wndysrf Posted April 8, 2003 Report Share Posted April 8, 2003 Mark?s Market Commentary ? April 8, 2003 In order to look for a market bottom, we must look for conservative investing attitudes and risk aversion. But during this bear market, hedge funds are upping their bets, and rampant spread trade speculations are running wild on Wall Street. According to today?s Wall Struck Journal ?For all their mystique, hedge funds are really souped-up models of mutual funds, which can borrow money to increase the size of their investments, and make big bets against the market by short selling.? ?The amount of money invested in hedge funds has risen to $600 billion, but they still only represent 4% of the stock market?s value. However, the funds recently have accounted for nearly a quarter of daily trading volume. That?s because the leverage that many funds use boosts the size of their bets. In addition, they tend to trade frequently and focus on volatile sectors such as technology and small cap stocks.? ?Volatile financial markets are putting pressure on these funds. Dozens of small hedge funds have closed down in recent months, and the SEC is investigating others for aggressive or inappropriate activities.? Here?s a profile of a typical hedge fund manager reported in today?s article: ?Two years ago, 37-year old Andy Skov quit his $1 million a year job at Morgan Stanley to start a hedge fund in order to participate in the new gold rush.? Mark?s Translation: Skov wasn?t satisfied with a million per year salary. He needed to jump on the HedgeHog gravy train where he could earn 20%. Especially while the guys over in Structured Finance were cleaning up, making ?mutual fund management? a low grade assignment. Skov?s picture is posted on page C17. He looks like your typical X-Box gamer. Shaved head, mustache, goatee, and stylish oval shaped glasses. He was convinced that he was going to be the next ?big hitter? on Wall Street. The envy of everyone at Morgan Stanley. Then he could have a shot at those juicy Asian ?Lucy Lin? financial advisers over in China featured on Morgan Stanley?s Bloomberg commercials on TV. Maybe he could have a crack at the lovely and delectable Catherine Yang, the night anchor. ?Skov was warned by his mentor, Barton Biggs. ?You are making a big mistake? he cautioned. Mr. Skov ignored the warnings and plunged ahead, opening his fund last March. Early on, the fund hit losses on European financials and emerging market stocks. Soon, he was down more than 5%, and with no trading profits, could not pay himself his salary until he made up his losses and starts raking up some gains.? ?By last August, Skov had downsized and moved his family into a smaller apartment. On a vacation in Lake Tahoe, Skov found himself waking at 7:00am, racing down to the phone in his cabin to call his trading friends to get news about the overnight market action. Sometimes, in order to avoid waking the kids, he rushed out with his cellphone, dodging trees down to the lake or order to get better reception.? Mark?s Translation: Skov was going stir crazy on his vacation. Since he had so many leveraged bets on the line, he was climbing the walls, unable to hit a ?refresh? button every 5 seconds, or staying up at 3:00am to watch the Asian and European action on Bloomberg. Constant gapping and wild market reversals made it impossible to ?ride a trend?, since so many eyeballs were gaming the same data in real time. He had to take heavy doses of Vicadin to get to sleep, but even then he was tortured by images of waking up and finding the futures spinning wildly in the wrong direction in the PreMarket, with Leslie LaRoche horse whipping him telling him to reverse his positions. Later, he went to his former mentor, Barton Biggs, for advice. Unfortunately, he had left Morgan Stanley, and started his own hedge fund. ?Christian Baha, the 34-year old hedge fund manager of Quadriga Asset Management, Inc., held a seminar for investors at the swanky W Hotel in Manhattan, boasting of 24% returns since 1996, a record he likens to George Soros. Baha is now registering a fund with the SEC in order to put together a television advertising campaign, unheard of in the traditional hedge fund marketplace.? Mark?s Translation: Baha was tired of hearing all the get rich quick informercials on late night TV, touting no money down real estate flipping and options speculating. It was obvious that the fortune to be made was not in the flipping or trading, but in promotion. Therefore he decided to hop on the infomercial gravy train, and start a Pyramid Scheme masquerading as a Hedge Fund. After all, most of his prospective clients were probably no name QVC addicts living in Iowa or Idaho, unaware of his Cayman Islands numbered bank account and beachfront villa in case things went bad. ?Hart Heller, who graduated from Harvard in 1999, started his own hedge fund last month with $5 million from friends and family members. While he is short on experience, he says he has outperformed the stock market for more than 5 years. ?I can invest in anything I want?, he says.? ?Bruce Rakay, a real estate developer in Sarasota, asked his broker to put his money in a safe investment 5 years ago. The broker invested it in a hedge fund. Soon, he became suspicious because his broker couldn?t tell him how his money was being invested, so he asked to withdraw. After ?weeks to process his request?, he found that his hedge fund went broke, and Mr. Rakay lost his entire $1 million investment.? ?????. Risk aversion also permeates the bond market: According to today?s WSJ: ?Cash Pours Into High-Yield Bonds? ?Junk Funds draw billions, amid stock market volatility and low Treasury yields. The sector is seeing a flood of cash after weeks of relentless inflows into high-yield mutual funds.? ?This is very unusual. It?s the first time in many years where demand for all kinds of low grade bonds is clearly outstripping supply.? Now that the war is over, new issues are flooding the market. ?Bankers have held back at the start of the war. Now I guess they?ve tested the waters and found that people are genuinely interested in buying new issues, so they are cranking out as many deals as they can.?, says Brian Hessel of Stonegate Capital Management. Yet another unidirectional trade, leveraging 100:1 off of the Greenspan Put and the Permanently Pegged interest rates. Yet another ?no brainer? investment strategy in Alice in Repoland. Wildcat Finance Obscene Speculations Wild Volatility and Overtrading Doug Noland?s ongoing nightmare continues. The Al Green Easing has made the safest investments so undesireable, the Liquidity Bubble Proceeds are piling into the riskiest of instruments, and day to day gaming of these fireballs within the Paper Pyramid is accelerating at hyperspeed. What we are seeing is the Nasdaq Bubble of 2000 all over again. But this time, it is the credit markets which are blowing off. As for the market today, we got a mean bear wedge going on in the intraday. I suspect that several more days of sideways action will be needed to work off the volume from yesterday?s spike, as Da Boyz desperately hold things up in order to get short for the next leg down. Still waiting for the turn window. Call volume is skyrocketing, right in front of the Options Expiration Freight Train. Another new low for the move on the VIX and VXN. The Dollar failed to make a higher high, and today broke out of his recent upchannel. Gold and the gold stocks are holding. They appear to be making bear flag, and I suspect the entire planet is shorting this group, expecting a collapse after the war trade. We?ll have to see if this flag suddenly morphs into an uptrend and a powerful squeeze, similar to what the SOX did after the 2001 and 2002 waterfall declines. Link to comment Share on other sites More sharing options...
Tchaikofsky Posted April 8, 2003 Report Share Posted April 8, 2003 Mark: Is this your mechanic? Link to comment Share on other sites More sharing options...
5thelement Posted April 8, 2003 Report Share Posted April 8, 2003 Mark: Interesting comment on the gold miners group. I figured these stocks are so beaten up, I can't believe the shorts haven't covered yet but you could be right. Jim Sinclair's been talking about a short squeeze in gold shares for months but we've yet to see it. Here's hoping you're right and we get a rocket ride on the miners, even if it only lasts 6 weeks thanks for your daily commentary. think you're completely right about a credit bubble and the safest investments made "undesireable" by Al Bubblespan. Link to comment Share on other sites More sharing options...
MyGoldenStool Posted April 8, 2003 Report Share Posted April 8, 2003 Mark: Is this your mechanic? Nice BMW!! Link to comment Share on other sites More sharing options...
Jimi Posted April 8, 2003 Report Share Posted April 8, 2003 That "mechanic" apparently has abundant experience fixing flats. Mr. Mark, can we start a hedge fund--Predator Capital, LLC--to feed of other hedge funds run by 30-somethings? That'd be as fun as reading your messages every evening. Stay groovy, Jimi Link to comment Share on other sites More sharing options...
longOnUranus Posted April 8, 2003 Report Share Posted April 8, 2003 SHYkowski- I have an autojack just like that, she inflates from 32A to 50EEEEE in no time. Great for off-road servicing. Saves money on front seat air bags, too. You also need one of those cleavage snorkels. Miners - I have a 20% position now long miners. I'm not sure we're in squeeze territory yet, I haven't seen any remotely "hysterical" buying in the group for a few weeks. If we get a swup over the next few days, along with a falling dollar, I'd look for explosive upside breakout. Probably early next week (opex). Link to comment Share on other sites More sharing options...
aureleus Posted April 8, 2003 Report Share Posted April 8, 2003 I actually met Christian Baha in 1999. He also heads a programming outfit for financial software - display/analysis of market data. Some very solid business relations established. They went public in 2000. Those guys are/were conservative. Basically a good trader + good programmers capitalizing on their skills. The hedge fund is a "parallel project", it operates on a technical system, first developed and in use since 1996, no discretionary decisions allowed. They have been pushing the fund at various German finance-sites since end of last year, see http://www.wallstreet-online.de or http://www.onvista.de. Seems to have whetted their appetite. In 1999 the fund was very low profile, Baha just said it looked very promising. Lessons to be learned: 1.) Not everyone out there is some addict looking for a quick buck. 2.) Even conservative investors, who THINK they are careful, suddenly risk everything in one move. Mania induced reasoning, I suppose. But as I said, Christian Baha is ok. But do your own DD. regards aureleus Link to comment Share on other sites More sharing options...
Bird D Durr Posted April 8, 2003 Report Share Posted April 8, 2003 Off to take my car to That mechanic............................. Was a nice send off to a forgettable day............................ Thanks for posting it...................................... Link to comment Share on other sites More sharing options...
realist Posted April 8, 2003 Report Share Posted April 8, 2003 I AM SHORT LIKE A MUTHA! Gotta admit, DoC had an effect on me last night his WhopSaw bizness. Absolute genius if ya ask me. Along with that very nasty gravestone doji and tri-star completion today on the SPX, I put my money where my mouth is once again. I have stops of course to protect captial. 886 on the first load and 896 on the second. Just my idea. Link to comment Share on other sites More sharing options...
Slothrop Posted April 8, 2003 Report Share Posted April 8, 2003 It's tough to generalize about hedge funds. Most of the stories that end up in the paper are about hedgies that took wild risks. But, with the demise of Long Term Capital, many new hedge funds (since 1999) are designed to minimize volatility at the expense of alpha. The last two I looked at had black box systems in place which eliminated the possibility of going much below zero and which contented themselves with not much more than a 9 or 10% upside. So, I don't know if it's possible to make vast, sweeping statements about the field. There are just too many different types of hedge funds these days. Link to comment Share on other sites More sharing options...
PileDriver Posted April 8, 2003 Report Share Posted April 8, 2003 So what stupid story are they going to try to float tonight to get this POS up Link to comment Share on other sites More sharing options...
flufflander Posted April 8, 2003 Report Share Posted April 8, 2003 How about "Saddam pregnant with alien love child" Link to comment Share on other sites More sharing options...
3Martinis Posted April 8, 2003 Report Share Posted April 8, 2003 Piles: Blue Line Skyrockets........ http://www.theonion.com/onion3621/blue_line_jumps.html Oooppss ..a little dated. Guess I missed the *hic* rally again Link to comment Share on other sites More sharing options...
Guest Posted April 8, 2003 Report Share Posted April 8, 2003 Fed Governors today denied that they are working on an "Emergency Economic Rescue Plan." RIGHT! Watch the press get after this thing and watch that headline stick to Greeny like glue. Every time they deny the existence of a Housing Bubble or an "Emergency Economic Rescue Plan" - the question answers itself - despite their denials. Plunger Link to comment Share on other sites More sharing options...
TheMotleyStool Posted April 8, 2003 Report Share Posted April 8, 2003 Can't believe BEARX actually climbed today. I was wondering if any market action, up or down, could make it stop declining. Smart move on the part of investors going into junk bonds. Equity investors don't give a damn about their ownership, as is proven by stock option grants, so why not buy the bonds? If the companies are unprofitable, just print some shares to keep the bonds afloat. Link to comment Share on other sites More sharing options...
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