Posts filed under “Really, really bad calls”
This was the big news yesterday out of California:
The California Public Employees’ Retirement System (Calpers) today announced that it will eliminate its hedge fund program, known internally as the Absolute Return Strategies (ARS) program, as part of an ongoing effort to reduce complexity and costs in its investment program.
The staff recommendation, supported by the Investment Committee, will exit 24 hedge funds and six hedge fund-of-funds valued at approximately $4 billion.
Though this move may shock some people, it was one of the most-telegraphed actions that the nation’s biggest pension fund has made. The seeds for this were planted last year, when Calpers moved the authority over hedge funds from its equity desk to its fixed-income group. Bond investors look at the world very differently from equity investors.
The criticism of hedge funds from the equity side of the investing universe typically focuses on performance and fees, to a lesser extent. Charging high fees — hedge funds typically collect fees equal to 2 percent of the assets under management plus 20 percent of any gains — is a pretty big drag on long-term performance. However, a handful of funds have managed to accomplish high returns over long periods of time. That is the promise of alternative investments. The reality is much different, as the industry as a whole and most of its components underperforms the broader market. Not surprisingly, paying high fees for a lack of performance has become a difficult investment practice to defend.
But that is the equity view. From the fixed-income side of things, the focus is on a risk-reward analysis . . .
U.S. policies toward Cuba are anachronistic and perplexing. The embargo is a Cold War relic that has long ago stopped serving its intended purpose. It was adopted after the now-defunct Soviet Union tried to establish nuclear bases on the island, bringing the two superpowers to the verge of nuclear war. But what purpose does the…Read More
Yesterday, we looked at why bankers weren’t busted for crimes committed during the financial crisis. Political corruption, prosecutorial malfeasance, rewritten legislation and cowardice on the part of government officials were among the many reasons. But I saved the biggest reason so many financial felons escaped justice for today: They dumped the cost of their criminal…Read More
“There Were No Convictions of Bankers for Good Reason” is the headline of a post by Mark F. Pomerantz, a lawyer and retired partner at Paul, Weiss, Rifkind, Wharton & Garrison in the New York Times’s Room for Debate discussion: The reason that senior bankers did not face charges, even though investigators interviewed countless witnesses…Read More
As I sat down to write this early this morning, no one knew what the jobs numbers would be. But I did know three related things: 1. The median forecast in a Bloomberg survey of economists is that 230,000 workers were added in August; 2. Almost all of the individual forecasters will be wrong. (Actually,…Read More
Earlier this week, Prudent Bear fund founder David Tice warned of an imminent crash — as bad as 30-60% down on the S&P500. One small thing: This is pretty much the same call that Tice made in 2010 and 2012. Apparently, if you make the same crash call every 2 years, most of the media…Read More
Student loans are the next great subprime crisis! At least that’s what the usual purveyors of doom and gloom say (see this, this and this). The numbers are big, the default rates are high and soon enough this is going to tip the economy into the next crisis or recession. Not so fast, writes…Read More
Last week, we discussed the problems with having poor reading comprehension and the impact that has on consuming news. This week, I want to look at the lack of math skills. America seems to becoming a dangerously innumerate society. Innumeracy is incompetence with numbers rather than words. This is a worrisome issue for the future…Read More