Schwab is now running ads that seem to offer great margin rates (for a limited time !!! act now!!). These are very credit card like (and predatory) in my opinion. The margin rates offered by most brokers are near criminal when compared to a consistently fair broker like IB (unbiased, we don’t use them – we don’t use margin in retail accounts and use Merlin/Goldman in private funds). (HT: Sea)
These are probably available for free on the internet somewhere (if readers find them leave a comment and I’ll update with hyperlinks):
Asset Bubbles and Market Crises by Norman and Thiagarajan
The Effect of Federal Reserve Policy, Yield Curves, and Current Level of Interest Rates on Equity Returns by Volkman, Laforge, and Dudney
The Myth of 1926: How Much Do We Know About Long-Term Returns on U.S. Stocks by McQuarrie
Great, great, great post on survivor bias (from a new academic paper by Xiaoqing Xu, and Anthony Loviscek of Seton Hall University):
“The average “hidden survivorship bias” is a whopping 0.54% per month or around 6% per annum according to the researchers. “
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What are the five most influential books in your life? (HT: AF).
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Sign of a slow Monday AM – just realized hyper-link in my new white paper ended up on “Mammoth Mountain Weather Forecast”.
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From Kottke:
The Planet Money podcast bought a toxic asset and is tracking what happens to the 2000+ mortgages that are bundled up into it over time.
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Altucher: Seven reasons why people hate me.
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Cool website: ETFReplay
In addition to adding some new funds, AlphaClone added the following features today:
View historical holdings
13G/D Alerts
More cool new features on the way!
Now that I have finished a few new research papers (make sure you sign up for the newsletter as readers will get the first look at any papers) I can end my Amazon book buying embargo.
What better book to end it with than Steve Drobny’s new title The Invisible Hands: Hedge Funds Off the Record – Rethinking Real Money? (Drobny’s first book was the very good Macro Market Wizards-esque Inside the House of Money, Revised and Updated: Top Hedge Fund Traders on Profiting in the Global Markets.)
Barton Biggs also has a new book coming out – A Hedge Fund Tale – although it seems like it is a Hedgehogging follow up?
Anything else good I’ve missed in the past few months?
Some of my favorite hedge funds below are going into the database this weekend.
Are there any funds not listed you would like to see on AlphaClone?
Abrams Capital
Delphi Mgmt
Mazama Capital
Whitebox Advisors
Carlo Cannell
JGE Capital Mgmt
MFP Investors
T2 Partners
Otter Creek
Owl Creek
Wintergreen
Brahman
Goodnow Investment Group
White Elm Capital
JAT Capital
Watershed Asset Mgmt
Karpus
Polygon
Lone Pine extension
I would probably pay $1000/year to subscribe to CXO.
A nice article on Perfect Sector Rotation – think about this when you hear someone yapping about where we are in the business cycle.
A reader emailed in asking about payout yield after my post the other day on the decline in companies reporting dividends (older post here). Here is a screen for Dow companies and their NPY.
Leading the list is The Travelers Companies (TRV) with a whopping 14% yield. Pretty nice chart too.
in this case it is the Lehman Range: (artist is Michael Najjar, HT: CC via Kottke)
that I am going to take for a spin over breakfast in the AM (HT: reader KJ)
“Out of Sample Equity Premium Prediction: Economic Fundamentals vs. Moving Average Rules”
Abstract
This paper analyzes the ability of both economic variables and moving-average rules to
forecast the monthly U.S. equity premium using out-of-sample tests for 1960–2008. Both
approaches provide statistically and economically significant out-of-sample forecasting gains,
which are concentrated in U.S. business-cycle recessions. Nevertheless, economic variables
and moving-average rules capture different sources of equity premium fluctuations: moving average
rules detect the decline in the average equity premium early in recessions, while economic
variables more readily pick up the rise in the average equity premium later in recessions.
When we simulate data with a habit-formation model characterized by time-varying return
volatility and risk aversion relating to business-cycle fluctuations, we find that this model
cannot fully account for the out-of-sample forecasting gains in the actual data evidenced by
economic variables and moving-average rules.
