Paper Chase: Hedge Funds Done?
We had the best growth since the 4th quarter of 2011 last quarter. GDP increased 4.6% revised up from 4.2%.
New home sales are the highest since 2008 surging 18% in August. This indicates strong consumer demand in what looks to be an improving economy.
The Market
The market recently has been concerned about the Fed tightening and the European economy. Nothing is 100% certain, but it’s clear the Fed has done a more than adequate job of staving of inflation. The concerns in the market are coming from short term speculators regarding volatility. As a long term investor, I have not the same worries. I am not looking at the market on a day to day basis. What we know is that this market is exuberant and not cheaply priced. It’s more about lack of clarity in what getting out of the market looks like. When would you get back in? Who could tell you?
Hedge Funds
Hedge Funds have a “2 and 20” fee structure meaning 2% of the total asset value and 20% of the profits. The return is based on fund manager strategy which may or may not be market related. Most do not have normally distributed returns.
CALPERS announced they would stop investing through hedge funds as their records have been middling in spite of receiving great acclaim. There is plenty of selection risk as there are thousands of hedge funds, and about a quarter of them shut down every year. There is no permanent advantage in investing through them, but there is permanent disadvantage being that they charge a lot of money.
What I’m Doing
Generally, I am staying the course in this market. I can’t nor will I try to outguess the market. A general maxim amongst investors is to own your age as a percentage of bonds including pension and social security. 60% stocks and 40% bonds is an even more general rule.
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The information should only be a starting point for doing additional independent research in order to allow you to form your own opinion regarding trading decisions. You should ask the firm with which you deal about the terms and conditions of the specific securities which you are trading and associated obligations. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.
