Moody's Weekly Credit Outlook - 12-5-11

Moody's Weekly Credit Outlook 12-5-2011

Everybody Should Be Reading This Weekly Report from Moody's

Moody's Weekly Credit Outlook 10-31-2011

Bridgewater Thinks Hedge Funds Aren't Really Worth It

By Zach Kouwe

A recent note from Bridgewater Associates, the largest independent hedge fund in the world, seems to support the view that most hedge funds aren't worth the high fees investors pay. Bridgewater's evidence comes from the high correlation the majority of hedge funds have with the stock market, especially since the Financial Crisis. In hedge fund speak, most funds are not delivering alpha (a return that's better than the market overall.) 


Bridgewater's conclusion is fairly simple:

One of the primary appeals of hedge funds to institutional investors is the prospect of generating absolute returns. i.e. similar returns in up and down markets. However, we continue to see that hedge fund returns are dominated by beta, in particular, the return of equities. Since institutional investors already have a concentrated exposure in equities, hedge funds have not been a good diversifier.  

Bridgewater Daily Observations on Hedge Fund Returns and Beta

View from my rooftop on 9/11

Oaktree's Howard Marks on "What's Behind the Downturn"

By Zach Kouwe

If there's one investment guru that can make some sense of craziness in the markets over the last month it's Oaktree Capital Management's Chairman Howard Marks. Oaktree, of course, is the $80 billion alternative investment management firm that filed to go public in June. That should tell you a little something about Marks' outlook for the economy. In his new letter to clients, out tonight, Marks gives his views on what's behind the downturn. The full letter is embedded below, but here's some highlights:

My overall vision continues to be of an airplane rising weakly, perhaps overloaded or with an engine sputtering and thus having difficulty getting above “stall speed.” Its sluggishness constitutes a drag and introduces risk, but predicting deceleration is going too far . . . and not necessary to convince us to remain cautious in deciding on our course of action.

So, as is often the case, the swing we’ve had is more in psychology than in fundamentals. The positives of June are diminished, forgotten or eclipsed, and now investors are preoccupied with the negatives. As usual, the truth probably lies in between.

Thus right now I would be a better buyer, albeit in moderation since fundamentals still pose threats.  I feel the prosperity we enjoyed in the final decades of the twentieth century was considerably better than “normal,” and better than we’re likely to see up ahead. I’m not implying a world without growth or otherwise permanently negative. Just one without the prosperity, dynamism or positive feelings of past decades.

Howard Marks on What's Behind the Downturn 09-07-11

Please Support a New Documentary that Honors our Fallen Soldiers

By Zach Kouwe

My friend, Andrew McKay, is putting the finishing touches on a new, and very engaging, documentary about an emotional journey across America to honor service members killed in the Iraq War. The journey, called Run for the Fallen, was started by my fellow Hamilton College alum Jon Bellona following the death of his best friend and college roommate, 1st Lt. Michael J. Cleary.


Andrew and his fellow filmakers are trying to raise $15,000 by September 18 to finish editing, record an original sound track and pay for technical costs such as color-grading and sound-mixing. You can donate through Kickstarter via this link. (Over $9,500 has already been raised as of this writing) The filmmakers are hoping to hit the screen by Memorial Day 2012. Here's an early trailer:   

Wild Swings in the Stock Market - New Research

By Zach Kouwe

Mebane Faber of Cambria Investment Mangement (and one of my clients) has a new research report out that examines some myths around buy and hold investing. It's especially prescient since Mark Cuban, owner of the Dallas Maverick, said this weekend that buy and hold investing was a "crock of shit." Cambria has a different investing philosophy than Cuban, namely a trend following quantitative approach.

In this paper, Faber takes a look at big one-day moves in the stock market, sometimes called "Black Swans." One of his conclusions is that, most of these events (both up and down) occur during times when the market is already falling. Avoiding the big swings not only helps you sleep better at night, but can give you better returns as well. Read the paper for more info.

Cambria Quantitative Research Monthly August 2011

Gowanus Lounge Coverage

By Zach Kouwe

Here'e the Gowanus Lounge writing about my research for Peter Tanous and Jeff Cox for their book, called Debt, Deficits and the Demise of the American Economy. The interesting thing is that the post, which was written a few months ago, calls the thesis of the book "far-fetched" and "highly unlikely." But, if you look at what has happened to the stock market in the last two weeks, plus the debacle of the debt ceiling coupled with the downgrade by S&P, the scenario in the book doesn't look that out of whack.

Here's a video of Peter Tanous on Tech Ticker with Henry Blodget recently.

Zachery Kouwe

By Zach Kouwe

Zachery Kouwe is a public relations executive specializing in financial services companies, including hedge funds, private equity firms and asset management firms. He uses his expertise in finance and Wall Street to help clients meet their goals through innovative PR strategies. He is a former financial journalist, who worked as a reporter at The New York Post, The New York Times, and The Dow Jones Private Equity Analyst.

In addition to strategy and media relations, Zach Kouwe also performs business writing assignments such as Op-Eds, ghostwriting, white papers, fact checking, book research, annual reports and speeches.

Zach Kouwe recently performed research for Joe Nocera (of The New York Times) and Bethany McLean (Contributing Editor for Vanity Fair) on their best-selling new book, "All the Devils are Here: The Hidden History of the Financial Crisis." He also researched a forthcoming book by CNBC.com writer Jeff Cox and Peter J. Tanous  called "Debt, Deficits and the Demise of the American Economy."