Using Veritas to Construct the "Per…

29-04-2017 Hits:82132 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:77760 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:77330 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:82077 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:78667 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:80958 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:47839 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:79669 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:79189 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:79740 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:84719 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:81665 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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In case you haven't noticed, I am pretty much anti-establishment. In keeping with that streak, I feel obligated to highlight the sham that is the global asset management industry. Many high net worth individuals and institutions pay big fees to alledged geniuses to essentially have their money sit in the stock and bond markets. Here's a surprise, you can do that for free. Hedge fund performance basically tracks the performance of the stock markets, particularly in the US. There is a small amount of alpha generated, but relatively little in comparison to what is marketed and publicized. Granted, a little alpha is better than none, but that is not necessarily what the alternative asset class mantra preaches, is it?

The results of this blog and my proprietary trading accounts run circles around hedge fund results, multiple circles. Granted, I had a bad quarter, and that bad quarter was sandwiched between two calendar quarters, which pulled on the performace of two (calendar-wise) quarters, but that was nothing but giving back some profit due to my underestimating the extent to which news flow and markets were to be manipulated by the powers that be while being net short. I knew it was coming, I just significantly underestimated the extent. Even so, BoomBustBloggers should be running circles around the crowd. I will release new performance figures at the end of this quarter to see how we stand (the most recent ones were from March). To date, my valuation, forensic and macro calls have been on point for two years running. It appears there are some who don't understand that prices can, and often, diverge from fundamental valuations - but despite that, fundamentals ALWAYS win in the end. That is how you make money. When something is mispriced, you take a position in it and wairt for reality to hit. Those that have a problem understanding that are usually the hot money crowd.

See The Great Global Macro Experiment, Revisited for more on my investment style, and click here for historical performance posts and towards the latter portion of 2008 - Updated 2008 performance. You can download a model that will give you an idea of performance for all but the latest research, which as I mentioned earlier had a bad quarter (you will have to search the site for it, I will post the link in the comments section once I find it). The most recent tabulated results are here:

BoomBustBlog Performance, year to date.

About 35% to 45% of those returns (profit) were given back in the recent bear rally, but this still leaves competition dominating performance. I am also quite confident that the upcoming quarters will be quite profitable for my bearish research, recouping if not besting the top line numbers from the March tabulation. It has become quite obvious that one must be fairly prolific trader through the bear market rallies, and that is not my cup of tea. I find trading to be laborious and time consuming, but the volatility and apparent market manipulation forces one, even one such as I, to take shorter duration positions than would normally be necessary.

As the research and ideas have gotten more complicated, I will have to institute a new, more realistic method of tabulating results for distributing through the blog. The buy and hold concept unfairly skews results downwards in an envrironment when a real investor is forced to trade more often. My dilemma is that I don't want to give the impression that I am soliciting through the proffer of results. I'll have it figured out by the time I retabulate results.

Now, about those other professionals...

We have analyzed hedge fund performance by computing hedge fund alpha in both down trending and up trending markets. We used Barclay's Hedge Fund Index asa  proxy for hedge fund performance. To compute alpha (Rp-Rb) we have used S&P 500 index as the benchmark index. In addition to alpha we have also computed tracking error and information ratio to give additional insights relating to hedge fund performance during up trending and down trending markets.

The table below presents performance of hedge fund over the past five years (since June 2004) based on monthly returns.

 

Hedge fund performance

Avg return of Hedge fund

0.43%

Avg return of benchmark (S&P)

-0.22%

 

 

Alpha (median)

0.36%

Alpha (average)

0.65%

 

 

Tracking error

2.92%

 

 

Information ratio

0.12

 

 

Positive returns  %

70.5%

Positive alpha %

57.4%

 

Down trending market

 

Up trending market

Avg return of Hedge fund

-1.22%

 

Avg return of Hedge fund

1.50%

Avg return of benchmark (S&P)

-4.22%

 

Avg return of benchmark (S&P)

2.37%

 

 

 

 

 

Alpha (median)

2.42%

 

Median

-0.49%

Alpha (average)

3.00%

 

Average

-0.87%

 

 

 

 

 

Tracking error

2.89%

 

Tracking error

1.70%

 

 

 

 

 

Information ratio

0.84

 

Information ratio

-0.29

 

 

 

 

 

Positive returns  %

37.5%

 

Positive returns  %

91.9%

Positive alpha %

91.7%

 

Positive alpha %

35.1%

 

Down trending markets

 

  • As stated previously on an absolute basis, hedge funds do not perform well during down trending markets with negative mean return of 1.22% (monthly) during down trending markets. However, on a relative basis, hedge funds have outperformed S&P during down trending markets with median alpha of 2.42%.
  • Since June 2004 S&P have yielded negative monthly returns during 24 occasions (categorized as down trending markets). Of these 24 months on only 9 occasions hedge funds have yielded positive returns (i.e) only 38% probability of generating positive returns during down trending markets.
  • On 22 of these 24 occasions hedge funds have outperformed S&P on a relative basis generating positive alpha (i.e) 92% probability of generating positive alpha during down trending markets.
  • Information ratio of hedge funds during down trending markets at 0.84x is considerably higher than overall information ratio of 0.12x (all periods since 2004) and -0.29x during up trending markets.

 

Up trending markets

  • During up trending markets on absolute basis hedge fund tend to perform better with an average monthly return of 1.50%. However, on a relative basis, hedge funds do not perform better during up trending markets with median alpha of -0.49%.
  • Since June 2004 S&P have yielded positive monthly returns on 37 occasions (categorized as up trending markets). Of these on only 3 occasions hedge funds have yielded negative returns (i.e) 92% probability of generating positive returns during up trending markets.
  • However on only 13 of these 37 occasions hedge funds have generated positive alpha (i.e) 35% probability to generate positive alpha during up trending markets.
  • Information ratio of hedge funds during up trending markets is negative (-0.29x) suggesting that hedge fund managers add no real value during up trending markets.

 

Overall performance

  • Overall mean monthly return of hedge funds is 0.43% compared with -0.22% of S&P 500 with median alpha of 0.36% and mean alpha of 0.65%.
  • Tracking error of hedge fund is 2.92% with a low information of 0.12x, implying that hedge fund managers add very little value through their active management strategies.