matter is that Scottish banknotes are promissory notes, with the same legal status as cheques and debit cards.
~PeterD
marketfolly
· 6 months ago
Nice find Peter, thanks for sharing! You've definitely found some nice pieces over the past few weeks and please keep bringing them to my attention.
michael
· 5 months ago
okay, while I understand the attempt that has been made to create a robust portfolio. The end result is that all backtesting does it find the best strategy for the past. Thereby almost always insuring failure in the future. It is like driving forward while looking in a rear view mirror. The best at what they do are the managers or investors that can see and anticipate larger trends. Get there first and place there bets. Once the market or big guns turn the large mutual funds around and start accumulating the asset class it is then time to start selling. So, my question is how can a hindsight clone accomplish this?
marketfolly
· 5 months ago
hey michael, our portfolio was created by analyzing individual managers, their styles, and their hedge fund firms. Sure, a portfolio created solely based on backtested results would be subject to skepticism going forwards. In fact, we've created a few other clones with Alphaclone that have performed better than the one we've labeled our own. We feel that our unique take on the managers and our familiarity with the strategies and their historical tendencies has created a unique blend.
For instance, Baupost Group is ran by Seth Klarman and is one of the most respected value investors of all time. In this regard, we would argue that his performance speaks for itself on a lengthy track record of years and years of double digit returns. Sure, past performance is no indication of future results, but the fact that he was able to keep a vast majority of his portfolio in cash throughout the crisis speaks for itself. Additionally, he has slowly started to deploy cash into this market turmoil as it plays right into his value bent.
Secondly, our selection of Eton Park plays right into a combination of merger arbitrage and stockpicking strategies. Mindich's fund is quite young (inception in 2004) and we are of the belief that newer, younger managers are driven and are hungry to generate performance track records of their own. Lastly, by focusing on Shumway, we focus on a pure stockpicker. His inception was also somewhat recent (2003/04). We have seen his talent through his time at Tiger Management and now at his own firm. This provides us with a fundamental bent in our portfolio. While one could argue that Baupost and Shumway are both value players, we are focused more on their ability to pick stocks and identify solid companies/trends with longer term timeframes. As such, they aren't as concerned with month to month performance, but more so the year by year metrics. And, their performance illustrates this.
Hopefully this clarifies and please let us know if you have any other questions or comments in this regard. You bring up a good point regarding survivorship bias and selecting portfolios predicated on past performance. Let me be clear that this is not what we have done. Like I said earlier, I've created portfolios on Alphaclone that have even better performance but I did not select them as the MF clone because I was searching for a clone that would perform well going forward due to deep analysis of the manager, their investment style/methodology, and their investment time frame.
Looking at results is not the only thing here. We have focused on so much more as we have been studying hedge funds and tracking them for many years now.
Anon
· 3 months ago
Please STOP quoting "% of portfolio" from the 13F.
This is misleading foolish amateurs into thinking great hedge funds run far more concentrated portfolio than they do.
The best estimate might be to take the % you derive and divide by 2 (estimating for effects of gross exposure, non-13F securities like international stocks, etc).
marketfolly
· 3 months ago
Fair point indeed, as we have inserted a *note* disclaimer at the end of each post noting how that percentage is calculated but we'll re-evaluate how to list that going forward.
mkline52
· 3 months ago
David Einhorn manages the portfolio for Greenlight Re ("GLRE"). The monthly performance as well as the largest holdings are listed on the Company's website.
As of 31-August-2009, the largest disclosed long positions in our investment portfolio are Arkema, Criteria Caixa Corp, Ford Motor Company debt, gold, Lanxess and Pfizer.
formance results and largest holdings are listed on the website.
marketfolly
· 3 months ago
yup very true, almost similar to Buffett's Berkshire in a loose sense. We've mentioned GLRE once or twice on the blog as a roundabout way to get access to Einhorn's portfolio management if you so desire.
mloren1357
· 2 months ago
You are doing a super job. I especially like your insights and reading lists. I was reading a news article in Yahoo, and clicked on what was an interesting link, and discovered Market Folley. It's fun seeing what the big guns are investing in. I am a physician and don't have much time to research stocks, so I lean toward sectors with ETF's. I'm still trying to diminish risk in my portfolio. I'm almost there.
marketfolly
· 2 months ago
Thanks very much for the kind words as they are always appreciated! We agree that it's interesting to see what they're investing in and tracking them can be quite exciting. Since you don't have time to research, you've taken an excellent approach by diversifying and reducing your risk with ETFs certainly. If you ever want to replicate hedge fund holdings in your portfolio just let us know and we'll be happy to walk you through how we just rebalance the portfolio only 4x a year and have seen 20% annualized returns. Additionally, if you're worried about downside protection, our portfolio covers this. Or I would also suggest looking into the ETF: SH as it is the inverse of the S&P 500 and at least hedges your portfolio a bit.
In addition to your sector ETFs make sure you get some commodity exposure somehow too, to diversify into other asset classes outside of the typical stocks and bonds. Thanks again for the kind words.
Oh and keep in mind that this is not investment advice, purely for information or educational purposes :)
lindaholley
· 2 months ago
I would like to send a personal note to Louis Bacon. We have a mutual investment interest in Taos Ski Valley, New Mexico.
marketfolly
· 2 months ago
Well your best bet would be to try to reach out to him through his hedge fund firm, Moore Capital Management. I'm sure he's impossible to reach unless you are already an acquaintance of his and I believe he lives in London. But definitely try to reach him through his firm.
All Comments
But, yes, to park USO for the long term would give you exposure to peak oil theory and its one of the few ways to play the commodity of crude somewhat directly. None of the ETFs to play crude are "ideal" for holding long-term. But, as a retail investor, you're limited to those options and so you've got to pick and choose. There are other options (OIL, DBO, etc) but each vehicle has its positives and negatives.
Any thoughts on how I can find straight forward, easy to understand "basic" Option trading information.
PS, this site is great !
Thanks
I'd like to also recommend three books: "Options and Options Trading: A Simplified Course That Takes You From Coin Tosses to the Black-Scholes" by Robert W. Ward; "Options: Trading Strategy and Risk Management" by Simon Vine, and an intermediate/advanced book: "Options as a Strategic Investment" by Lawrence G. McMillan.
Once you're done with the first two books (and only then!) visit Charles Cottle's excellent website www.riskdoctor.com.
Good luck!
Best,
PeterD
Did I work on your back at an airport in Guatemala, after a hurricane, Oct. 24, 2005? Mike
Are we permitted to discuss our investment picks? I am asking because since I first discovered marketfolly, I've been closely following Soros's portfolio and I've made a stock purchase lately that ties in well with Soros's increased interest in a certain sector. If Soros had not heavily increase his position in said sector I've would not have considered the purchase. I don't want to discuss the purchase per se; instead, I would like to discuss my reasoning behind such a purchase. I find it kind of exciting and would like to share it with others. And btw, my purchase was small so I am not sweating it, especially with this crazy market of late,
~PeterD
I look forward to the feedback,
~Peter
Also, I'm based in Dallas, are you as well?
Have you heard of the American futurist, inventor, scientist, and "world leader in pattern recognition techniques" Raymond Kurzweil? He's quite the amazing fellow. This guy makes quants look like high school dropouts. I think you'll find his website, http://www.fatkat.com/index.html, quite interesting, Jay.
"fat" by the way, is an acronym for "financial accelerating transactions"
Here's the company's overview from his site (sorry, it's past midnight and I'm a little tired to summarize it):
"Company Overview
Quant investing is a significant phenomenon. It is applied today to an estimated trillion dollars of market funds. In the near future, Quant technique are expected to play a major role across the broad scope of capital markets (a 20 trillion dollar arena).
FatKat's goal is to combine the best in financial knowledge with the best in mathematics and computer science to create a self-sustaining Quant system. Pattern recognition techniques (the hallmark technology of Ray Kurzweil firms) play a central role in finding predictability in the markets of today and the future. Our proprietary techniques are geared to find predictability wherever it exists, and to maintain that advantage in an automated fashion. We believe that the FatKat technology adds a unique dimension to the field of quantitative investment."
~PeterD
Math whiz. If there's a wild card in this investing arms race, it may be FatKat. The company may sound like a villain in a James Bond flick, but it's really a fledgling investment firm in Wellesley, Mass., founded by inventor and AI evangelist Ray Kurzweil. Although he's currently mum on FatKat, Kurzweil has written about the potential of mathematical formulas known as genetic algorithms to beat the market. The Darwinist process would begin with software randomly generating a million sets of rules for buying and selling stocks. Each set is a financial organism with the rules constituting its DNA. The ones that can't beat the market are killed, while the stock-savvy survivors mutate and breed until the population is back to a million. Rinse and repeat 100,000 times. "The surviving software creatures should be darn smart investors," he writes in The Age of Spiritual Machines.
How smart might AI programs get? By the year 2050, perhaps, investment software programs may be able to "come up with their own investment hypotheses, test them out, and implement them," says Andrew Lo, director of MIT's Laboratory for Financial Engineering. For now, though, humans still have a big role to play in the AI investment process. While the numbers are being crunched, the world keeps spinning and you need humans to keep track of it. At AIT, it takes all weekend to download data and update investment models. You also need humans to monitor the world for events that aren't reflected immediately in the data, such as terrorist attacks. And what happens if supersmart computers eventually get so good at the prediction game that all investors are made of silicon rather than carbon? Then the computers, as Kurzweil puts it, "will be trying to outpredict each other."
Sophisticated computer programs take the human element out of picking winners on Wall Street
Intriguing stuff to say the least.
Ray Kurzweil is an extraordinarily fascinating man. When you get the chance, read up about him in wikipedia and you'll see that the adverb "extraordinarily," if anything, is an understatement! And I kid you not when I say that Kurzweil is hoping and working for the day when he would be able to upload his brain to some sort of supercomputer and achieve---you're not going to believe this---immortality.
No, Jay I haven't been reasearching them. The reasons are twofold: First, I am a newbie when it comes to hedge funds, quant funds, and what have you---besides, I wouldn't know what to ask. Second, I've noticed that FatKat has a contact e-mail, and... well, I was kind of hoping you would contact them. You're not shy, are you? ;)
Cheers,
~PeterD
I just wanted to bring to everyone's attention an interesting essay I just read in the London Review of Books about the banking crisis(who says it went away). It's by John Lanchester, titled "It's Finished." Here is the link: http://www.lrb.co.uk/v31/n10/lanc01_.html
It is well worth the read.
Here's the first paragraph:
It’s a moment of confusion and loathing that most of us have experienced. You’re in a shop. It’s time to pay. You reach for your purse or wallet and take out your last note. Something about it doesn’t feel quite right. It’s the wrong shape or the wrong colour and the design is odd too and the note just doesn’t seem right and . . . By now you’ve realised: oh shit! It’s the dreaded Scottish banknote! Tentatively, shyly – or briskly, brazenly, according to character – you proffer the note. One of three things then happens. If you’re lucky, the tradesperson takes the note without demur. Unusual, but it does sometimes happen. If you’re less lucky, he or she takes the note with all the good grace of someone accepting delivery of a four-week-dead haddock. If you’re less lucky still, he or she will flatly refuse your money. And here’s the really annoying part: he or she would be well within his or her rights, because Scottish banknotes are not legal tender. ‘Legal tender’ is defined as any financial instrument which cannot be refused in settlement of a debt. Bank of England notes are legal tender in England and Wales, and Bank of England coins are legal tender throughout the UK, but no paper currency is. The bizarre fact of the matter is that Scottish banknotes are promissory notes, with the same legal status as cheques and debit cards.
~PeterD
For instance, Baupost Group is ran by Seth Klarman and is one of the most respected value investors of all time. In this regard, we would argue that his performance speaks for itself on a lengthy track record of years and years of double digit returns. Sure, past performance is no indication of future results, but the fact that he was able to keep a vast majority of his portfolio in cash throughout the crisis speaks for itself. Additionally, he has slowly started to deploy cash into this market turmoil as it plays right into his value bent.
Secondly, our selection of Eton Park plays right into a combination of merger arbitrage and stockpicking strategies. Mindich's fund is quite young (inception in 2004) and we are of the belief that newer, younger managers are driven and are hungry to generate performance track records of their own. Lastly, by focusing on Shumway, we focus on a pure stockpicker. His inception was also somewhat recent (2003/04). We have seen his talent through his time at Tiger Management and now at his own firm. This provides us with a fundamental bent in our portfolio. While one could argue that Baupost and Shumway are both value players, we are focused more on their ability to pick stocks and identify solid companies/trends with longer term timeframes. As such, they aren't as concerned with month to month performance, but more so the year by year metrics. And, their performance illustrates this.
Hopefully this clarifies and please let us know if you have any other questions or comments in this regard. You bring up a good point regarding survivorship bias and selecting portfolios predicated on past performance. Let me be clear that this is not what we have done. Like I said earlier, I've created portfolios on Alphaclone that have even better performance but I did not select them as the MF clone because I was searching for a clone that would perform well going forward due to deep analysis of the manager, their investment style/methodology, and their investment time frame.
Looking at results is not the only thing here. We have focused on so much more as we have been studying hedge funds and tracking them for many years now.
This is misleading foolish amateurs into thinking great hedge funds run far more concentrated portfolio than they do.
The best estimate might be to take the % you derive and divide by 2 (estimating for effects of gross exposure, non-13F securities like international stocks, etc).
As of 31-August-2009, the largest disclosed long positions in our investment portfolio are Arkema, Criteria Caixa Corp, Ford Motor Company debt, gold, Lanxess and Pfizer.
formance results and largest holdings are listed on the website.
In addition to your sector ETFs make sure you get some commodity exposure somehow too, to diversify into other asset classes outside of the typical stocks and bonds. Thanks again for the kind words.
Oh and keep in mind that this is not investment advice, purely for information or educational purposes :)