World Beta Blog

AlphaClone is hiring!  Here is the ad on Craigslist, and the full text below:

AlphaClone, a privately-held 10 month-old San Francisco start-up, has an exciting opportunity available for a ‘HEAD OF SALES & MARKETING’ who wants to be part of the birth of a new web-delivered financial services company. We are generating revenues, founder funded and currently raising our first institutional round. The company is poised for growth and looking for a seasoned marketing executive to join the team. You can find more information on the software in the tour here.

AlphaClone is a unique online investor service that takes the pain and anxiety out of stock investing by allowing any investor to quickly and intelligently apply the stock ideas of top hedge funds. Our founding team includes both professional portfolio managers and Fortune 500/Silicon Valley leaders who have successfully lead technology-drive media ventures.

This is a rare opportunity to become involved in a start-up venture and obtain an equity/part-owner stake in a company at the pre-money stage (pre Series A funding). The company has successfully raised initial start-up funds, and is in talks with series A investors. We are looking for an entrepreneurial, business-minded individual experienced in the development of a business from the earliest stages. You will have the opportunity to play a critical role in defining many aspects of the business. It is also a fantastic opportunity for anyone looking to build business skills and experience while developing leadership credentials, especially in the current economic climate.

REQUIREMENTS:
-Ideal candidate will have at least 5 years of Sales & Marketing experience and must have worked in the investment or financial software industry or related to be considered.
-Experience managing successful marketing campaigns, including strategy and execution, strongly preferred.
-Online marketing experience required, with metrics and ROI modeling and analysis, email marketing and promotion, subscriber lists, website branding, and advertising.
-Experience working with development teams to ensure that new features tie into the marketing strategy and appeal to specific target markets is strongly preferred.
-Excellent verbal and written communication skills, professional appearance, and outgoing personality required.
-Must understand the investment landscape (Sharpe Ratio, Alpha, etc.)
-Have existing contacts in place, or ability to generate those contacts.
-College graduates with a degree in business or marketing preferred.

RESPONSIBILITIES:
-Work directly with the CEO/Founders to craft and execute the sales and marketing strategy for the company. Define sales and marketing targets and deliverables.
-Manage and Lead the Marketing & Sales for the company. Create go-to strategies, sales and revenue models and draft marketing campaigns.
-Manage an internal/external teams to execute marketing campaigns.
-Establish new business accounts and sign clients to the new platform.
-Hire and supervise a small sales staff.
-Gauge customer feedback and needs.

You will have direct input on product development, and work closely with the development team to identify and target critical features, gauge user’s needs and leverage development to maximize marketing objectives.

The position is EQUITY ONLY to start, with salary and benefits commencing immediately upon Series A funding. Interested parties, please submit a cover letter and resume via email, explaining briefly why you’d be a great candidate, with ‘HEAD OF SALES & MARKETING’ in the subject. As we are a small operation, please understand that we may not be able to respond to all inquiries. Please feel free to refer this to anyone who may be interested. Thank-you.

(Quick note – I’m playing around with Twitter, and you can follow my updates here.  I would be surprised if I last more than a month or two on here but who knows…)

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Q: What country’s equity market has had the best performance over the past 109 year?

This is an awesome PDF from CSFB – lots of good commentary from Dimson et al.

2009 Global Investment Returns Yearbook

A: Australia – real returns of 7.3% per year.

(Ignore: 7931756897)

I am traveling to Big Sky this weekend, so if there are any readers in Bozeman or on the ski hill drop me a line. . .

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Longtime readers will know that I am a big fan of the work put out by Bridgewater Associates.  In fact, the subtitle of the blog, "Engineering Targeted Returns and Risk" is lifted from one of their research pieces on optimal beta portfolios.  Dalio had an interested interview in Barron’s in which he talked about the "D-process".  Interestingly enough he advocated a position in gold which is up $30 or so today to $940:

Are you a fan of gold?

Yes.

Have you always been?

No.  gold is horrible sometimes and great other times.  But like any other asset class, everybody always should have a piece of it in their portfolio.

What is your view on stocks?

Buying equities and taking on those risking in late 2009, or more likely 2010, will be a great move because equities will be much cheaper than now.  It is going to be a buying opportunity of the century.

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Reese’s The Guru Investor is a good book on stock screening.  While I prefer factor based stock screening ala Portfolio123/FactSet/Clarfi (they give you more flexibility in the exits), this book is well worth the money.

Just pre-ordered, Covel’s updated Trendfollowing book. 

And I thought writing a book was difficult, McGraw Hill decides to drop Bailout Nation…Barry’s response here.  Bizarre.  

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Quote of the day: "Whenever you find yourself on the side of the majority, it is time to pause and reflect." – Mark Twain

Results for risk-parity versions of the GTAA model. 

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If you have had an overdraft at Bank of America, they probably owe you some $$. (HT: Sea.)

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Hussman on the need for debt restructuring.  He includes some highlights from the great interview with Ray Dailo in Barron’s this weekend.

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LovelyCharts

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Global X has ETFs in the works for Argentina, Egypt, Peru, Nordic, Philippines, and Columbia.

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El-Erian interview in Kiplinger’s.  Notice that he says diversification is no longer sufficient to temper risk, but he doesn’t state what an investor should do about it. . .

Why are you telling investors they need to diversify differently these days?

The traditional approach to diversification, which served us very well, went like this: Adopt a diversified portfolio, be disciplined about rebalancing the asset mix, own very well-defined types of asset classes and favor the home team because the minute you invest outside the U.S., you take on additional risk. A typical mix would then be 60% stocks and 40% bonds, and most of the stocks would be part of Standard & Poor’s 500-stock index.

This approach is fatigued for several reasons. First of all, diversification alone is no longer sufficient to temper risk. In the past year, we saw virtually every asset class hammered. You need something more to manage risk well. Second, it matters a great deal how you implement the asset allocation, because when the world gets bumpy, different investment types really do behave differently.

Third, consider where we’re headed. We are going toward a world where the U.S. will no longer be the most dynamic part of the global economy. Because of the debt excesses of the past few years, it will be a while before the U.S. economy returns to 3% or 4% annual growth. Therefore, the wise investor asks, "Where else can I tap into sustainable growth?" To do that, you need a more global approach.

The crash in commodity prices makes this a good time to buy, doesn’t it?

This would be a good time.

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Anyone want to nominate a title for the new installment of Really with Seth and Amy?  How about: "buy and hold stocks for the long run?"

Over the 10 years through January, an investor holding the stocks in the S.& P.’s 500-stock index, and reinvesting the dividends, would have lost about 5.1 percent a year after adjusting for inflation, as is shown in the accompanying chart.

I was at dinner the other nite and someone mentioned Decision Moose, so I thought I would do an update on a very simple system.  I have written a lot on World Beta about cross market momentum in the past (ie asset class rotation).  Some previous posts are listed at the end of this blog. 

Anyways, below are some log equity curves for a simple rotation system.  The same five asset classes as my paper back to 1973.  Ranked on the average of the trailing 3, 6, and 12 month total returns. Rebalanced monthly.  Top 1 is all-in the top asset class, Top 2 is all-in split 50/50 between the top two asset classes, Top 3 is all-in split between the top three asset classes, etc.  Results are frictionless.  Top1 would have done around +15% last year, Top 2 -9%, and Top 3 -24%.  I think you could easily expand this to more asset classes but you would have to increase the number of holdings in line with the %ages above (ie Top 2 40% of the investable universe).

Again, I think this just captures the alpha of momentum and increases your Sharpe to the .80 area.  (Asset classes cluster around 0.20 and buy and hold around 0.40.)  There are some tweaks and improvements but this is a nice example of parameter stability – and they beat buy and hold roughly 75% of the time (and have continued to work in recent years).

Some rotation funds of various flavors.

FUNDX (Newsletter here), (Fact Sheet here)
Rydex International Rotation Fund (RYFHX), (Fact Sheet here)
Rydex Sector Rotation Fund (RYSRX), (Fact Sheet here)
DWA Technical Leaders (PDP), (Fact Sheet here)
DWA Balanced (DWAFX, DWAFX), (Fact Sheet here)
VL Industry Rotation (PYH) (Fact Sheet here)
VL Timeliness (PIV) (Fact Sheet here)
Claymore/Zack’s Country Rotation (CRO) (Fact Sheet here)
Claymore/Zack’s Sector Rotation (XRO) (Fact Sheet here)
BlackStar (study here)

Previous Posts:

You Spin Me Round

Alpha Persistence

Alpha Engines

Cross Market Mo (and here)

This is a nice paper by the folks at Barra, although I am not so sure why this doesn’t fall in the portable alpha camp…

Portfolio of Risk Premia: a new approach to diversification by Briand, Nielsen, and Stefek

I remember clipping this graphic out of the newspaper in college (I may still have it somewhere).  Although it seems to me the current value is closer to previous market tops than bottoms, no?  From Fortune mag:

Kahneman and Taleb

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Great post over on dshort focusing on serial correlation in market returns. 

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Arnott on fundy indexing and vol as an asset class.

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Why SPAC Investors Should Listen to the Market

Abstract:     
Special purpose acquisition companies (SPACs) have raised around $21bn from investors since 2003, and comprised 20% of total funds raised in US IPOs in 2007. SPACs are interesting structures – allowing investors a risk-free option to invest in a future acquisition. However, we show that one-half of approved deals immediately destroy value. Investors, who can observe the market’s view of the proposed deal, as well as that of the founders, should listen to the market, since the extreme incentives faced by the SPAC founders create corresponding conflicts of interest. We propose a simple, observable rule – based on market prices – which investors should heed.

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A review of my 5 ideas for 2009 since a couple focused just on January. 

1.  Follow a simple tactical asset allocation model.   Working great so far.

2.  Look for a particularly pronounced January Effect in beaten down microcaps.  Poor but mixed.  Small caps and microcaps performed poorly – down around 10% and 13% respectively vs. down around 8% for large caps.  I mentioned two stock screens as well.  The first was down a whopping 20% while the second was up around 6%.  The second screen used insider buying as a screen criteria, so maybe beaten down stocks that are experiencing heavy insider buying are good opportunities right now?  The performance was also much better when you pulled the start date back to mid-December.

3.  Look for a bounce across the board in January.  Dead wrong - on average asset classes were down around 10%.  Worst Jan ever for stocks.

4.  Follow the smart money. Great (relatively).  The stocks mentioned that were the most popular Tiger Cubs holdings were up 1% on average.

5.  Get long Japan. Wrong (so far).