World Beta Blog

In the 1% chance I have readers in either Telluride or Moab (or even less likely, along the way), drop me a line if you want to meetup the first week of July.

I’m also turning off the comments on the blog.  I don’t think it adds much value and it is a pain for me to monitor for spam.  I rarely participate in the conversations and often comments are left days/weeks/months after the original post.  If you strongly oppose that let me know.

If you have any questions or comments feel free to email me as always.

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What I’m reading:

Hedge Fund Rising Stars

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(Not so)SuperFund

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This new book by Kochard on pre-order looks like a Market Wizards style book for hedge fund investors -Top Hedge Fund Investors: Stories, Strategies, and Advice .

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Ivanhoff on Mo and Value

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Time lists their best blogs, and (not) surprisingly I haven’t heard of most of them.   Also not surprisingly there are not any finance/investing/economics blogs on the list.

There are some fun blogs on there though (although and after some review I am amazed they made any sort of best of list):

http://theoatmeal.com/comics/coffee

http://www.postsecret.com/

http://www.informationisbeautiful.net/visualizations/because-every-country-is-the-best-at-something/

If you didn’t see the press release, we are excited to announce that Cambria is filing to launch an actively managed global tactical asset allocation ETF.  We have to be pretty quiet for awhile during the registration period, but if you want to receive a red herring when it becomes available please email info@cambriainvestments.com with “Red Herring” in the subject line.

Press release here.

For those who are not familiar (according to the comments on the last post there are quite a few) with drawdowns, below is a chart of the long bond ETF that corresponds to the drawdown chart I posted.  Note:  The TLT chart is daily while the drawdown chart is monthly only data (the June 09 drawdown was more severe intra-month).

As you can see, an investor lost about 25% from the peak in Tbonds from 2009 – March 2010 before rallying significantly thereafter.

I hope that clears it up.

I did a post a year ago on the largest drawdown ever for US long term bonds.  Well, that has now been exceed with the 26% drawdown (monthly timeframe) in March.  That’s higher than even the inflation exploding 70s and 80s.  Charts below:

Jim Pallotta is getting ready to re-launch Raptor Global in July.  The fund once hit $11 billion and had returns of 14% over 15 years.

Interestingly enough, using AlphaClone to track the top 10 holdings of Tudor would have beaten the market by over 5% a year since 2000, including besting the S&P 500 7 out of 9 years (I’m excluding 2009/10 since he spun Raptor out in 2009).

Do you think he is launching the fund to coincide with the end of the NBA Finals (part owner of the Celtics)?

For those that thought I was going crazy for mentioning I was getting ready for a trip to Chicago next last Monday, my apologies.

I will be in Chicago for a conference on next Monday the 21st, drop me a line if you want to meetup Monday eve or Tuesday the 22nd.

The malware has been removed from the blog, only Google Chrome was picking it up – thanks for the heads up!

I was having dinner with a RIA in Malibu (David Kreinces of ETFPM) a couple weeks ago when the topic of fees came up.  We agreed that investors should pay very little for buy and hold portfolios.  In general, I think 25-50 bps is a fair fee especially if the advisor is tax harvesting the portfolio.  David however told me something that I have never heard of in the industry – he charges nothing.  His model is to manage core buy and hold portfolios for free, and to charge for his alpha portfolios.  (I have no benefits to mentioning this other than I think it is interesting and unusual.)

Having seen the new company Betterment get a ton of press for its new site (where it charges a whopping .9% fee for buy and hold accounts), I thought I would do a roundup of some of the buy and hold allocators out there and their fees.  If I missed any, or the fields are incorrect, please let me know and I will update the tables.  Pretty amazing the wide disparity, but the trend in general is – they charge too much!

(Note:  Covestor just updated their business model today and I haven’t had a chance to review yet.)

CLICK HERE TO ENLARGE

I was playing around with the data over on Shiller’s website the other day and thought I would post a few of the charts.  Nothing mind-blowing here, it just annoyed me how you always saw the results posted in 5 pt buckets (which are arbitrary) rather than in quartiles or deciles.  Below are the buckets, followed by the deciled, followed by a scatterplot.  It seems like there are three groupings, great returns up to about 13, then decent returns up to about 20, then crappy returns over 20.

I’ve written a bunch about mean reversion, most recently in May but also in my book.  One strategy is to look for asset classes that were down both two and three years ago (1,2, and 3 years ago is even better).  The median return from our study after down years two AND three years ago was 19% (vs ~12.66% for all observations). The median return after three down years in a row was 25.78%!

How would a portfolio of countries that were down two and three years ago be doing?  Pretty darn good (the world indexes are down around 5-10% depending on which you choose):

Some airplane reads:

Sovereign Risk: Beyond the Numbers – CreditSuisse

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Buy Write or Put Write:  An Active Portfolio to Strike it Right – Yang

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The Value of Seth Klarman – Absolute Returns