Hedge fund manager Ackman says markets too complacent about the coronavirus

Founder of Pershing Square, hedge fund manager Bill Ackman speaking on Tuesday at the Financial Times’ Dealmakers conference

  • markets once again have become too complacent about the coronavirus.
  • is hedging his equity exposure with insurance against corporate defaults
  • “We’re in a treacherous time generally and what’s fascinating is the same bet we put on eight months ago is available on the same terms as if there had never been a fire and on the probability that the world is going to be fine.”
(Ackman referring to his similar trade earlier in the year that paid off big time).
FT link is here for mote (may be gated)
(This pic for a while back)
Founder of Pershing Square, hedge fund manager Bill Ackman speaking on Tuesday at the Financial Times’ Dealmakers conference

What is the Most Expensive Investing Book?

The most expensive investing and stock trading book is Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor, which you can pick up a new copy of on Amazon (AMZN) for $1,749.00. The book was written by Seth Klarman, the successful founder and president of the Baupost Group, a Boston-based hedge fund. The book has a rating of four stars based on customer reviews and was published by HarperCollins in 1991.

Book Review :Risk Management in Trading -by Davis Edwards

It is a commonplace that risk management is critical to trading success. What constitutes good risk management, however, is anything but commonplace knowledge. Was VaR the number that killed us, as Pablo Triana claimed, or is it a useful, perhaps even indispensable, tool? Should risk management teams have their separate turf or should they be integrated with the trading desks? And what do you have to know to be a risk manager?
Davis W. Edwards addresses all of these questions, with particular emphasis on the third, in Risk Management in Trading: Techniques to Drive Profitability of Hedge Funds and Trading Desks (Wiley, 2014). The book is a useful self-study guide for those who aspire to become risk managers; each chapter ends with a set of questions to test the reader’s knowledge, and there is an answer key at the back of the book. It also goes a long way toward satisfying the curiosity of those who want to know just what it is that risk managers really do. It does not, however, directly address the concerns of the individual trader who wants to incorporate sound risk management principles into his business model.
After three preliminary chapters (on trading and hedge funds, financial markets, and financial mathematics) Edwards gets to the heart of the matter. He discusses backtesting and trade forensics; mark-to-market accounting; value-at-risk; hedging; options, Greeks, and non-linear risks; and credit value adjustments (CVA).
To give you a better sense of the level of the book—and so you can test your own skills—here are a few questions from the quizzes.


Super Rich: The Greed Game

The luxurious lifestyle of those at the top of the world of finance inspires awe, disgust, and ambition. With the mind boggling salaries of the hedge fund traders in the millions and even hundreds of millions of dollars, it’s no wonder people are growing curious about how they made their money.

Robert Peston, the BBC’s Business Editor, talks with investment bankers, hedge fund managers, and top managers from private equity firms on how the super rich have made their money. It offers an eye opening look into how the big earners operate, and some of the potential consequences of their greed driven pursuit of more and more money and success. 

Investors Poured $19 Billion Into Hedge Funds in August

Hedge-fundHedge funds had nearly $20 billion pour into their coffers last month, as investors flocked back amid revived market optimism.

Hedge funds booked inflows of $19.6 billion in August, according to Total hedge fund assets rose 2.56 percent, or $47.09 billion, to hit $1.886 trillion in August, the report said.

The influx of investments made August the third month in four that inflows outweighed outflows, said.

Go to Report from Hedge »

Learn To Love Uncertainty

It is often said that markets hate uncertainty and it is true. We do live and trade in uncertain times. But, as traders and investors, we must all learn to love and appreciate uncertainty. With uncertainty, also brings opportunity. Understanding this concept is so very important and learning how to profit from uncertainty consistently is going to make a critical difference between your success and failure.

Traders learn through experience the importance of examining and evaluating the markets through placing percentages on various future market scenarios. For example, at the hedge fund I worked at last week, every morning traders assemble for a 30 minute premarket meeting where everyone at the firm works closely together to outline the various potential scenarios for the market that day and then place specific odds on what they think is most likely to occur and why. One trader every day is in charge of diagramming out the different market scenarios on a whiteboard which resembles a flow chart so that the firm has a structured and easy to follow game plan. That game plan is also copied and stored so that the firm can later review it to learn and prepare in future days. In fact, at the end of every trading day they have another meeting to review the game plan and what went right and wrong and why.

By having the plan in place with various market scenarios outlined and positions to profit from those scenarios, uncertainty is no longer a factor. In fact, traders learn to love uncertainty because uncertain market conditions tend to favor those who are the most prepared to handle anything and everything Mr. Market could throw their way.

When the market does something outside of that original plan (it doesn’t happen as often as you might think), there is always a Plan B, Plan C, and so on with a number of preconfigured trading ideas to profit if the market moved in a specific manner different than the most likely scenario. By having this planned structure in place, everyone can then focus on price action and trading setups as they occur instead of flying by the seat of their pants or, even worse, finding themselves held hostage or paralyzed by the ticker.

I had the distinct privilege of looking through the archive of firm’s game plans for the past year and was amazed by how well the firm positioned itself according to the plan AND more importantly how it handled itself when the market did something unusual. In fact, just reviewing past game plans would be incredibly useful as a teaching mechanism for new traders who have little understanding of how the pros plan their work and work their plan. If you’re like me, you’ll begin to respect the other side of the trade much more than you probably do already.

As you might imagine, the process of formulating a game plan based on setting percentage odds for various scenarios was very interesting and useful for me to watch and participate in. It also stressed how important it is to have a plan, but at the same time be flexible enough to adjust as market conditions change. I usually spend at least an hour of prep time before every trading day, but after last week’s experience I will be doing more prep than before. That’s how important I think this kind of exercise can be!

So, the question becomes, are you adequately prepared every trading day? In working with many traders over the years, most are not as prepared as I saw with my very own eyes last week. In fact, given the firm’s results compared with other traders I know, I have good reason to think that kind of high-level preparation frequently can separate the winners from the losers.

Yes, it is true that we call can get lucky (every trade in theory has a 50% chance of working out, correct?), but over time the market will remove that luck factor and your success will be determined primarily on consistency and how you plan and deal with uncertainty in the markets. If you spend time every morning engaged in developing your own plan, I think you’re bound to see steady and significant improvement. As Sun Tzu once said, “every battle is won before it is ever fought” and that’s true for those who engage in doing battle with the market in such uncertain times.

Enjoy ( Must Read )

Paul Singer

From Forbes:

Coming off a huge debt deal with Argentina, hedge fund billionaire Paul Singer’s advise is to be wary of expert advice. “The important turning points in markets are never identified with precision in advance by ‘experts’ and policymakers. This lack of foresight is not surprising, because markets and the course of the economy are not model-able scientific phenomena but rather are examples of mass human behavior, which are never predictable with anything like precision,” says Singer. “But what is surprising is that even the most sophisticated investors, traders and commentators continue to rely on predictions issued by those who have no record of success at such forecasts.”


A great quote

I’m sure every trader has run into some kind of negativity from know-it-all chodes who just don’t get what this subject is about – it goes something along the lines of “What good does it actually do? You are just stealing other peoples money?” blah blah *yawn* blah….

Here’s a great quote from a book I’m reading “Hedge Fund Edge” that demolishes their complaints:

“Principle 7: Develop a Love and Respect for Trading, Free Markets, and Individual Liberty and Initiative.

Profits are just the gravy. When they test a group of traders, one of the traits that almost all successful traders and investors share is a deep understanding of how trading and investing is part of the process that allows humankind to progress. Even day-traders provide critical liquidity that allows others to hedge, companies to raise capital, and investors to invest with limited risk. Stock selection allows investors to become second-level venture capital firms, with their demand helping provide access to financing in areas where the people need capital most. The more you understand the remarkable way in which freedom and free association work to produce economic gain and real progress for humankind from new innovations and technologies, the more likely you are to feel a strong sense of purpose at being a part of such an incredible system. And the stronger your sense that your efforts are creating something good that is bigger than yourself, the more committed, enriched, excited, and innovative you will become.”

… so put that in your pipe and smoke it.

Daiwa to launch 'Trump-related' mutual fund

Daiwa Asset Management is set to start operating a mutual fund that invests in stocks related to U.S. President-elect Donald Trump’s infrastructure investment policy. Daiwa will launch the product on Tuesday.

The open-end mutual fund — the first of its kind in Japan since Trump’s election victory in November 2016 — is likely to be made available to retail investors by the end of the month.

 The U.S. infrastructure builder equity fund, which invests in U.S. companies, will quantify how much each stock will benefit from Trump’s infrastructure policy, based on criteria such as sales ratio in the U.S. and the degree of obsolescence of the target infrastructure. The details of the portfolio will be determined by how much share prices are undervalued and how competitive the companies are.

The portfolio, comprising 30-50 companies — mostly in the construction, transport and materials sectors — will be adjusted as appropriate as Trump’s policy takes form.

Trump has pledged to spend $1 trillion to overhaul the country’s aging infrastructure over the next decade.

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