Thanks To Potomac Flacks
Potomac Flacks Has Moved!
Potomac Flacks readers: As of October 3, 2006, we've upgraded our site and moved from our blogspot address over to www.potomacflacks.com. Be sure to change your bookmarks...
Thanks To Potomac Flacks
Thanks To Potomac Flacks
Alternative investment?
Which alternatives are alternatives? Most diversified investment portfolios are effectively funds of funds so the main decision is WHO chooses the managers. Replacing long only with long short doesn't help unless skill is evident. People with rare talent go where incentives are best. Why risk YOUR money on "low cost" mediocrity? The best don't compete on fees.
Forecasting alpha and identifying good funds is hard but not impossible. After much intensive due diligence, predictive financial analytics and non-linear multifactor modeling I've found the key drivers for FUTURE superior performance are innovation, hard work, great teams, aligned interests and exclusive focus. Amazing how many "famous" funds fail on those criteria.
Value added alpha comes from selecting the right securities or the right managers. It's a similar process. I just look for new ideas and asymmetric payoffs. But conventional "wisdom" favors old products with low returns at high risk and little margin of safety. Despite investors needing consistent performance, passive pushers resist innovation and dispute after fee alpha even exists! Manager evolvability is a selectable trait.
I wouldn't mind were it not for the disastrous effect such high risk "wisdom" has on hard working peoples' retirement savings and institutions with fiduciary responsibilities. According to some economists it's luck but I do get most manager and security selection decisions correct. It's not rocket science. Just common sense, mathematical rigor and tracking the ENTIRE world.
Seek alpha, avoid beta. The persuit of perfection requires understanding over knowledge. I like shibumi investments. Improvize and adapt strategies to CHANGING alpha capture opportunity sets. I hire top teams to focus on making money and hedging risk NOT gathering assets. Hedge funds are called "replacement investments" in Japanese for good reason - traditional long only hasn't worked.
In Japan, like anywhere else, there's lots of inefficiencies for alpha capture. Why wouldn't you want "replacement investments" when bonds don't yield enough and stock "recoveries" notoriously give back gains? Dow 12,000 again is almost as boring as the many previous Nikkei 12,000s. I prefer manager skill than risky buy and hold. Constant improvement - kaizen - and continuous innovation - kakushin - are essential for absolute returns in bull AND bear markets. Warren Buffett is heavily short Nikkei puts. A bullish outlook on Japan which few BRKA watchers have followed or know about.
Luckily 2010 was good for my retirement plan. Not as great as the supposedly "difficult" 2008 or easy 2009 but still above required actuarial returns. Most external alpha vendors did better than +10% after fees - the minimum acceptable target. I directly manage a few special situations if I have an edge and the time to analyze properly. Alpha from emerging markets was a major contributor if only because volatility and mispricings are so prevalent.
As I expected a year ago, my VUPPS position delivered with Peru and Sri Lanka two of the strongest bull markets. Ukraine, Pakistan and Venezuela also did well. The long Colombia/short China, long Bangladesh/short Brazil and long Indonesia/short India trades beat the overhyped BRIC. Don't overweight BIG places; overweight the BEST opportunities.
My largest USA holding MSB went from 14 until by luck I sold near the high at 56. The second biggest BPT having been ignored after years of double digit dividends finally got attention and I reluctantly took profit at 122. Why waste time in SPY when stock picking is safer? Japan and China aren't sources of beta but fantastic for alpha. I love it when people outside their circle of competence say the places are about to implode. Watching those JGB and yen bears get trapped in short squeezes was lucrative. FXY for the yen but no ETF for the world's largest government bond market? Better to use JGB futures. Long new Japan/short old Japan positions like long Skymark Airlines 9204/short Japan Airlines 9205 did fine. Making 200% on the long and 120% on the short was even better than long Southwest LUV/short Northwest a few years ago. Yes you CAN make more than 100% on shorts.
Just weeks into 2011 and reminders from Tunisia and Egypt EGPT that security selection with innovative research and risk management is the BEST route to absolute returns. And short selling whatever groupthink says is "hot". There's lots of money to be made in China but it won't come from a "passive" China index fund. Maybe it's better to border BRICs than be a BRIC. Not surprisingly Mongolia was the top market in 2010 - all those natural resources sandwiched between Russia and China. I just bought my first Laos stock EDL, years after the initial visit. Of course I also made a few mistakes last year, which is why TRUE diversification is important. Small losses are the cost of doing business. Large drawdowns mean there is something very wrong.
Semantic arbitrage? Despite the name of this blog, in my professional life I long ago stopped using the term "hedge fund" when referring to skill-based strategies. Even "alternative investments" has become a catch-all for any manager not doing long only relative return stocks and bonds. Alpha is available from many sources in public and private markets, in numerous countries over many time horizons. In assessing a fund I strip out any betas and luck to calculate the proportion of returns due to the manager. Skill is persistent, luck isn't. I now use "innovative strategies" as a better term than the overused moniker "absolute return". That was almost as misleading as "market neutral". Every fund I look at that says it's market neutral ISN'T.
All good strategies innovate to keep performing. Alpha is extracting returns out of other market participants. Beta is too risky and unreliable to gamble on for the long term. The best managers make use of the latest financial products and drive the invention of new ones. Style drift is not bad; it may even be preferable in good manager. Paulson & Co. was a merger arbitrage fund but now trades everything from CDOs to commodities. Berkshire Hathaway is wrongly considered a buy and hold shop but Warren Buffett has used alternative strategies and hybrid securities for 60 years. Convertible bond arbitrage, derivatives trading, value investing, event driven were all "new" once. Any style not adaptable to changing market regimes is obsolete. Abnormal returns require keeping ahead of copycats.
There is still massive scope for innovation in portfolio construction and wealth management. Many investors have processes that fail to reap the full benefits of modern investment methods. New strategies and financial products are being developed all the time. Blaming credit derivatives for the recession and GFC - Global Financial Crisis - is like blaming match manufacturers when a house burns down. John Paulson's net worth rose by billion in 2010. Warren Buffett was "paid" billion from eating his own cooking and making clients far more. Their strategies have little in common other than thorough security analysis and working harder than the "crowd". How "hard" does a passive "manager" work? Be proactive not reactive. And definitely not passive.
Variant perception drives alpha. But portfolio optimization remains mired in the beta driven suboptimal mean variance world of Markowitz and Sharpe. Policy asset allocation still dominates while others pay it little attention and INSTEAD focus on security selection and strategy diversification. John Paulson, Warren Buffett and many others aim to put 100% capital to work in good opportunities. They are not concerned with 60% in stocks and 40% in bonds. I find this unrewarded, unhedged faith in asset class returns rather than skill-based strategies strange. Currently it appears we are in a bull market but that will change soon enough. Passive funds end up getting crushed.
Good managers that can make money in any conditions have to be incentivized for the hassle of accepting outside capital and undergoing exhaustive evaluation and monitoring. It's great for investors that so many still make their services available for low fees of 2 and 20 and often cheaper. The crowd fears "exotic markets" and "frontier strategies" but smart investors enjoy spending the returns the mainstream miss. Forget about alternative investments and focus on "innovative investments". Construct robust portfolios that GROW and PRESERVE capital no matter what happens. That takes hard work and it's worth paying for. Invigorate return streams with replacement investments.
Thanks To Hedge fund
Forecasting alpha and identifying good funds is hard but not impossible. After much intensive due diligence, predictive financial analytics and non-linear multifactor modeling I've found the key drivers for FUTURE superior performance are innovation, hard work, great teams, aligned interests and exclusive focus. Amazing how many "famous" funds fail on those criteria.
Value added alpha comes from selecting the right securities or the right managers. It's a similar process. I just look for new ideas and asymmetric payoffs. But conventional "wisdom" favors old products with low returns at high risk and little margin of safety. Despite investors needing consistent performance, passive pushers resist innovation and dispute after fee alpha even exists! Manager evolvability is a selectable trait.
I wouldn't mind were it not for the disastrous effect such high risk "wisdom" has on hard working peoples' retirement savings and institutions with fiduciary responsibilities. According to some economists it's luck but I do get most manager and security selection decisions correct. It's not rocket science. Just common sense, mathematical rigor and tracking the ENTIRE world.
Seek alpha, avoid beta. The persuit of perfection requires understanding over knowledge. I like shibumi investments. Improvize and adapt strategies to CHANGING alpha capture opportunity sets. I hire top teams to focus on making money and hedging risk NOT gathering assets. Hedge funds are called "replacement investments" in Japanese for good reason - traditional long only hasn't worked.
In Japan, like anywhere else, there's lots of inefficiencies for alpha capture. Why wouldn't you want "replacement investments" when bonds don't yield enough and stock "recoveries" notoriously give back gains? Dow 12,000 again is almost as boring as the many previous Nikkei 12,000s. I prefer manager skill than risky buy and hold. Constant improvement - kaizen - and continuous innovation - kakushin - are essential for absolute returns in bull AND bear markets. Warren Buffett is heavily short Nikkei puts. A bullish outlook on Japan which few BRKA watchers have followed or know about.
Luckily 2010 was good for my retirement plan. Not as great as the supposedly "difficult" 2008 or easy 2009 but still above required actuarial returns. Most external alpha vendors did better than +10% after fees - the minimum acceptable target. I directly manage a few special situations if I have an edge and the time to analyze properly. Alpha from emerging markets was a major contributor if only because volatility and mispricings are so prevalent.
As I expected a year ago, my VUPPS position delivered with Peru and Sri Lanka two of the strongest bull markets. Ukraine, Pakistan and Venezuela also did well. The long Colombia/short China, long Bangladesh/short Brazil and long Indonesia/short India trades beat the overhyped BRIC. Don't overweight BIG places; overweight the BEST opportunities.
My largest USA holding MSB went from 14 until by luck I sold near the high at 56. The second biggest BPT having been ignored after years of double digit dividends finally got attention and I reluctantly took profit at 122. Why waste time in SPY when stock picking is safer? Japan and China aren't sources of beta but fantastic for alpha. I love it when people outside their circle of competence say the places are about to implode. Watching those JGB and yen bears get trapped in short squeezes was lucrative. FXY for the yen but no ETF for the world's largest government bond market? Better to use JGB futures. Long new Japan/short old Japan positions like long Skymark Airlines 9204/short Japan Airlines 9205 did fine. Making 200% on the long and 120% on the short was even better than long Southwest LUV/short Northwest a few years ago. Yes you CAN make more than 100% on shorts.
Just weeks into 2011 and reminders from Tunisia and Egypt EGPT that security selection with innovative research and risk management is the BEST route to absolute returns. And short selling whatever groupthink says is "hot". There's lots of money to be made in China but it won't come from a "passive" China index fund. Maybe it's better to border BRICs than be a BRIC. Not surprisingly Mongolia was the top market in 2010 - all those natural resources sandwiched between Russia and China. I just bought my first Laos stock EDL, years after the initial visit. Of course I also made a few mistakes last year, which is why TRUE diversification is important. Small losses are the cost of doing business. Large drawdowns mean there is something very wrong.
Semantic arbitrage? Despite the name of this blog, in my professional life I long ago stopped using the term "hedge fund" when referring to skill-based strategies. Even "alternative investments" has become a catch-all for any manager not doing long only relative return stocks and bonds. Alpha is available from many sources in public and private markets, in numerous countries over many time horizons. In assessing a fund I strip out any betas and luck to calculate the proportion of returns due to the manager. Skill is persistent, luck isn't. I now use "innovative strategies" as a better term than the overused moniker "absolute return". That was almost as misleading as "market neutral". Every fund I look at that says it's market neutral ISN'T.
All good strategies innovate to keep performing. Alpha is extracting returns out of other market participants. Beta is too risky and unreliable to gamble on for the long term. The best managers make use of the latest financial products and drive the invention of new ones. Style drift is not bad; it may even be preferable in good manager. Paulson & Co. was a merger arbitrage fund but now trades everything from CDOs to commodities. Berkshire Hathaway is wrongly considered a buy and hold shop but Warren Buffett has used alternative strategies and hybrid securities for 60 years. Convertible bond arbitrage, derivatives trading, value investing, event driven were all "new" once. Any style not adaptable to changing market regimes is obsolete. Abnormal returns require keeping ahead of copycats.
There is still massive scope for innovation in portfolio construction and wealth management. Many investors have processes that fail to reap the full benefits of modern investment methods. New strategies and financial products are being developed all the time. Blaming credit derivatives for the recession and GFC - Global Financial Crisis - is like blaming match manufacturers when a house burns down. John Paulson's net worth rose by billion in 2010. Warren Buffett was "paid" billion from eating his own cooking and making clients far more. Their strategies have little in common other than thorough security analysis and working harder than the "crowd". How "hard" does a passive "manager" work? Be proactive not reactive. And definitely not passive.
Variant perception drives alpha. But portfolio optimization remains mired in the beta driven suboptimal mean variance world of Markowitz and Sharpe. Policy asset allocation still dominates while others pay it little attention and INSTEAD focus on security selection and strategy diversification. John Paulson, Warren Buffett and many others aim to put 100% capital to work in good opportunities. They are not concerned with 60% in stocks and 40% in bonds. I find this unrewarded, unhedged faith in asset class returns rather than skill-based strategies strange. Currently it appears we are in a bull market but that will change soon enough. Passive funds end up getting crushed.
Good managers that can make money in any conditions have to be incentivized for the hassle of accepting outside capital and undergoing exhaustive evaluation and monitoring. It's great for investors that so many still make their services available for low fees of 2 and 20 and often cheaper. The crowd fears "exotic markets" and "frontier strategies" but smart investors enjoy spending the returns the mainstream miss. Forget about alternative investments and focus on "innovative investments". Construct robust portfolios that GROW and PRESERVE capital no matter what happens. That takes hard work and it's worth paying for. Invigorate return streams with replacement investments.
by Veryan Allen. Copyright 
Thanks To Hedge fund
US Mint Reduces Prices for Silver Numismatic Products
The United States Mint has resumed sales for previously suspended silver numismatic products, with some at lower prices. An array of silver products had been suspended on September 26, 2011, following a sharp decline in the market price of silver.
Yesterday, sales of the 2010 and 2011 Silver Proof Sets and America the Beautiful Silver Proof Sets had resumed at the prices previously in effect.
Today, sales of the 2011 Proof Silver Eagle, 2011-W Uncirculated Silver Eagle, and America the Beautiful Five Ounce Silver Uncirculated Coins have resumed. These products reflect price decreases of .50 or .00 per ounce of silver content. A summary of the old price, the new price, and the change is included in the table below.
| Old Price | New Price | Change | |
| 2011 Proof Silver Eagle | 68.45 | 58.95 | -9.50 |
| 2011-W Unc Silver Eagle | 60.45 | 50.95 | -9.50 |
| ATB 5 oz. Silver Unc Coins | 279.95 | 229.95 | -50.00 |
I believe this is the first time that the US Mint has reduced the prices of silver numismatic products during the course of an offering.
On the other hand, they have increased prices of silver products during an offering. Most recently this took place for the 2011 Proof Silver Eagle, which had its price raised from .95 to .45 in early September. The decrease effective today, brings the price below the original price.
Thanks To Mint News Blog
Health Ranger Launches "Valley of Longevity" Shampoo - 98% Organic and 100% Fragrance-Free
(NaturalNews) For years, I've tried to find a truly natural shampoo that I could feel good about using and recommending to family, friends and NaturalNews readers. It's been a virtually impossible task: Many of the so-called "natural" shampoo products sold today are loaded with fragrance, Sodium Lauryl Sulfate (SLS) or questionable preservative chemicals. This is true even with many "organic" brands (some of which aren't really organic, of course).
Those aren't the kind of things I want to be putting on my hair (and scalp), and I'm willing to venture you feel the same way about it. Why is it so difficult to find a good quality, truly natural, fragrance-free shampoo sold at a reasonable price?
I decided to work on this problem myself. With the help of a couple of remarkable product formulators in the natural products industry (who are long-time followers of superfoods and living foods themselves), we've been able to come up with an a really solid shampoo formula using absolutely nothing artificial:
• No parabens
• No SLS (sodium lauryl sulfate) or other "hidden" forms of SLS
• No fragrance chemicals
• No chemical preservatives
• No sudsing chemicals
• No harsh chemicals that destroy hair fibers
• No petroleum byproducts
• No testing on animals (of course!)
We went all out on this formula, working on it with our formulators for months, sourcing everything organic that we could find. The result? Our shampoo is 98% organic and 100% natural. (It's not yet certified organic, nor USDA Organic. We've just begun that process and hope to receive those certifications in the future...)
What's in the 2% that's non-organic? Both guar gum and Kosher vegetable glycerin are not available in organic forms (because these aren't ingredients commonly made with pesticides anyway). Everything else is 100% organic.
Check out these remarkable ingredients yourself:
Our natural shampoo ingredients:
Purified Water, Saponified organic oils of Cocos Nucifera (Coconut Oil), Organic Helianthus Annuus (Sunflower), and Organic Castor Seed, Kosher Vegetable Glycerin, Guar Gum, Panthenol (Vitamin B5), Organic Equisetum Arvense (Horsetail/Silica), Organic Urtica Dioica (Nettle), Organic Astragalus Membranacus (Astragalus), Organic Coriandrum Sativum (Cilantro), Triticum Vulgare (Wheat Germ Oil), Pelargonium Gravolens (Geranium Essential Oil), Organic Rosmarinus Officinalis (Rosemary), Organic Matricaria Recutita (Chamomile), Organic Aloe Barbadensis Leaf (Aloe), Citric Acid, Rosemary Seed Extract.
As you can readily tell yourself, this formula is absolutely loaded with herbs and nutrients that support and nourish healthy hair: Horsetail, Nettle, Geranium oil, Aloe, Coconut Oil and much more. And our only "preservative" is rosemary seed extract - a natural inhibitor of bacterial growth, made by Mother Nature!
Beware of false "organic" shampoo products
In my five years as the editor of NaturalNews, I've tried hundreds of different hair care and body care products. There are some real gems in the industry, such as Karen Adler's Toothsoap company (www.Toothsoap.com), which also offers a "Hair Soap" shampoo that's truly natural. But overall, I've been totally let down by the so-called "natural" products industry when it comes to shampoo.
Those aren't the kind of things I want to be putting on my hair (and scalp), and I'm willing to venture you feel the same way about it. Why is it so difficult to find a good quality, truly natural, fragrance-free shampoo sold at a reasonable price?
I decided to work on this problem myself. With the help of a couple of remarkable product formulators in the natural products industry (who are long-time followers of superfoods and living foods themselves), we've been able to come up with an a really solid shampoo formula using absolutely nothing artificial:
• No parabens
• No SLS (sodium lauryl sulfate) or other "hidden" forms of SLS
• No fragrance chemicals
• No chemical preservatives
• No sudsing chemicals
• No harsh chemicals that destroy hair fibers
• No petroleum byproducts
• No testing on animals (of course!)
We went all out on this formula, working on it with our formulators for months, sourcing everything organic that we could find. The result? Our shampoo is 98% organic and 100% natural. (It's not yet certified organic, nor USDA Organic. We've just begun that process and hope to receive those certifications in the future...)
What's in the 2% that's non-organic? Both guar gum and Kosher vegetable glycerin are not available in organic forms (because these aren't ingredients commonly made with pesticides anyway). Everything else is 100% organic.
Check out these remarkable ingredients yourself:
Our natural shampoo ingredients:
Purified Water, Saponified organic oils of Cocos Nucifera (Coconut Oil), Organic Helianthus Annuus (Sunflower), and Organic Castor Seed, Kosher Vegetable Glycerin, Guar Gum, Panthenol (Vitamin B5), Organic Equisetum Arvense (Horsetail/Silica), Organic Urtica Dioica (Nettle), Organic Astragalus Membranacus (Astragalus), Organic Coriandrum Sativum (Cilantro), Triticum Vulgare (Wheat Germ Oil), Pelargonium Gravolens (Geranium Essential Oil), Organic Rosmarinus Officinalis (Rosemary), Organic Matricaria Recutita (Chamomile), Organic Aloe Barbadensis Leaf (Aloe), Citric Acid, Rosemary Seed Extract.
As you can readily tell yourself, this formula is absolutely loaded with herbs and nutrients that support and nourish healthy hair: Horsetail, Nettle, Geranium oil, Aloe, Coconut Oil and much more. And our only "preservative" is rosemary seed extract - a natural inhibitor of bacterial growth, made by Mother Nature!
Beware of false "organic" shampoo products
In my five years as the editor of NaturalNews, I've tried hundreds of different hair care and body care products. There are some real gems in the industry, such as Karen Adler's Toothsoap company (www.Toothsoap.com), which also offers a "Hair Soap" shampoo that's truly natural. But overall, I've been totally let down by the so-called "natural" products industry when it comes to shampoo.
A few comments about this 3-0 team
Did you notice that the Giants are 3-0? Nice. Hmm, let's see who they beat.
a) the Redskins, who BARELY BEAT the Rams (0-3) 9-7 and then proceeded to lose to the Detroit Lions! So this is a 1-2 Redskin team that has barely escaped after facing teams that are 1-5. Not impressive.
b) the Dallas Cowboys, who beat the TB Bucs (0-3) and barely beat the Carolina Panthers (0-3). If Steve Smith does not cut off his route in Q4, Newman does not get that pick 6 and the Panthers can potentially (not likely, but possibly) march down the field to win the game. In Jerry's Palace. In Dallas.
c) the TB Bucs (0-3), who beat nobody.
This is not the Giants fault that they have not faced greatness thus far. And it is not the Giants fault that the teams they have faced have not faced greatness thus far either.
All the Giants can be right now is 3-0. WHICH IS PRECISELY WHAT THEY ARE. We simply have to recognize that this 3-0 team we are rooting for has not yet played a very good football team yet. We as fans must be sober and recognize that our team has a lot ahead.
Playing TB, KC and OAK is paradise for a team that needs to heal and come together. On the job training for guys like Rouse and CC Brown. Work Study for guys like Bruce Johnson. It's a shame that guys like Nicks and Sintim (OUR #1 and #2 picks, for heaven's sake!) have been out! What an oppty to get snaps.
Without showing too much disrespect for the Chiefs and Raiders, these next two games can be preseason warmups for the team if they do not look past them. Or else, yes, in THIS CASE, they will be trap games. Take care of business. Improve. Get healthy. And get ready for tougher opponents now by simply executing fundamentals better every game. Today Francesa called the Giants an "elite team." Maybe. In due time. Enjoy it all, one week at a time. I love Kansas City Barbeque.
Thanks To ULTIMATENYG
a) the Redskins, who BARELY BEAT the Rams (0-3) 9-7 and then proceeded to lose to the Detroit Lions! So this is a 1-2 Redskin team that has barely escaped after facing teams that are 1-5. Not impressive.
b) the Dallas Cowboys, who beat the TB Bucs (0-3) and barely beat the Carolina Panthers (0-3). If Steve Smith does not cut off his route in Q4, Newman does not get that pick 6 and the Panthers can potentially (not likely, but possibly) march down the field to win the game. In Jerry's Palace. In Dallas.
c) the TB Bucs (0-3), who beat nobody.
This is not the Giants fault that they have not faced greatness thus far. And it is not the Giants fault that the teams they have faced have not faced greatness thus far either.
All the Giants can be right now is 3-0. WHICH IS PRECISELY WHAT THEY ARE. We simply have to recognize that this 3-0 team we are rooting for has not yet played a very good football team yet. We as fans must be sober and recognize that our team has a lot ahead.
Playing TB, KC and OAK is paradise for a team that needs to heal and come together. On the job training for guys like Rouse and CC Brown. Work Study for guys like Bruce Johnson. It's a shame that guys like Nicks and Sintim (OUR #1 and #2 picks, for heaven's sake!) have been out! What an oppty to get snaps.
Without showing too much disrespect for the Chiefs and Raiders, these next two games can be preseason warmups for the team if they do not look past them. Or else, yes, in THIS CASE, they will be trap games. Take care of business. Improve. Get healthy. And get ready for tougher opponents now by simply executing fundamentals better every game. Today Francesa called the Giants an "elite team." Maybe. In due time. Enjoy it all, one week at a time. I love Kansas City Barbeque.
Thanks To ULTIMATENYG
New York in 1941
A small selection of shots from the Charles W. Cushman Photograph collection. These are all from New York, some from the 1940s and some from the 1960s. It's an amazing collection of photography, theres some great shots of London in the 60s as well.
Thanks To The Sell! Sell! Blog
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