Wednesday, April 27, 2011

Short takes

Bankrupt stars: Athletes who lost it all - Yahoo! Sports: CNBC provides a slide show on 15 athletes and their stories who "lost it all" financially. A "look in":

"In 2008, the NBA Players’ Association claimed that 60 percent of pro basketball players go broke within five years of retirement."
REread that sentence. 60%? Wow.

Scott Burns in the Houston Chronicle looks at hedge funds and finds them expensive and risky:

"The massive growth and recent resurgence of hedge funds are strong evidence that a sucker really is born every minute....Debt increases risk, so you'll win big (maybe) or lose big (more likely). One indication you will lose big is simple: Most hedge funds die young. Researchers Burton Malkiel and Atanu Saha found, in 2005, that less than 25 percent of all hedge funds in 1996 were still around in 2004. This produces, they estimated, a huge "survivor bias" in reported hedge fund returns since the records of the failing hedge funds are quietly buried with them.

Over the last eight years the most commonly referenced index of hedge fund performance, the HFRX Global Hedge Fund Index, has trailed the return of the S&P 500 seven times. Over the last four years the S&P 500 beat the hedge fund index three times - and hedge funds are supposed to thrive in bad markets."

Robots help in Japan and not just in the nuclear plants. First it should be noted that to look at any given month in isolation is silly, but if there is a month when emotions may play a larger role it is after a disaster so it is noteworthy that quantitative trading strategies, at least in this case, beat traditional investing immediately following the Earthquake/Tsunami/Radiation events. From Bloomberg:

"A fund that uses mathematical models to trade stocks and sports a beer-swilling robot as its mascot beat Japan’s best money managers last month, when an earthquake and tsunami triggered a nuclear crisis and sparked panic equities selling.

Six computer programs, making all the investment decisions for T&D Asset Management’s Kabu-Robo Fund, generated returns of 1.9 percent in March. The average actively traded fund that invests in Japan lost 6.9 percent during the month, according to Tokyo-based Rating and Investment Information Inc. The benchmark Nikkei 225 (NKY) Stock Average dropped 8.2 percent in the period.

“People tend to go with the herd when there’s a panic,” said Kazuhiro Kunisada, chief executive officer of Trade Science Corp., which designed the programs for T&D’s Kabu-Robo Fund. “Robots just follow the rules.”"

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