Print
Hits: 4523

April Fools! Stocks in U.S. Rise, Led by Banks in Best Start to 2nd Quarter in 70 Years Now, lets look at the top ten increases in the S&P over the last 30 years, wherein 30% of them happened IN THE LAST 21 DAYS (including April Fool's day, how appropriate)!. I know I said I don't believe much in technical analysis, primarily because I am not a short term trader, but bear with me since I do look at historical charts.

  1. 1.      Oct. 21/1987      9.10%
  2. 2.      July 24/2002      5.70%
  3. 3.      Aug 17/1982      4.80%
  4. 4.      Mar 18/2008      4.20%
  5. 5.      Oct 15/1998       4.20%
  6. 6.      Sept. 1/1998       3.90%
  7. 7.      Oct. 11/2002      3.90%
  8. 8.      Jan. 17/1991       3.70%
  9. 9.      Mar 11/2008      3.70%
  10. 10.   Apr 1/2008        3.60%
  11. 11.  Mar 13/2003      3.50%

image001.gif

The 120 day avg. has not been wrong yet quite useful in showing significant trends, including Black Monday, LTCM, the Asian and the Russian Crises, and 9/11 - all easily discernible from graph - and all most likely peanuts compared to what we are going through now…

 

Here is a closeup of 30% worth of the 3 decades top 10 upside pops - extreme volality and noise. Now, imagine this leveraged 2x, 10x, 30x, or more. Hold on to your lunch!

image010.gif

... and from Bloomberg, hedge funds as a group seem to be facing historically tough times due to the unprecdented volatility. There shorts are getting bashed in the bull rallies. My take on this is - that's what you get for being a short term player. Expand your investment horzons (which is probably very difficult with clients who are demanding monthly and quarterly performance), and use insurance! Isn't that why they call them HEDGE funds? I, personally, would rather wait with minimal funds under managment than put up with finicky clients who would insist on constant monthly and/or even quarterly returns. You (or at least, I) can't invest that way. I need time for my investment theses to pan out. It takes months, some times several quarters for my "evil machinations" to come to fruition - but when they do pan out they usually more than compensate for the wait, even when adjusted for risks, drawdowns and downside volatility. Trying to make them work by the end of the month will just result in losses and a quest for luck. I can't afford to rely on luck.

Now, on to the article from Bloomberg.com

More than a dozen hedge funds have shut, frozen redemptions or needed to seek outside capital this year as markets tumbled. Peloton Partners LLP liquidated its largest fund after making wrong-way bets on mortgage securities, while JWM Partners LLC, the investment firm run by ex-Long-Term Capital Management LP chief John Meriwether, was hurt by swings in Japanese government bonds.

``Hedge funds have not covered themselves in any form of glory in this quarter,'' said Paul Ross, chief executive officer of London-based Iveagh Ltd., the investment arm for the Guinness family brewing fortune. ``They've been extremely difficult markets for hedge funds in general.'' 

Volatility Rises

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.

Strategies that should profit as stocks and bonds decline have also been hurt because of short-term rallies as the U.S. Federal Reserve takes steps to restore confidence after the decline in the U.S. subprime-mortgage market.

That means prices have been jumping around much more than usual. Daily changes of 1 percent or more in the Standard & Poor's 500 Index, the benchmark index for U.S. stocks, have occurred on 51 percent of trading days this year, according to S&P. The last time the percentage hovered at that level was in 1938.

The index jumped 3.6 percent today, the most in two weeks.

``Even if the view has been correct and negative, it's been very difficult in these markets to make money because the moves are violent and the rallies sharp,'' said Ross, who invests a large portion of Iveagh's $800 million in assets with hedge funds.