El costo de la guerra: Cost of war

Finally__the_End_of_War____by_enricoagostoni

In short, far from “de-escalating,” the Crisis in Crimea is starting to look permanent — and indeed, may expand beyond the borders of Crimea. This bad news helped stocks on the S&P 500 and Dow Jones Industrial Average suffer their worst declines in nearly two months — and this could be only the beginning.

Two weeks ago, at the start of this crisis, we ran down five ways the conflict between Ukraine and Russia could affect your portfolio. Two weeks into the crisis, with new facts in hand, we’re back to update that advice with five more predictions. Here goes.

Manufacturing
Trade between Russia and the U.S. passed $38 billion in value last year, and much of that could be at risk if the Obama administration follows through on threats to punish Russia’s land-grab in Crimea with trade sanctions. Even worse for investors, Russia has promised to retaliate against such sanctions, potentially hurting U.S. companies that have made direct investments in the country.

Major U.S. manufacturers such as Ford (NYSE: F  ) and General Motors have invested more than $10 billion directly in Russia. Ford, for example, manufactures Focus and Mondeo automobiles at its plant in St. Petersburg and is in the process of building a new $274 million engine plant in the Russian region of Tatarstan. GM set up its first factory in St. Pete as well — a $300 million, 98,000-cars-annually assembly plant — and up until this crisis began, it was expanding its joint venture with AvtoVAZ in Togliatti.

Banking
One of the likeliest targets for U.S. trade sanctions would be cutting ties with Russian banks in an attempt to constrict Russia’s access to foreign capital. This holds immediate implications for banking giant Citigroup (NYSE: C  ) . The U.S. bank with the most exposure to the country, Citigroup serves more than 3,000 institutional customers in Russia, has a retail customer base of 1 million and operates 50 bank branches in a dozen Russian cities. Citigroup earns about $300 million annually in Russia — for now.

Oil and gas
Closer to Crimea proper, a consortium of companies including Italian energy producer Eni(NYSE: E  ) recently signed a $4 billion investment deal with Ukraine to develop underwater gas fields off the western coast of Crimea. A “production sharing agreement,” this deal was made with the Ukrainian government as a party, however. If Crimea is leaving Ukraine, the legal validity of the deal could be questioned — and Eni could lose its 50% stake in the project.

Steel — again
ArcelorMittal 
(NYSE: MT  ) is a bit trickier. Last time we looked at the stock, we mentioned how its operations might be disrupted by conflict in eastern Ukraine, hurting global steel supplies and driving up prices. Instead — the opposite may happen. Last week, Arcelor warned that while it’s still producing plenty of steel, steel usage in Ukraine has dropped like a rock, as companies delay construction projects to see how the conflict with Russia plays out.

Result: Arcelor’s steel is being diverted to international markets, potentially increasing supply and driving prices down. (Curiouser and curiouser, indeed.)

Military suppliers
Finally, we turn to the defense contractors. This week, Ukrainian leaders made impassioned pleas to the U.S. for military assistance. Asked to supply guns and ammo, the Obama administration agreed only to send food aid, fearing that sending weapons to Ukraine might offend Russia.

But as we saw with Arcelor, this situation is fluid. The U.S. has a history of providing surplus weaponry to bolster the militaries of allied nations — offering two dozen old F-16 fighter jets to Romania in 2010, for example, and sending 400 used M1A1 Abrams main battle tanks to Greece in 2011 — all free of charge.

But “free” isn’t always what it seems. In the F-16 deal, for example, Romania was expected to spend $1.3 billion upgrading its fighter jets to modern standards. That’s money in the bank forLockheed Martin (NYSE: LMT  ) . Potentially, if Russia fails to back down in Ukraine, we could soon see Congress approve similar sales of military hardware — to Ukraine, to Georgia (which has had issues with Russia in the past), and to other border states such as Estonia or Latvia, which also wish to strengthen their defenses.

The risk to investors? Shorting defense contractors in the middle of a new cold war.

ford-russia_large

 

En resumen , lejos de ” de- escalada “, la crisis en Crimea está empezando a parecer permanente – y, de hecho , puede expandirse más allá de las fronteras de Crimea. Esta mala noticia ayudó a las poblaciones en el S & P 500 y el Dow Jones Industrial Average sufren sus peores caídas en casi dos meses – y esto podría ser sólo el comienzo.

Hace dos semanas , en el inicio de esta crisis , nos encontramos a cinco formas en que el conflicto entre Ucrania y Rusia podría afectar a su cartera. Dos semanas después de la crisis, con nuevos hechos en la mano , estamos de vuelta para actualizar ese consejo con cinco predicciones más . Aquí va .

fabricación
El comercio entre Rusia y los EE.UU. aprobó $ 38 mil millones en valor el año pasado, y gran parte de que podría estar en riesgo si el gobierno de Obama sigue a través de amenazas de castigar a Rusia – apropiación de tierras en Crimea con sanciones comerciales. Peor aún para los inversores , Rusia ha prometido tomar represalias en contra de tales sanciones , lo que podría lastimar a las empresas estadounidenses que han realizado inversiones directas en el país.

Los principales fabricantes estadounidenses como Ford ( NYSE : F ) y General Motors han invertido más de $ 10 mil millones directamente en Rusia. Ford , por ejemplo , fabrica Focus y Mondeo automóviles en su planta de San Petersburgo y está en el proceso de construcción de un nuevo $ 274 millones la planta de motores en la región rusa de Tatarstán. GM estableció su primera fábrica en St. Pete , así – una planta de ensamblaje de $ 300.000.000 98000 -cars- anualmente – y hasta comenzó esta crisis, se estaba expandiendo su empresa conjunta con AvtoVAZ en Togliatti .

banca
Uno de los objetivos más probables para las sanciones comerciales de Estados Unidos estaría cortando los lazos con los bancos rusos en un intento de constreñir el acceso de Rusia al capital extranjero. Esto tiene implicaciones inmediatas para el gigante bancario Citigroup ( NYSE : C) . El banco de los EE.UU. con la mayor exposición al país , Citigroup sirve a más de 3.000 clientes institucionales en Rusia , tiene una base de clientes al por menor de 1 millón y opera 50 sucursales bancarias en una docena de ciudades rusas. Citigroup gana alrededor de $ 300 millones anuales en Rusia – por ahora.

Petróleo y gas
Más cerca de Crimea adecuada , un consorcio de compañías como productor de energía italiana Eni ( NYSE: E) ha firmado recientemente un acuerdo de $ 4 mil millones de inversión con Ucrania para desarrollar campos de gas bajo el agua frente a la costa occidental de la península de Crimea. Un “acuerdo de reparto de la producción , ” este acuerdo se hizo sin embargo con el gobierno de Ucrania como partido, . Si Crimea está dejando de Ucrania , la validez jurídica del acuerdo podría ser cuestionada – y Eni podría perder su participación del 50 % en el proyecto .

Acero – de nuevo
ArcelorMittal ( NYSE : MT) es un poco más complicado . La última vez que nos fijamos en la acción, le mencionó que sus operaciones podrían verse afectados por el conflicto en el este de Ucrania , afectando a los suministros de acero a nivel mundial y aumentando los precios . En lugar de ello – podría ocurrir lo contrario . La semana pasada, Arcelor advirtió que mientras aún está produciendo un montón de acero , el uso de acero en Ucrania ha caído como una roca, ya que las empresas retrasen los proyectos de construcción para ver cómo el conflicto con Rusia se desarrolla.

Resultado : acero de Arcelor se está desviando a los mercados internacionales , lo que podría aumentar la oferta y bajar los precios . ( Curioso y más curioso , por cierto. )

proveedores militares
Por último , nos volvemos a los contratistas de defensa . Esta semana , los líderes ucranianos hicieron súplicas apasionadas a los EE.UU. para la asistencia militar. Preguntado suministrar armas de fuego y munición, el gobierno de Obama estuvo de acuerdo sólo para enviar ayuda alimentaria , por temor a que el envío de armas a Ucrania podría ofender a Rusia.

Pero como hemos visto con Arcelor , esta situación es fluida . Los EE.UU. tiene una historia de proporcionar excedentes de armamento para reforzar los ejércitos de las naciones aliadas – ofreciendo dos docenas de antiguos F- 16 aviones de combate a Rumania en 2010, por ejemplo, y el envío de 400 carros de combate M1A1 Abrams utilizado a Grecia en el año 2011 – todos de forma gratuita .

Pero el “libre ” no es siempre lo que parece . En el acuerdo de F- 16, por ejemplo , se espera que Rumania gastar $ 1.3 mil millones de actualizar sus aviones de combate a los estándares modernos . Eso es dinero en el banco forLockheed Martin ( NYSE : LMT ) . Potencialmente, si Rusia no puede dar marcha atrás en Ucrania , pronto podríamos ver que el Congreso apruebe las ventas similares de equipos militares – a Ucrania, en Georgia (que ha tenido problemas con Rusia en el pasado) , y para otros estados fronterizos como Estonia o Letonia, que también desean fortalecer sus defensas.

El riesgo para los inversores? El cortocircuito de los contratistas de defensa en el medio de una nueva guerra fría.

 

 

Advertisements

Los nuevos reyes del Antiguo: David Tepper

2013 Earnings: $3.5 billion
Tepper has set a new standard for hedge fund managers. His track record has long been phenomenal, but since the financial crisis his returns have reached a whole new level. In 2013, the 56-year-old founder of Appaloosa Management outperformed the U.S. stock market and the vast majority of hedge fund managers, with his biggest fund posting net returns of more than 42%. Over the last five years, Tepper’s main hedge fund has generated annualized net returns of nearly 40%—and gross returns of some 50%. In what has almost become an annual tradition, Tepper gave back some cash to his investors at the end of the year. In 2013, Tepper’s Appaloosa celebrated its 20th anniversary by pledging $20 million to various charities. Tepper also gave $67 million to Carnegie Mellon University last year—adding to the $55 million he previously gave the university—and continued to support other causes like basic needs and education.

Appaloosa Management is an American hedge fund founded in 1993 by David Tepper and Jack Walton specializing in distressed debt.Appaloosa Management invests in public equity and fixed income markets around the world.

In 1993 David Tepper and Jack Walton founded Appaloosa Management, an employee owned hedge fund, in Chatham, New Jersey.[4][5] The firm through the 1990s was known as a junk bond investment boutique and through the 2000s a hedge fund.

2002 Conseco & Marconi Corp.

In the fourth quarter of 2002 Appaloosa Management returns were heavily a result of junk-bond and distressed debt bets in Conseco and Marconi Corp. that the market was bottoming out.

2007 Delphi

Assets under management in 2007 were $5.3 billion. The Financial Times reports the company has “attracted interest for its large ownership position in Delphi, the bankrupt car parts supplier, and its clashes on whether management has the shareholders best interests in mind or those of GM and the UAW.”

2008 financial crisis through 2011

Appaloosa survived the financial crisis of 2008 with relatively few investor redemption orders.

From 2009 to 2010 Appaloosa Management’s assets under management grew from $5 billion to $12 billion.

In November 2010 the New York Times reported total assets under management of $14 billion.

In 2010 it was reported that since 1993 Appaloosa Management had returned $12.4 billion to clients—ranking it sixth on a ranking of total returns to clients by managers since inception.

In 2011 the company was awarded the Institutional Hedge Fund Firm of the Year award.

In Sep 2011, a Delaware bankruptcy court found that Appaloosa Management is one of four hedge funds that had played a role in Washington Mutual’s restructuring which might have received confidential information that could have been used to trade improperly in the bank’s debt.

Investment Strategy

Appaloosa Management’s investments focus on undiversified concentrated investment positions.Appaloosa invests in the global public equity and fixed income markets with a focus on “equities and debt of distressed companies, bonds, exchange warrants, optionsfutures, notes, and junk bonds.” According to BusinessWeek, the firm’s client base consists of high net worth individuals, pension and profit sharing plans, corporations, foreign governments, foundations, universities, and other organizations.” Investors commit to a locked period of three years during which their withdrawals are limited to 25 percent of their total investment.

0x600

Palomino Fund

The Palomino Fund from its inception in 1995 to 1998 had a 25 percent return. After Russia defaulted, the fund lost 49 percent of its value between February to September 1998. The fund returned –26.7% percent in 2008 and 117.3 percent in 2009. The company was ranked by Bloomberg Markets as the top performing fund of any hedge fund manager managing over one billion dollars

source:businessweek

Banqueros Automáticos:The computers that run the stock market

Citadel Securities has quietly become one of the largest forces in U.S. stock trading.

quants-illo_2622703b

From the 35th floor of a downtown Chicago office tower, Citadel executes one out of every eight stock trades in the United States. At roughly 900 million shares a day, more stocks move through Citadel’s systems than the New York Stock Exchange, which trades roughly 700 million shares a day.

If you own a 401(k) or have ever used an online broker, your trades have almost certainly passed through Citadel.

The most notable thing about the firm’s trading floor is how eerily quiet it can be.

About 40 people “run” the trading floor, but they are simply overseeing computers that use algorithms to fill and route stock orders.

Related: High speed traders pay for an edge

130705144548-citadel-thumb-video-620x348

Welcome to the new world of trading: More and more, high speed computer programs are replacing thousands of floor brokers once seen running and yelling across the floor of the NYSE.

Citadel’s “floor” brokers don’t do a lot of running. They sit together behind rows of computer terminals, clicking away on keyboards to ensure the firm’s computers are operating correctly and are connected to all the right exchanges.

In essence, Citadel’s proprietary computer programs have become the new eyes, ears, and brains of the U.S. stock market.

About 20 programmers create the computer algorithms that decide how to execute each order, and what to send to public exchanges or so-called dark pools.

Dark pools may sound like the favorite haunts of Star Wars villains, but they are simply venues where buyers and sellers can submit bids without disclosing them to the public markets. Citadel operates a dark pool called Apogee out of its New York office.

Citadel’s programmers are constantly making adjustments as computers “learn” customer behavior to make the process more efficient.

“All the decisions are made by the computers,” Jamil Nazarali, Citadel’s head of electronic execution, told CNNMoney during an exclusive behind-the-scenes tour. “The people here are not making any decisions with respect to whether an order should be filled or at what price it should be filled. That’s all done in an automated way.”

aapl-today-620x459

Split second decisions: Citadel’s computers execute a buy or sell order nearly instantaneously.

When Citadel’s computers do not to fill an order internally, the trade is pushed along to one of 13 public exchanges or one of more than 20 dark pools.

By law, Citadel must match or give a better price than what’s been quoted on a public exchange, said Nazarali.

But some industry watchers question whether Citadel’s prescient computer programs are always giving customers the best price.

Nazarali says they do: “As a market maker, I have a regulatory obligation to fill all customers orders on my book before I trade.”

He said Citadel’s systems actually create an even playing field between high-speed traders and retail traders who place orders through brokers like TD Ameritrade (AMTD)because they all have access to the same technology.

The industry’s primary regulator, FINRA, recently asked some market makers and dark pool operators to provide information on how they fill trading orders. Regulators are worried about high-speed traders get an edge over other investors in certain trading venues. It’s unclear if Citadel was part of that group, and FINRA declined to comment.

Trading is definitely faster, but whether it’s better and cheaper for the average retail investor remains to be seen.

Principal regulador de la industria, FINRA, recientemente pidió a algunos creadores de mercado y operadores de piscinas oscuras para proporcionar información sobre cómo se llenan las órdenes de operaciones. Los reguladores están preocupados por los operadores de alta velocidad consiguen una ventaja sobre otros inversores en determinados centros de negociación. No está claro si la ciudadela era parte de ese grupo, y FINRA declinó hacer comentarios.

El comercio es definitivamente más rápido, pero si es mejor y más barato para el inversor minorista medio aún está por verse.

देवताओं और गोल्ड: Metacapital Mortgage Opportunities

io102sZISGIg

                                            Manager: Deepak Narula

Management Firm: Metacapital Management

Location: U.S.

Strategy: Mortgage-backed arbitrage

Assets, in billions: $1.5

YTD total return: 37.8%

2011 return: 23.6%

(Reuters) – Deepak Narula, one of the hedge fund industry’s best known mortgage bond traders, said he sees a much tougher year ahead for investors but sees opportunities in certain mortgage trades.

Next year will “be a more challenging year” than 2013 because of “much greater uncertainty around how the Fed will behave,” and because of lofty bond and equity valuations, Narula, the founder of $1.45 billion hedge fund Metacapital Management, said on Wednesday.

This year Narula’s main fund has struggled to produce gains, though an investor recently told Reuters the portfolio has been able to reduce losses in the last few months. However, the firm’s $240 million Rising Rates fund, launched in May, has climbed about 14 percent year-to-date.

Last year, Metacapital’s flagship fund soared more than 40 percent, as structured credit funds rose about 19 percent on averaged. “Absent some large shock to the system” that causes initial cheapening of assets “those returns are history,” Narula said.

Those funds have only risen about 8 percent on average this year.

Managers who invested in residential mortgage-backed securities throughout 2012 and the beginning of 2013 benefited mightily from the Federal Reserve’s efforts to keep interest rates low, which pushed up the prices of mortgage bonds.

eastern-states-overseas-highway-af

Deepak Narula has given us some sound advice – you want to be careful going against the mission of the Federal Reserve.

And, his hedge fund earned a 38 percent return last year, the number one hedge fund performer according to Bloomberg News.

“To revive the housing market, the Fed has thrown a lot of firepower at agency mortgage-backed securities. Policy makers have worked hard to let homeowners refinance. They’ve been clear that that’s their mission-and you want to be careful going against that mission.”

George Soros, who bet against the British pound in the 1990s and made millions of dollars, I’m sure, would agree.

In addition, three of the top five funds in the Bloomberg Markets list of top performing hedge funds also were investors in mortgage securities.

“Betting on mortgage securities outpaced every other strategy, with an average return of 20.2 percent against an industry average of just 1.3 percent,” states the Bloomberg report.

But, hedge funds are not the only ones that benefited from the Federal Reserve action. Check out these two posts: “Is it too late to get into the housing rebound?” and “Is it too late to get into the housing rebound? Part Two“.

Three cheers for saving the middle class!

Nothing seems to work better as a way to make money than to work with a government policy or program. Ask the people who started up Solyndra!

The major problem with betting against a government policy or program … don’t be too early.

Narula has not always been successful in playing the mortgage market. He started his fund Metacapital in 2002. He saw the danger in the market for subprime mortgages as early as 2005 and start shorting them. Subprime mortgages did tank, but not until three years later.

the-27-incredible-views-you-had-only-see-if-you-were-a-bird-1

In 2006 his fund had to return money to investors and in 2007 he had to close the fund. He was “right,” but then again, he was “wrong.”

As he states, “If you are too early, you are wrong.”

But, betting “with” government policy works on the upside as well.

Over the past fifty years or so, the federal government, supported by the Federal Reserve, created credit by the millions of dollars in order to keep unemployment at low levels and to foster home ownership for the middle class and below. We had a sustained period of “credit inflation.”

Three things happen in a period of credit inflation: people take on more and more risk; people build up more and more financial leverage; and people engage in financial innovation. The last fifty years is known for all three of these things happening.

And, during this period, more and more people went to work in the financial and more and more companies added financial subsidiaries. By the early2000s, a substantially greater percentage of Americans worked in the financial sector than ever before. And, many manufacturing companies, likeGeneral Electric (GE) and General Motors (GM), earned more than fifty percent of their profits from their financial subsidiaries.

The “mission” of the federal government and the Federal Reserve System was to provide the economy with high levels of employment and greater degrees of home ownership.

The mental attitude of the leaders of American finance and industry? Well, as summarized by Charles (Chuck) Prince, the CEO of Citigroup, “”As long as the music is playing, you’ve got to get up and dance.”

Those that left the dance floor “too soon” were “right” that things were getting too risky and might fall apart. But, as Narula said, “If you are too early, you are wrong.”

Your government creates opportunities to make money … and to make lots of it. The big money to earn will, however, not go to those that will help to reduce the imbalance in the income/wealth curve. As we have seen, the past fifty years of credit inflation have done more to create the imbalances that now exist than reduce them.

And, government “missions” will continue to do so in the future.

So, one way to make money is to determine what is the federal government or the Federal Reserve “mission” and bet “with” the mission. That is, find out what these people are trying to do and develop an investment strategy that “uses” this mission. We know that the federal government and the Federal Reserve, in their well-meaning way, will continue on with their policies for a long time.

The Federal Reserve says that short-term interest rates will remain low until 2015. Really?

George Soros can tell you that when a government positions itself in this way, opportunities exist.

But, remember what Narula said – to be too early is to be wrong. Also, if you try and get into the game too late or stick around the game for too long, you will be wrong.

Timing is important.

Three cheers for Deepak Narula!

Location Type Single Location
State of Incorporation New York
Annual Revenue Estimate 120000
Employees 2
SIC Code 6722, Management Investment Offices, Open-End
NAICS Code 525910, Open-End Investment Funds
Business Categories

黄金の太陽: The power of the solar technology etf TAN

EvergladesSunriseJune

Guggenheim Solar (TAN)

46.70 Down 0.56(1.18%) 4:00PM EST|After Hours : 46.10 Down 0.60 (1.28%) 7:11PM EST

Prev Close: 47.26
Open: 47.51
Bid: 46.00 x 200
Ask: 47.35 x 100
NAV¹: 46.95
Net Assets²: 383.58M
YTD Return(Mkt)²: 11.80%
Day’s Range: 45.88 – 47.78
52wk Range: 15.00 – 47.78
Volume: 1,036,528
Avg Vol (3m): 561,480
P/E (ttm)²: 17
Yield (ttm)²: 1.14

¹As of Feb 27, 2014

²As of Jan 31, 2014

The Guggenheim/MAC Global Solar Energy Index ETF seeks investment results that correspond generally to the performance, before the Fund’s fees and expenses, of an equity index called the MAC Global Solar Energy Index. The Fund will normally invest at least 90% of its total assets in common stock, American depositary receipts and global depositary receipts that comprise the Index. Guggenheim Advisors, LLC seeks a correlation over time of 0.95 or better between the Fund’s performance and the performance of the Index.

The Index is designed to track companies within the following business segments of the solar energy industry: companies that produce solar power equipment and products for end-users, companies that produce fabrication products (such as the equipment used by solar cell and module producers to manufacture solar power equipment) or services (such as companies specializing in the solar cell manufacturing or the provision of consulting services to solar cell and module producers) for solar power equipment producers, companies that supply raw materials or components to solar power equipment producers or integrators; companies that derive a significant portion of their business (measured in the manner set forth below under “Index Methodology” section) from solar power system sales, distribution, installation, integration or financing; and companies that specialize in selling electricity derived from solar power.

Source:

Yahoo

Seeking Alpha

<a href=”http://www.bloglovin.com/blog/11808371/?claim=82s4d8mtcvc”>Follow my blog with Bloglovin</a>

未来的国王:Top little known Hedge Funds

bridgewater-associates

Bridgewater manages approximately $150 billion in global investments for a wide array of institutional clients, including foreign governments and central banks, corporate and public pension funds, university endowments and charitable foundations. Approximately 1,400 people work at Bridgewater, which is based in Westport, Connecticut.

Founded in 1975 out of a two-bedroom apartment, Bridgewater remains an independent, employee-run organization. Throughout its 39-year history, Bridgewater has been recognized as a top-performing manager and an industry innovator, winning over 40 industry awards in the past five years alone. In both 2010 and 2011, Bridgewater ranked as the largest and best-performing hedge fund manager in the world and in both 2012 and 2013 Bridgewater was recognized for having earned its clients more than any other hedge fund in the history of the industry. Its clients and employees routinely give Bridgewater top satisfaction ratings in annual surveys.

81-victor-khosla-tied

Management Firm, Location: Blue Harbour Group, U.S.

Strategy: Activist

Assets (in billions): $1.3

YTD Total Return: +19.8%

2012 Return: +16.2%

Read more: http://www.businessinsider.com/30-most-successful-hedge-funds-of-2013-2014-1?op=1#ixzz2uaE3WWpw

Blue Harbour Group, L.P., a Registered Investment Advisor, is an investment manager focused on investing in undervalued U.S. public companies. Our mandate is to serve as a trusted lead investor, working in a collaborative and supportive manner with companies to identify initiatives to unlock and create shareholder value. We are long term investors with a multi-year investment horizon.

 

Clifton S. Robbins is the Chief Executive Officer and Portfolio Manager of Blue Harbour Group, L.P. and has been an investor for over twenty-five years. Prior to founding Blue Harbour Group in 2004, Mr. Robbins had been a Managing Member of General Atlantic Partners, LLC. Prior to joining General Atlantic Partners in 2000, Mr. Robbins had been a General Partner of Kohlberg Kravis Roberts & Co. which he joined in 1987. Mr. Robbins began his career in Mergers & Acquisitions at Morgan Stanley & Co. in 1980.

 

Mr. Robbins is complemented by a team of senior professionals responsible for generating investment ideas, developing relationships with management teams, performing research and due diligence on prospective investments, and monitoring portfolio investments. The team consists of professionals with experience ranging from six to fifteen years in the areas of corporate finance, private and public market investing.

blue_harbor

INVESTMENT STRATEGY

Blue Harbour’s approach to investing in the public markets is similar in many respects to private equity investors. In this regard, Blue Harbour’s investment approach seeks to add value by working collaboratively with company management to design and to implement strategic initiatives that unlock and create shareholder value. We focus on U.S. public companies that could create significant value by implementing strategic or financial change. Much like private equity investors, a critical component of our strategy is to support superior management teams who are committed to creating value for shareholders. Importantly, unlike private equity investors, Blue Harbour’s mandate to invest in publicly traded securities affords us the advantages of not paying control premiums nor are we subject to the illiquidity and leverage of private equity models.

  • We source investment opportunities primarily through publicly traded markets but can also buy equity stakes directly from the issuer if appropriate
  • We acquire a significant minority stake and become a lead shareholder
  • We acquire our positions at the public market price instead of by auctions
  • We collaborate with company management on critical strategic and financial issues

 HT Capital Management – Hong Kong

images

AP Images

Founded: 1997

AUM: $673.2 million

Manager: Ophelia Tong

  • Tong co-founded HT Capital with her husband Karl Hurst.

Strategies: Long Equity

  • HT’s two funds combined to return 6.08% last year.

 

Source:

http://www.htcapital.hk/

http://www.bwater.com/

Invest in a better world:SRI ( Socially Responsible Investing)

EvergladesSunriseJune

An investment that is considered socially responsible because of the nature of the business the company conducts. Common themes for socially responsible investments include avoiding investment in companies that produce or sell addictive substances (like alcohol, gambling and tobacco) and seeking out companies engaged in environmental sustainability and alternative energy/clean technology efforts.

Today, more than one out of every nine dollars under professional management in the United States—$3.74 trillion or more—is invested according to SRI strategies.
Individuals, institutions, investment companies, money managers and financial institutions apply SRI strategies across asset classes to promote stronger corporate social responsibility, build long-term value for companies and their stakeholders, and foster businesses, generate jobs or introduce products that will yield community and environmental benefits.  The institutions involved in SRI include corporations, universities, hospitals, foundations, insurance companies, public and private pension funds, nonprofit organizations and religious institutions.
What are the fastest growing areas of sustainable and responsible investing?
Alternative investments have become one of the most dynamic segments within the ESG investing space.  The number of alternative investment funds that consider environmental, social or corporate governance criteria has grown more rapidly than any of the other types of funds that US SIF Foundation tracked in its 2012 Report on Sustainable and Responsible Investing Trends in the United States. Alternative investment funds include social venture capital, double or triple bottom line private equity, hedge funds and property funds.  US SIF Foundation identified an estimated $132 billion in capital under the management of 301 alternative investment funds at the start of 2012, up dramatically from the $37.8 billion identified by US SIF Foundation in 177 funds just two years earlier, at the start of 2010.
Close behind in the rate of growth over the same two-year period were the assets of mutual funds that consider ESG criteria.  The number of such funds grew from 250 to 333, and their collective assets more than doubled—from $316 billion to $641 billion.

Social responsible investment

Social responsible investment

General Mills, Inc. (NYSE:GIS 3.10% Yield

General Mills is a manufacturer and marketer of branded consumer foods sold through retail stores. Co. is also a supplier of branded and unbranded food products to the foodservice and commercial baking industries. Co.’s major product categories in the U.S. are ready-to-eat cereals, refrigerated yogurt, ready-to-serve soup, dry dinners, shelf stable and frozen vegetables, refrigerated and frozen dough products, dessert and baking mixes, frozen pizza and pizza snacks, grain, fruit and savory snacks, and a range of organic products including granola bars, cereal, and soup. Co. has three operating segments: U.S. Retail; International; and Bakeries and Foodservice.

Equity Residential (NYSE:EQR 4.46% Yield

Equity Residential is a real estate investment trust focused on the acquisition, development and management of apartment properties. Co. is the general partner of, and at Dec 31 2012 owned an approximate 95.9% ownership interest in ERP Operating Limited Partnership (ERPOP), an Illinois limited partnership. All of Co.’s property ownership, development and related business operations are conducted through ERPOP and those entities/subsidiaries owned or controlled by ERPOP. As of Dec 31 2012, Co., directly or indirectly through investments in title holding entities, owned all or a portion of 403 properties located in 13 states and the District of Columbia consisting of 115,370 apartment units.

Eaton Corp plc (NYSE:ETN 2.35% Yield

Eaton is a power management company. Co. operates in six segments: Electrical Americas and Electrical Rest of World, which engaged in electrical components and systems; Cooper, which manufactures electrical products; Hydraulics, which provides hydraulics components, systems and services for industrial and mobile equipment; Aerospace, which supplies aerospace fuel, hydraulics and pneumatic systems for commercial and military use; Truck, which designs and manufactures a line of drivetrain and powertrain systems and components for commercial vehicles; and Automotive, which supplies automotive drivetrain and powertrain systems including components of cars, light trucks and commercial vehicles.

 HCP, Inc. (NYSE:HCP 5.76% Yield

HCP is a real estate investment trust engaged in investing primarily in real estate serving the healthcare industry. Co. acquires, develops, leases, manages and disposes of healthcare real estate, and provides financing to healthcare providers. Co.’s portfolio is comprised of investments in the following five healthcare segments: senior housing, post-acute/skilled nursing, life science, medical office and hospital. Co. makes investments within its healthcare segments using the following five investment products: properties under lease, debt investments, developments and redevelopments, investment management and investments in senior housing operations.

Sources:

http://www.etfchannel.com/

Gold found in the clouds

Invest in the cloud

Invest in cloud computing companies for long term golden returns.

Due to the strong demand for cheap software, cloud computing companies are enjoying great market momentum. This has attracted hundreds of competitors, from start-ups to traditional tech giants. At least 13 new players have gone public in the last 18 months, with most of them surpassing the $1 billion market cap milestone in a few months. But only cloud companies that innovate their product portfolio constantly, and build economic moats, will be able to survive the competitive landscape.

 

Consumers may be more familiar with cloud service offerings. This includes Google Drive, offered by Google (GOOG), SkyDrive by Microsoft (MSFT), Box.com, and DropBox.

Some of the other big players investors might want to start with are grouped below.

Networking [Read descriptions for all companies mentioned]

1. Cisco Systems, Inc. (CSCOEarningsAnalystsFinancials): The networking giant grew through acquisitions. The company is turning its focus on SDN. UBS argued that innovation in hardware will happen through SDN. Performance, latency, and resiliency are elements that will improve.

 

Software

Cloud computing supported virtualization initiatives, since hardware and storage became very inexpensive. A leader in this field:

2. VMware, Inc. (VMWEarningsAnalystsFinancials): Valued with a POP (price of profit) of 34 at the time of writing, shares dipped sharply below $100 after issuing a profit warning at the beginning of 2013.

 

In the software services industry:

3. Amazon.com Inc. (AMZNEarningsAnalystsFinancials): The book retailer, which now sells practically everything for consumers, also sells AWS (Amazon Web Services). This allows companies ranging from all sizes (small to large) to rent hosted computing and storage. The company is extending its reach by bundling content through Amazon Prime, and reaching more users by selling tablet device hardware almost at-cost.
4. Salesforce.com (CRMEarningsAnalystsFinancials): The high price of shares of Salesforce.com is supported by quarterly results that pleased investors. Last quarter (Q4), the company won many large deals. Deals between 7- and 8-figures rose by 50% compared to last year. The company plans to acquire companies aggressively. This will add to the already 3 million apps developed on Heroku and on the force.com site.
5. Oracle Corporation (ORCLEarningsAnalystsFinancials): benefits from the growth in cloud demand, although the most recent quarter was disappointing. Oracle experienced a drop in hardware product sales, which dropped 23% from last year. The company is introducing SPARC M5 and T5 servers, which the company claims is 10x faster than older models.
6. International Business Machines Corp. (IBMEarningsAnalystsFinancials): Big Blue benefits from selling consulting services for cloud solutions. IBM also makes Power 780 servers that compete with those offered by Oracle.

Computer Associates Technologies  (NASDAQ: CA  ) , Amazon.com (NASDAQ: AMZN  ) , and NetSuite (NYSE: N  )  are the best-performing stocks year to date in the cloud computing index. What makes each of these three companies special? How did they manage to build strong economic moats in a fierce landscape? More importantly, after experiencing more than a 40% increase in stock price, can they still be considered attractive investment opportunities?

 

Sources:

http://www.fool.com/

http://wire.kapitall.com/

Dead kings and worlds of Gold

2061-438879

 

Portfolio of a successful hedge fund Master Capital Management:

 http://www.nasdaq.com/quotes/institutional-portfolio/masters-capital-management-llc-72853

Mike Masters: The making of a maverick

01 SEP 2011 –

By Kit R. Roane

 

Mike Masters: I have a
Christian worldview
Photographs by Michael Rubenstein

Mike Masters, a six-and-a-half-foot former all-American swimmer, is used to pushing against the current. Over the past four years, he has repeatedly bucked his hedge fund brethren by calling for financial reforms and has laid into both investment banks and institutional investors for piling into commodity derivatives, which he believes have spiked prices and hammered the poor.

 

“I have a Christian worldview,” Masters says unapologetically of his Capitol Hill activities. “Investing is not just about efficiency, and not everything is an investment, even if it is theoretically uncorrelated. There are bigger ideas out there.”

But these days he’s battling a turbulent current of a different sort: declining hedge fund returns. The roughly $200 million he runs through Masters Capital Management has fallen by more than 12% through July 2011, compared with a gain of 2.20% in the AR U.S. Equity Index and a gain of 2.75% in the S&P 500.

Masters is by no means alone in what has been a tough year for even the most storied hedge fund managers. But the loss stands out for the Texas-born money manager, because over the past 16 years his financial prowess has generally matched his fine-tuned sense of social justice. Masters has produced annualized returns over the past 24 months of more than 80%, according to investors, compared with an S&P return of about 28% during the same period. Longtime investors have enjoyed a compound annual growth rate of about 29% since 1995. More remarkably, they have experienced only three down years.

Although Masters refuses to discuss fund returns, noting that Masters Capital Management works only with accredited investors, he admits that nothing comes easy. “It is not about home runs for us, as much as sometimes I wish it would be. It’s more about approach, and making singles and doubles, and repetition,” he explains. “To a certain extent, I think this business is a lot like the insurance business and other businesses that have to do with risk. If you are making high-probability decisions, you will make mistakes, but you will be successful over time. The trick is to make enough of these high-probability decisions.”

Masters, 45, doesn’t fit the mold of either a legislative firebrand or a hedge fund titan. He is a devout Catholic who is active in several charities. Cordial, if informal, he has an affinity for sockless loafers and eschews wearing a tie. Although a senator once called him “the most powerful guy in Washington” following one round of his testimony on Capitol Hill, he seems the antithesis of that as he politely excuses himself to return to his trading screens one hot Atlanta afternoon, a towering plate of Kentucky Fried Chicken balanced precariously in one hand.

His fund, the Marlin fund, is equally difficult to pin down. Run out of a well- appointed office suite across from a Johnny Rockets burger joint and named after a feisty sport fish, it focuses on what Masters calls catalyst trades.

In general, this means he looks for triggers that will move mispriced securities, usually highly liquid midcap and large-cap stocks and their options. But to do that successfully, Masters has gone far off the beaten path, digging deeply into behavioral finance. He once hired a former Central Intelligence Agency spook to help him understand competitive intelligence, and brought in three philosophy graduate students to suggest new ways of conceptualizing and organizing his trading system.

 

Mike Masters: We needed to evolve

Masters sees such pursuits as critical to his success. “Some funds spend a lot of their time on marketing and other aspects of the business, but for better or worse, we spend an inordinate amount of time on trying to understand why we do the things we do,” he says. “I think that has been the core of our success.”

 

The portfolio tends to be concentrated in 25 to 40 names, with no single name representing more than 10% of the total and no sector representing more than 30%. Masters generally turns over about 70% of the book within six months or less, with positions often being held only a matter of days. More than half of it is usually placed in listed options (long both puts and calls), so the portfolio can look quite different over time. For instance, Marathon Oil showed up among Masters’ largest holdings in March 2011 but was nowhere to be found in December 2010.

Trades can have a fundamental element, but nearly all of them are heavily influenced by Masters’ judgment about how other groups of market players (mutual funds, pension funds, hedge funds and the like) invest and how their movements in the market will affect securities.

This can be as simple as understanding that value investors tend to be less aggressive when buying securities than growth investors. “When you see that value-to-growth transition or growth-to-value transition, it will affect the price action,” Masters says.

But the trade is generally tied to how such homogeneous groups will react to some apparent or not-so-apparent event, from earnings announcements, updates and road shows, to end-of-quarter window dressing or signs of distress. In 2003, for instance, Masters made a slew of buys on what he calls the uncertainty trade. President George W. Bush was threatening war in Iraq, infecting the financial markets and the real economy with doubt. Masters’ view was that once the war started, whether or not the U.S. won, the uncertainty that was holding back everything from stock prices to business expansion would be removed. More precisely, he figured defensive stock groups would do poorly compared with more volatile names.

“We decided to make a pretty big bet, which actually worked well,” he says. Securities and Exchange Commission filings from the start of 2003 show Masters holding large option positions in the Amex Japan Index, Goldman Sachs, Intel, J.P. Morgan and United Parcel Service, among others. The S&P 500 index, after declining or flatlining through February of that year, took off after the U.S. declared war in March and gained more than 18% over the next six months.

Masters made a similar call toward the end of the credit crisis in 2009, buying airlines, financials and other beaten-down sectors, with the portfolio at the time showing a heavy slug of American Express, Bank of America, Wells Fargo, FedEx, MetLife, Prudential Financial, US Airways, Delta Air Lines, UAL, and iShares MSCI Emerging Markets Index Fund. It also contained other unloved companies, such as Temple-Inland, Louisiana-Pacific, MBIA, General Motors and Eastman Kodak.

This June, the fund followed a more typical behavioral trade, purchasing stocks in the belief that manager mandates would force mutual funds to put cash to work. That would drive a rally toward the end of the month, which underinvested hedge funds would chase. Quantitative programs, the theory went, would then add fuel to the fire. Masters says such situations are akin to one person buying a block of Exxon, causing others to scramble, and “then suddenly the market is up 10%.” The idea appears to have panned out, with the S&P 500 rising a little more than 3% over the last 10 days of June.

In 2010, such maneuvers helped Masters Capital return greater than 41%. However, Masters wasn’t crowing much in his midyear update to clients this time around. In the firm’s June 13 investor letter, Masters and his team noted their disappointment in the performance, saying the European debt crisis, continued fighting in Libya, and weakened domestic economic data had contributed to volatility in the stock market and led to both “weak trading results and negative attribution from our core portfolio positions.”

Masters responded by reducing his position in some longer-term holdings, such as Swift Transportation, because of concerns about the broader economy. That stock had been highlighted the previous quarter for improving business dynamics and fits within a general move by Masters, as he again brings in a few new investors, to find more core trades that take advantage of industrial shifts. He notes that such shifts have occurred in the railroad industry and are now occurring in the airline industry, as companies in both have cut back supply and realized “that a dollar in price is worth more than a dollar in volume.”

Performance-measuring schemes, he says, have turned too many hedge funds into short-term momentum investors, which may create new opportunities for his firm. “We have always had a sort of trading orientation,” he adds. “But if you want to know where most of the real alpha is, it is out a year or two.”

While that belief didn’t stop Masters from selling a bit of Swift and focusing on strategies to trade around second-quarter earnings reports, his investment letter made it clear that the fund would continue to watch that company’s progress “and allocate capital accordingly.”

This year is just a hiccup for Masters when compared with the volatility he and his investors navigated in 2008. The credit crisis and ensuing equity swoon, he says, “tested everybody’s belief that there was some objective value in the marketplace.”

According to Masters, his fund was flat through much of 2008, and he didn’t begin putting significant capital to work until October. But Masters was still early.

“What we missed in 2008 and 2009 was the aftermath of Madoff and what that would do to the fund-of-funds industry. We didn’t know it would be that severe in terms of the unwinds, and that really hurt us,” he says. “We stayed in our positions, although it was very painful.”

This led to pointed questions on investor calls. “He was in a lot of airline stocks at the time,” says John Kuck, who was Masters’ college roommate and an initial investor in his fund. “These things went from $4 to $2, so you can’t help but do a little armchair quarterbacking.”

But Masters didn’t shirk from his trades, say two investors. He got on the call, apologized for the volatility and noted that as the biggest shareholder, he was hurting more than anyone. Then he said that despite being early, the trades were solid and he was going to ride them out.

“As an investor, you might have doubted where he was going and his judgment. But he was able to trust his instinct and stick with some bets that were really hard,” says Kuck. “It got ugly. We went down about 50%. I think that his character led him through that. And the experience of going down 50% to—within 12 months—being up 90%, or net 70%, told me a lot about him. I had a lot of respect for Mike, not that I didn’t have it before, but his convictions were unquestionable.”

All of Masters’ losing years were followed by sharp upward reversals, with data showing him roaring back from a 2002 loss of 14.65% to an 80.57% gain in 2003. He answered the 2008 loss of 22.59% with a 69.21% gain in 2009. In each case he handily outstripped stock market rebounds.

“Mike has had some bad quarters, but he’s had a lot of good ones too,” notes Neal Allen, a co-founder of Invesco Capital Management, who placed part of his IRA with Masters in 1999 and says he’s always been impressed by Masters’ discipline and flexible approach. “There have been a lot of changes in the market, and Mike seems to have been able to adapt to the changes that have come along.”

Although investors say Masters started out charging no management fee, he now takes the standard 2% of assets under management. He charges a 20% performance fee on the first 35% return, 25% on any gain from 35% to 70%, and 30% of any gains over 70%. The fund carries a high-water mark and a hurdle rate of Libor (30-day, 12-month average). There is no gate; however, there is a one-year soft lockup, carrying a 2% penalty. Investors can redeem monthly with 30 days’ notice.

Masters grew up in Marietta, Ga., in a family where stock trading was a fluid conversation. His maternal grandmother, Cleo, had a margin account. His father, Burt, traded professionally for five years before obtaining an MBA from Emory University. He then worked as a consultant and entrepreneur in the food service industry and a variety of other fields.

Both Masters’ uncle Louie and uncle Larry were avid investors of the Graham and Dodd variety. While they favored a diversified portfolio of classics—such as Dixie Bearings and U. S. Steel—Masters’ father loved the short side, always telling his son that knowing when to sell was just as important as knowing when to buy.

The lesson stuck with Masters, who recalls that good-natured arguments about investing philosophy were common at the dinner table whenever one of his uncles was around. “My dad would always say my uncle was too conservative,” recalls Masters, “and my uncle would say my dad was too aggressive.”

The young Masters wasn’t destined to run a hedge fund, however. Growing up, he was interested most in athletics, and when he arrived at the University of Tennessee on a swimming scholarship, his ultimate goal was to become a physician.

The rigor required to attain that childhood dream became apparent a few years into college, and he ended up majoring in business. But swimming stayed with Masters. An all-American in the freestyle sprint for four years, Masters’ Olympic bid was cut short when he contracted mumps the summer before the Olympic trials.

By the time his Olympic hopes were dashed, Masters had begun seriously dating the woman who would later become his wife, Suzanne, whom he had met at a fraternity party. He decided to apply to Emory to get an MBA. When the school told him he needed some relevant work experience first, he used a neighborhood connection to get a job as a broker trainee. It was a bad fit. Masters and the brokerage parted ways shortly after he tried to unilaterally lower the commission structure for his clients so they could trade more actively without prohibitive cost. “I guess I was pretty naive,” he says.

The one thing Masters had enjoyed about the job was trading, and he says he was fairly good at it. So, in 1994, after discussing his situation with his father and Suzanne, the 28-year-old Masters decided to try to do it full-time. He wrote his initial approach on a Lotus spreadsheet, had his father help him come up with a prospectus, and built a piece of furniture in the garage designed to hold enough cathode-ray-tube trading screens to track about 200 stocks at a time. At first, Masters planned to trade stocks using a combination of market triggers and fundamental variables, such as cash flow, book value and the like. But “the ultimate conclusion I came to was, on the shorter time horizon, the only thing that matters is the catalyst, and that was the solution,” he says.

Masters’ timing was good. He launched at the cusp of a great bull market that would, by 2000, lead technology shares to dizzying heights. But he still needed to persuade investors that his strategy was predictable and sound. He was working with about $25,000 in personal capital at the time, had no track record and no fund. Undaunted, he began knocking on doors, pitching former customers and acquaintances. “Most folks would say, I’ll give you $25,000 or $50,000. The biggest single investment was $200,000,” he says, adding that most of the capital came from family members or wealthy individuals who probably gave him less money than they were likely to lose “playing golf on a Saturday.”

Rod Chamberlain, a retired salesman and builder of supercomputers, was introduced to Masters by some early investors from a Georgia moving company. He is among those who fondly recall Masters giving him the nascent pitch. “Right from the beginning, I felt like this guy could really accomplish what he said, that he wasn’t BS-ing,” says Chamberlain, 74, who invested $100,000 in June 1995.

By that time, Masters had raised $700,000 to start his fund. Trading out of a 100-square-foot room owned by a local brokerage, he quickly began posting eye-popping returns. In 1996, Masters returned just over 79%. He followed with a greater than 57% return in 1997, the year he moved his operation into its own 2,000-square-foot office just upstairs. Meanwhile, Masters’ winning streak continued to gain notice. By 1999, he had attracted about $300 million. In 2000, fund assets reached $500 million, and Jack Schwager came calling to interview Masters for his investment book series, Market Wizards, describing the hedge fund manager as so focused that he would physically lock himself in his trading room during market hours.

About the same time, with money pouring in, particularly from European funds of funds, Masters decided to pull up stakes and follow several other hedge funds to the Virgin Islands, attracted by the beneficial IRS tax treatment. (He relocated the fund back to Atlanta in the summer of 2010.)

The rapid fund inflows, which peaked in December 2001 at about $650 million, were a mixed blessing, because many of Masters’ new backers seemed to be chasing returns, with little interest in understanding his philosophy or his style of investing. “I felt like I was riding a rocket ship as assets were coming in, and the ride was fast enough for me,” says Masters, who was by then one of the largest traders of single-company stock options. “I was trying not to go crazy.”

The ride ended abruptly with the market cascade that began in March 2002. The hot money, says Adam Cooper, a partner in the firm, “pulled the rip cord.” By 2003, funds under management were down to just above $200 million. Masters stopped seeking new investors, and assets under management have remained south of $300 million pretty much ever since.

“Certainly one of the reasons why I have not been enthusiastic about raising capital is that most investors don’t have a high tolerance for pain, and when they should be investing, they often go the other way,” Masters says, adding that during this period, he was also wrestling with his underlying strategy of catalyst trading.

“We knew that things had changed. We could see it in our performance and in the fact that some things we were doing weren’t working the same way,” he says. “My view was that we needed to evolve, and I thought it would be good to hire some experts in epistemology to look at our process and our thought construction.”

Cooper called up Harvard, then Yale. Nobody returned his calls. At Columbia, they “thought I was selling insurance,” says Cooper. Then he reached out to NYU. He explained to the dean of the philosophy department that his firm was working on a trading strategy and wanted help with the philosophical underpinning first. Masters ended up hiring three graduate students from NYU for an initial six-month stint at the hedge fund’s St. Croix offices.

“We weren’t searching so much for answers about how one ought to trade, but were more focused on seeking clarification on what general principles underwrote Michael Masters’ trading strategies,” says Dr. Michael J. Raven, who was one of those graduate students and now teaches philosophy at the University of Victoria in Canada. He added that during the process, Masters showed a “raw curiosity” and “a sincere enthusiasm for reflecting critically on trading strategy.”

Masters also brought a greater behavioral bent to his work, sending Cooper off for months to cull and summarize research on sometimes arcane subjects such as cognitive bias and the effect of news on buying behavior. An offshoot of Masters’ research in this area led him to Capitol Hill in 2008.

After looking at fund flows and doing some calculations on oil demand, Masters wrote a note to Warren Mosler, an old friend and fellow hedge fund manager who runs III Offshore Advisors from the Virgin Islands, saying he believed pension funds and other “index speculators” were having an outsize effect on rising commodity prices. Cooper says Mosler passed the note to Connecticut senator Joseph Lieberman, who invited Masters to testify before the Senate.

Masters told the Senate that hundreds of billions in investment dollars entering the commodities futures markets had turned speculators into virtual hoarders, that this money was squeezing millions of U.S. consumers and could end up starving millions more of the world’s poor.

Many lawmakers struggling with rising commodity prices welcomed his testimony. At one hearing, Missouri senator Claire McCaskill even thanked Masters for providing a simple road map for puncturing oil prices, which she said lawmakers were under “incredible pressure” to reduce.

Since then, the effect of speculation on the price of commodities has been widely debated. While many experts think that speculation plays a role in creating excessive short-term price volatility, there is little consensus over whether an increase in speculation has altered longer-term price trends.

Masters was particularly effective in arguing for position limits and other regulatory changes to the commodities market because of his status in the financial community. “He had high ideals, and you don’t often associate such high ideals with hedge fund folk,” says Dave Andrews, a Holy Cross brother and a senior representative of Food & Water Watch, who calls Masters’ continuing leadership in the area “significant.”

However, not everyone thought Masters was being purely altruistic, with some critics noting that his fund held many airline and other stocks being battered by rising oil prices. (As of March 2011, Masters continued to hold several such positions.)

Others just blasted the economic reasoning underpinning his testimony. Paul Krugman, the Nobel Prize–winning economist and New York Times columnist, called it “just stupid,” while Michael Dunn, the outgoing Commodities Futures Trading commissioner, said recently that the position limits Masters advocated may be, at best, “a cure for a disease that does not exist or at worst, a placebo for one that does.”

Told of the criticism, Masters just shrugs as though he’s heard it all before, then leans back in his chair and patiently lays out his reasoning again. It is clear Masters sees little wisdom in the crowd, whether in Washington or on Wall Street, and he plans to keep making his bets accordingly. “It’s important to understand that the market is not God,” he says. “It isn’t perfect, and prices do get out of whack.” AR

http://www.hedgefundintelligence.com/Article/3205813/Ten-Years-of-Absolute-Return-Top-Funds-by-Strategy.html