Friday, 22 November 2013

Debacle between Hedge Fund Titans on Herbalife is getting ludicrous

Bill Ackman just appeared on Bloomberg TV on his short position of Herbalife. Head over here for the full interview.

Here's the succinct points on 7 Hallmarks of a pyramid scheme by SEC and Ackman says it exhibits all 7:
1) emphasis on recruiting
2) promises of high returns in short period
3) easy money or passive income
4) buy-in required
5) complex commission structure
6) no genuine product or service
7) no demonstrated sales revenue

***Update as of Nov 25th 2013: Poll results as shown***

This Herbalife trade has been the most high profile trade/investment to date. Ackman on the short side (he has change the structure of his trade from short stocks to buying put options with target of 0; and if the company were to be taken private he will restructure his trade to CDS).

On the other side of his short trade are the legendary hedge fund titans: Carl Icahn, George Soros (who used to have money managed by Ackman but have yanked it out), Stanley Druckenmiller, William Stiritz, Kyle Bass, and Dan Loeb (profited out of the position).

Read more here: Articles by Hedgie
Will Bill Ackman be eventually right on his short trade? free polls 

Debunking the Causality between pre-Great Depression and Now (Chart)

The market participants must be on the edge now given market charting all time high. Analysts tend to over analyze rather than acting in a rational manner.
So without further ado, let's debunk the myths. i) Correlation does not always equal causation but it does provide an insight into investors' sentiment/mirror its behaviour over time ii) My previous article had posit however that we may be transitioning into a secular bull market.

1) Dan Greenhaus of BTIG (@danBTIG) includes this chart in his latest nightly email. It shows the current market aligned with the market in the days before the Depression.

Read more here: Articles by Hedgie

How Paulson and Other Hedgies Have Been Hoodwinked to 'The Gold Trade' - An Alternate View

Most hedgies will declare “inflation” is on the rise and it is worth it to own gold as portfolio diversification has almost thrown in the towel by now and moved on. Recall how Paulson lost $736 million in Q2, which raises questions: How did he manage to make the greatest trade ever yet not continue his winning streak again thereafter? (As of the recent quarter though he had outperformed his peers.)

No other hedgies run the world’s greatest hedge fund than Ben Bernanke. There are a few schools of thought that i) inflation will rise thus compelling almost every money manager to chase for yields ii) inflation will not see an uptick too soon since there is a slack in productivity and excess capacity in production

Witness the inflation chart here (Inflation print at 1.2% as of September 2013):

Read more here: Articles by Hedgie

Bloomberg: Appaloosa's Tepper Says Stock Markets Not in Bubble (Interview)

Video: Appaloosa's Tepper Says Stock Markets Not in Bubble

Following my previous article: Is this the beginning of a secular bull market?
David Tepper has made another appearance on Bloomberg and opined that the market is NOT in a bubble.

Tepper is the highest paid hedge fund manager in 2012 and he is known for making sound market calls.

Key takeaways:
1) Market is not in a bubble. He uses S&P and Nasdaq Forward PE multiple to illustrate his point. Below chart shows PE multiple (not forward) of S&P500 which has rallied from 17x (1995) to 31x (2000) pre internet bubble. Now post GFC 2008, the market's PE has been in range bound between 10-18x; still well below implied PE multiple of 25x.

Read more here: Articles by Hedgie

Is this the beginning of a secular bull market?

"The Market Can Remain Irrational Longer Than You Can Remain Solvent”. Every pundit is worried about the impending crash or the QE taper talk hounds airtime needlessly. Let’s look the facts and take a vote here:
Is this the beginning of a secular bull market? free polls 

It will be interesting to see the poll results to gauge investors’ sentiment.

First off, what’s the definition of secular market? A secular market is “one where a market is driven market driven by forces that could be in place for many years, causing the price of a particular investment or asset class to rise or fall over a long period of time. In a secular bull market, strong investor sentiment drives prices higher, as there are more net buyers than sellers. In a secular bear market, weak sentiment causes selling pressure over an extended period of time”.

Read more here: Articles by Hedgie