Friday, November 21, 2014

Are Central Banks Panicking?

Koh Gui Qing and Jason Subler of Reuters report, China surprises with interest rate cut to spur growth:
China cut interest rates unexpectedly on Friday, stepping up efforts to support the world's second-biggest economy as it heads towards its slowest expansion in nearly a quarter of a century.

The cut, the first in over two years, came as factory growth has stalled and the property market, long a pillar of growth, has remained weak, dragging on broader activity and curbing demand for everything from furniture to cement and steel.

"It's comes right after China's disappointing PMI figures showing that manufacturing activity is getting dangerously close to contraction," said Alexandre Baradez, chief market analyst at IG in Paris, referring to a private factory survey this week which added to worries about slowing global growth.

"China's central bank is now following the path of the Fed, the ECB and the BoJ. Central banks are really driving markets," he said.

Just a few weeks ago, Chinese President Xi Jinping had assured global business leaders that the risks faced by China's economy were "not so scary" and the government was confident it could head off the dangers.

In a speech to chief executives at the Asia Pacific Economic Cooperation (APEC) CEO Summit, Xi said even if China's economy were to grow 7 percent, that would still rank it at the forefront of the world's economies.

The People's Bank of China said it was cutting one-year benchmark lending rates by 40 basis points to 5.6 percent. It lowered one-year benchmark deposit rates by less - just 25 basis points. The changes take effect from Saturday.

"The problem of difficult financing, costly financing remains glaring in the real economy," the PBOC said.


The central bank also took a step to free up deposit rates, allowing banks to pay depositors 1.2 times the benchmark level, up from 1.1 times previously.

"They are cutting rates and liberalising rates at the same time so that the stimulus won't be so damaging," said Li Huiyong, an economist at Shenyin and Wanguo Securities.

Recent data showed bank lending tumbled in October and money supply growth cooled, raising fears of a sharper economic slowdown and prompting calls for more stimulus measures, including cutting interest rates.

But many analysts had expected the central bank to hold off on cutting interest rates for now, as authorities have opted instead for measures like more fiscal spending, as they also try to balance the need to reform the economy.

Chinese leaders have also repeatedly stressed they would tolerate somewhat slower growth as long as the jobs market remained resilient.

More recently, the central bank injected cash into the system in the form of short-term loans to banks in an attempt to keep down borrowing costs and encourage more lending even as bad loans increase.

But a growing number of economists said those moves were not translating into either lower financing costs or more credit for cash-starved Chinese companies.

Analysts expressed doubts over whether the impact of the rate cut would find its way into the real economy, either, as the cooling economy makes lenders more risk-averse. Some predicted multiple cuts would be needed well into next year.

Hurt by the cooling property sector, erratic export demand and slackening domestic investment growth, China's economy is seen posting its weakest annual growth in 24 years this year at 7.4 percent.

China's rate move comes after the Bank of Japan sprang a surprise on Oct. 31 by dramatically increasing the pace of its money creation, while European Central Bank President Mario Draghi shifted gear on Friday and threw the door wide open to quantitative easing in the euro zone.

"There is definitely more concern around about the state of the global economy than there was a few months ago, you see that not just when you talk about Europe," British finance minister George Osborne told an audience of business leaders in London on Friday.
Reuters also reports world shares surged on Friday as China surprised markets with its first interest rate cut in more than two years and the European Central Bank's Mario Draghi threw the door wide open to full scale money printing:
European shares and other growth sensitive commodities all leapt as China's move to cut rates to 5.6 percent gave markets a welcome lift after a week where data has shown its giant economy heading for its worst year in almost quarter of a century.

It came as ECB head Draghi spoke in Frankfurt of his determination to use more aggressive measures such as large scale asset purchases -longhand for money printing- to ensure the euro zone did not slump into a new crisis.

"We will continue to meet our responsibility - we will do what we must to raise inflation and inflation expectations as fast as possible," Draghi said in a heavyweight speech.

"If on its current trajectory our policy is not effective enough to achieve this ... we would step up the pressure and broaden even more the channels through which we intervene."

Both the euro zone and China have been lagging the momentum of the United States, stimulus-driven Japan and faster-growing Britain over the last month, but a ramping up of the ECB's rhetoric and Beijing's actions will stoke hopes of a turnaround.

Germany's DAX, France's CAC and pan-regional Euro STOXX 50 were all up between 0.8 and 1 percent by 1230 GMT, leaving them on course for weekly gains of 4.5 percent, 2 percent and 2.4 percent respectively.

"The two together, (China cut, Draghi speech) suggest to me there is still a lot of hard policy work to be done next year," said Neil Williams, chief economist at fund manager Hermes in London.

Beijing's move also carried a hint of an escalating currency tussle in Asia.

A sharp fall in the yen this year as Tokyo has introduced wave after wave of stimulus, has been putting the squeeze on China's exporters due to a loss of cost advantage.

Japanese Finance Minister Taro Aso said on Friday that the yen's fall over the past week had been "too rapid". It was one of the strongest warnings against a weak yen since the aggressive stimulus efforts began two years ago and saw the currency leap off a 7-year low to 117.98.


Currency markets everywhere were shaken into life by China's move and the signals coming out of Frankfurt.

The euro fell sharply, slicing its way back down through $1.25 to $1.2430, while 10-year Italian government bond yields, which have been one of the biggest beneficiaries since Draghi took charge of the ECB in 2011, hit a new all-time low.

Hopes that China's growth will now quicken provided a shot in the arm for the Australian dollar, often used as a more liquid proxy for Chinese investments, and likewise lifted other key commodity currencies.

The rate cut also added to a positive mood among oil traders, many of whom expect the Organization of the Petroleum Exporting Countries to trim production, at what looks to be a landmark meeting in Vienna on Nov. 27.

Oil jumped 2 percent, or $1.75 to $81.07 a barrel as it surged towards its first weekly rise since mid-September in its biggest daily rise in a month.


Global investor sentiment was also underpinned by record finishes by the Dow Jones industrial average and S&P 500 on Thursday after a spate of upbeat U.S. data that offset the recent signs of spreading weakness in China and Europe.

Wall Street was expected to add a further 0.6 percent when trading resumes with the day's upbeat sentiment expected to more than make up for a lack major data.

In emerging markets, Russia's rouble, which is closely tied to the fortunes of oil, was heading for its first weekly rise since early September as the pressure it has been under eased.

Copper and gold also got a lift, with the red metal up 1 percent and spot gold climbing to $1,197 an ounce as traders cheered the prospect of more global stimulus.

"Commodity prices have risen across the board," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank. There is hope that this step (lower Chinese interest rates) will lift commodities demand."
So what's going on here? China's surprise interest rate cut comes a few weeks after the BoJ's Halloween surprise. Global stock and commodity markets are rejoicing after this latest central bank "surprise" but I'd be very careful here because after the initial knee-jerk reaction, reality will settle in.

And the reality is that apart from the United States, the world economy is very weak, with many big economies teetering on recession. Nowhere is this more alarming than in Europe where shrinking incomes are wreaking havoc on periphery and core economies:
Seven years after the financial crisis first struck in 2007, Europe continues to teeter on the brink of a recession. Many economies in the region are yet to regain the levels of per capita income they saw in 2007. For some, incomes are much lower than what they were seven years ago. The accompanying chart shows those European economies that continue to see a fall in per capita incomes, computed in their national currencies at constant prices, compared with 2007. The data have been taken from the International Monetary Fund’s World Economic Outlook database, updated in October.

Greece has been the worst affected, but it is not only southern Europe that has been hit. Incomes in Finland, Denmark, Luxembourg and Norway are still considerably below where they were in 2007. While there’s much talk of a recovery in the UK, per capita incomes there are still below their 2007 level (click on image below).

The weakness in Europe will have several consequences. The obvious one is exports to the region will suffer. The frailty of the euro zone will ensure that monetary policy at the European Central Bank will remain easy for a long time and the ultra-low interest rates there will be a source of liquidity for global markets. Further, with incomes not rising, fresh investments in Europe are likely to be delayed. As a result, funds are likely to move out of Europe to greener pastures, to markets such as India.

The long stagnation in Europe is already having social repercussions, with mainstream parties losing ground to populists of the right and the left. But the stark question that confronts Europe today is: in an era of globalization and footloose capital, is it possible for its welfare states to survive? Or, is the welfare state a hoary relic of a bygone Keynesian age?
Indeed, I visited the epicenter of the euro crisis in September and saw deflation in the form of much lower wages and pensions. I also witnessed how the bloated public sector keeps thriving, weighing Greece down. And this isn't just a Greek problem.

Importantly, as long as Europeans keep putting off major structural reforms, their deflation crisis will just deepen and potentially spread throughout the world, including the United States. Everyone is underestimating the risk of deflation coming to America but I think global central banks are terrified of this prospect and will do anything they can to fight deflationary headwinds spreading throughout the world.

The big question remains will the titanic battle over deflation sink bonds? I don't see it and apparently neither does George Soros who just handed Bill Gross at Janus $500 million of his money to manage.
And if deflation does eventually come to America, all those global pension funds flocking to riskier investments are going to get clobbered, wishing they were more invested in good old bonds.

But for now, markets are rejoicing, hoping for the best. You're seeing a major relief rally going on in energy (XLE) and materials (XLB). Beaten down sectors like coal (KOL), gold (GLD) and oil services (OIH) and especially stocks like Freeport-McMoRan (FCX), Cliffs Natural Resources (CLF), Teck Resources (TCK), Petrobras (PBR) and Vale (VALE) are all rallying hard off their 52-week lows on Friday as investors think the latest central bank moves are all positive for the global recovery.

I haven't changed my outlook at all. I think short-sellers are licking their chops and using this latest relief rally to add to their short positions in these sectors and stocks. Be very careful here, don't get carried away and don't read more into China's surprise interest rate cut than the fact that they're very worried. Moreover, we can be on the precipice of a major currency war which will propel the mighty greenback higher and commodity and oil prices lower.

Deflation will be the final nail in the coffin. I had an interesting exchange earlier this week with an astute private equity investor who shared these comments with me on Yves Smith's latest rant against private equity and Blackstone:
Some truths mixed in with rants which could apply to any and all facets of the investment industry. If you don't like Blackstone, don't put money with them. PE even in its golden age did less well across the board then generally perceived, but has played its role reasonably well in dealing with the unpleasant reality of mature companies in mature economies. The bigger picture involves risks around deflation, China, quiet changes to the ISDA contracts that govern counterparties, etc. these things matter more.
I want you all to keep this in mind as global markets rejoice after the latest "surprise" move by a central bank.  

Having said this, the deflation scenario I have in mind is still a few years off. This is why I told my readers to plunge into stocks in mid October but to choose their stocks and sectors very carefully:
I continue to favor small caps (IWM), technology (QQQ) and biotech shares (IBB), including smaller biotechs (XBI) that have sold off lately. These are extremely volatile and risky but there is a great secular story here that will play out for many years to come. 

Keep an eye on companies like Acadia Pharmaceuticals (ACAD), Avanir Pharmaceuticals (AVNR), Idera Pharmaceuticals (IDRA), Biocryst Pharmaceuticals (BCRX), Progenics Pharmaceuticals (PGNX), Seattle Genetics (SGEN), Threshold Pharmaceuticals (THLD), TG Therapeutics (TGTX),  XOMA Corp (XOMA). I would take advantage of the latest selloff to add to some of these biotechs. I also like Twitter (TWTR) and see a bright future for this social media stock.

Are there other stocks I like at these levels? Yes but I'm waiting to see what top funds bought and sold in Q3 before delving into more stock specific ideas. All I can say is tread carefully here and know when to buy the dips and more importantly, when to sell the rips.
This is still very much a stock picker's market which is why I track top funds' quarterly activity very closely.  I've added quite a few new funds to Q3 activity, including  John Lykouretzos' Hoplite Capital Management and David Gallo's Valinor Management, and will keep adding more to this list.

Please use this information carefully and remember to donate and subscribe to my blog via the PayPal buttons at the top right-hand side. Too many institutions that regularly read my comments have yet to subscribe but others have recognized the value and work that goes into writing these comments. I thank all of you who have subscribed and donated and continue to support my efforts.

Below, Bob Stokes of Elliot Wave International discusses why central bankers fear deflation. Also, Richard Bernstein, Richard Bernstein Advisors, discusses the ECB's decision to expand its balance sheet and why he is "confused" by Mario Draghi's statements.

If you ask me, it's too late, the ECB has pretty much lost all credibility and is well behind the deflation curve and central banks in Asia are right to fear the worst.

Lastly, in the second of three interviews (part 1 here), the manager of the global macro fund Eclectica, Hugh Hendry, tells MoneyWeek's Merryn Somerset Webb why central banks will go even further than anyone expects to keep the global economy afloat (h/t, Zero Hedge).

Indeed, all aboard the QE Express! Stay tuned, the macro environment is about to get a lot more interesting going into 2015.

Thursday, November 20, 2014

Will GPIF's New CIO Rise to the Challenge?

of Bloomberg report, GPIF Names Private Equity Executive as Investment Head:
The world’s biggest manager of retirement savings named a private-equity executive as head of investment after the Japanese fund changed its strategy to seek higher returns.

Hiromichi Mizuno, 49, a partner at London-based Coller Capital Ltd., becomes the first chief investment officer at the $1.1 trillion Government Pension Investment Fund from Jan. 5, the fund announced late yesterday. Mizuno, who joined the fund’s investment committee in July, will lead moves to reduce domestic debt and boost equity holdings to half of assets.

The retirement manager overhauled its asset mix on Oct. 31, pledging to shift $182 billion into stocks as unprecedented quantitative easing by the Bank of Japan risks eroding the value of its bond-heavy portfolio. Mizuno’s appointment comes as a health ministry group debates changes to the fund’s governance, after a separate government panel called on it to move beyond a system in which decision-making power lies with the president.

GPIF set allocation targets of 25 percent each for Japanese and overseas equities last month, up from 12 percent each. The pension manager will cut local debt holdings to 35 percent from 60 percent and boost foreign debt allocations to 15 percent from 11 percent.

Alternative investments, including private equity, infrastructure and real estate, can make up to 5 percent of holdings in GPIF’s portfolio, and will be incorporated in the other asset classes.
Career History

Mizuno joined Coller Capital in 2003 and is responsible for finding, arranging and monitoring investments, according to the company’s website. Mizuno previously worked at the then Sumitomo Trust Bank, with roles including head of private equity investment in New York and vice president of the international credit department in Tokyo, according to the website.

Coller Capital buys assets from other private-equity investors who are seeking to free up capital. It spends from $1 million to more than $1 billion on each transaction and has done deals with Lloyds Banking Group Plc, Credit Agricole SA and Royal Dutch Shell Plc, according to its website.

Japan’s Topix index has jumped 9.2 percent since the day GPIF announced its new strategy and the Bank of Japan unexpectedly added to stimulus. Shares also have gained as the nation’s slip into recession caused Prime Minister Shinzo Abe this week to put off a planned sales-tax increase and dissolve parliament for an early general election.
Eleanor Warwick of the Wall Street Journal also reported, Japan to Name Hiromichi Mizuno CIO of Public Pension Fund:
Japan’s government plans to name a private-equity executive as the first chief investment officer of the nation’s $1.1 trillion public pension fund this week, immediately making him one of the most important investors in the world, according to several people familiar with the matter.

The government will name Hiromichi Mizuno, currently a partner with London-based private-equity firm Coller Capital, to the new role at the Government Pension Investment Fund, the people said.

The appointment would put the 49-year-old from central Japan in control of the world’s biggest fund of its kind as the GPIF tries to increase its returns by investing more aggressively.

Mr. Mizuno would be a big catch for the fund, which has struggled to attract outside talent because of low salaries and a small budget. Despite its size, the GPIF’s roughly 80 employees are squeezed into one floor of a 1970s office building in downtown Tokyo. Most of its investments are managed by outside asset-management firms.

Mr. Mizuno was educated in the U.S. and speaks fluent English, which addresses concerns among foreign investment firms that have had trouble working with GPIF.

After starting as a banker at Japan’s Sumitomo Trust and Banking Co., Ltd., Mr. Mizuno joined Coller Capital in 2003.

Coller occupies a niche in the financial world, buying stakes in private-equity funds from investors who want to cash out early. It is an opportunistic strategy that allows those with plenty of cash and long investment horizons to get good deals from others who are cash strapped or concerned about short-term performance. Such a strategy could play to the strengths of a fund like GPIF, which like most pension funds has a long time horizon.

Hiring more investment professionals to manage the fund’s ¥127 trillion pot has been a core push of Prime Minister Shinzo Abe ’s administration as it tries to make the fund a more aggressive and sophisticated investor in order to secure payouts to a mounting number of retirees. The fund manages reserves for the nation’s universal basic pension as well as that for private-sector employees.

The fund’s lack of professional asset managers has also come to the forefront in the wake of a change to the way it allocates it investments, announced last month. Under the investment overhaul. the fund cut its 60% target weighting to low-yielding domestic bonds to 35% and increased the allocation for equities. It is branching out into new asset classes such as real estate and private equity.

The GPIF is headed by its president, Takahiro Mitani, who has ultimate decision-making power under the current law, but Mr. Mizuno would be effectively in charge of overseeing important investment decisions. Rather than making investments himself, Mr. Mizuno will spend more time choosing professional fund managers to oversee portions of the fund’s investments.

Mr. Mizuno joined the GPIF in July as an adviser and a member of its investment committee, an eight-member group that advises the fund part-time. At a news conference last month, Mr. Mitani described Mr. Mizuno’s expertise in private equity as “invaluable.”

Mr. Mizuno has a bachelor’s degree from Osaka City University in Japan and a master’s in business administration from Northwestern University’s Kellogg School of Management. He also is an adviser to the Kyoto University’s Center for iPS Cell Research and Application.
This is an excellent hire for GPIF. I really like the fact that he worked at Coller Capital, a top notch fund that specializes in secondary investments and providing liquidity to private equity investors.

But Mr. Mizuno has his work cut out for him. As global pension funds flock to alternatives at the worst possible time, he will need to rely on his experience at Coller to skillfully delve into illiquid asset classes. This is no easy feat when managing over a trillion dollars.

He will also need to meet his global counterparts and ramp up his hiring, attracting and retaining talented individuals to manage traditional and alternative assets. Again, this is a lot harder than it sounds, especially for the GPIF.

In other news, the Alberta Investment Management Corporation (AIMCo) just appointed Kevin Uebelein as Chief Executive Officer:
The Board of Directors of Alberta Investment Management Corporation (AIMCo) is pleased to announce the appointment of Mr. Kevin Uebelein as Chief Executive Officer. He will assume his responsibilities on January 5, 2015, and will succeed Dr. Leo de Bever, AIMCo's first Chief Executive Officer, who led AIMCo from its establishment in 2008 to the highly regarded investment management firm it is today.

Kevin is a highly accomplished executive with an impressive career of almost three decades in investment management. Prior appointments include President and Chief Executive Officer of Pyramis Global Advisors, the institutionally-focused asset management unit of Fidelity Investments, holding assets in excess of USD 200 billion, and also the position of Global Head of Investment Solutions at Fidelity Investments. Previously, Kevin held progressively more significant positions with Prudential Financial Inc., including Head of Alternative Investments, and culminating as Chief Investment Officer for Japan, and then International operations.

Mr. Uebelein holds a Bachelor of Accounting degree from Harding University, an MBA from Rice University, and is a Chartered Financial Analyst (CFA) charterholder.

"The appointment of Mr. Uebelein as Chief Executive Officer marks the successful conclusion of a comprehensive, diligent process to identify the individual best suited to lead AIMCo through its next phase of organizational maturity. Kevin brings exceptional talent, investment acumen and a strong client orientation to the organization. We look forward to working with him in this exciting new chapter for AIMCo." says Charles Baillie, Chair, AIMCo Board of Directors.

"AIMCo is a recognized global leader in investment management, and I am excited to have the opportunity to work with this team. I am wholly committed to delivering on our mandate of superior risk-adjusted returns for our clients, and doing so within an environment of strong client engagement and excellent organizational health," says Kevin Uebelein. "I am looking forward to my relocation to Edmonton in January and to experiencing all that Alberta has to offer."

"On behalf of the AIMCo Board of Directors, I want to sincerely thank Leo for his unwavering commitment to building an organization that rivals the most accomplished of institutional investors. Leo will be with AIMCo until December 31, 2014 and will assist with our transition initiatives," says Baillie. "Leo's passion for investments is undeniable and he has built a legacy of which all Albertans can be proud. We wish him continued success and good health in the future."
I congratulate Kevin Uebelein on this appointment and look forward to talking and meeting him one day. He has big shoes to fill but I'm sure he'll do an outstanding job.

Below, Luke Ellis, president of Man Group, discusses the secrets of the world's biggest listed hedge fund. Listen carefully to this interview, it's very interesting.

Wednesday, November 19, 2014

CalSTRS' Shift to Internal Management?

Dawn Lim of the Wall Street Journal reports, Calstrs’ Investment Office Restructuring Paves Way for More Internal Management:
The California State Teachers’ Retirement System said it restructured how its investment office is organized and is emphasizing stronger internal controls to pave the way for a shift toward more internal management.

Calstrs, the nation’s second-largest public pension fund, said in a release that it plans to increase the amount of assets its investment team manages internally to 60% of its portfolio, from the current 45%.

The closely watched $186.4 billion pension fund has previously said in investment policy documents that by managing assets internally, it can have more control over corporate governance issues and the flexibility to tailor strategies to its needs.

Calstrs will focus initially on publicly traded assets as it looks to raise the amount of assets its staff will oversee, Spokesman Ricardo Duran said.

In a signal that fixed income could be emphasized for more in-house management, Glenn Hosokawa was named director of fixed income, while Paul Shantic was named director of inflation-sensitive assets. They were previously acting co-directors of fixed income.

Fixed income made up 15.8% of Calstrs’s portfolio, as of Sept. 30, short of an allocation target of 17%. Inflation-sensitive assets made up 0.7% of pension fund assets; the target allocation for the asset class is 1%.

A new organizational structure “allows us to bring more assets in-house,” said Calstrs’ Chief Investment Officer Christopher Ailman in the release.

In addition, Debra Smith was named chief operating investment officer, a new role at the pension fund. She was previously director of investment operations.

Ms. Smith leads a new unit that will tackle issues such as compliance, ethics and internal controls. She will report to the investment committee twice a year, giving her a direct line to board members.

The position builds more separation between investment management and operations at the pension fund, allowing the chief operating investment officer more “structural autonomy,” said Mr. Duran.
Dale Kasler of the Sacramento Bee also reports, CalSTRS restructures investment staff, hires operating officer:
CalSTRS has named its first-ever chief operating investment officer as part of a restructuring of the office that oversees the pension fund’s $186 billion portfolio.

The California State Teachers’ Retirement System said Debra Smith, who had been director of investment operations, is the pension fund’s chief operating investment officer.

CalSTRS also named two asset class directors. Glenn Hosokawa was named director of the $22 billion fixed-income portfolio, and Paul Shantic was named director of CalSTRS’ $1.4 billion inflation-sensitive portfolio. Both had been with CalSTRS in other investment-related roles.

Pension fund officials said the restructuring gives CalSTRS greater control over its portfolio.

“These three appointments, coupled with our 2010 creation of a deputy chief investment officer, completes a new organizational structure that allows us to bring more assets in house,” said Chief Investment Officer Christopher Ailman in a prepared statement. “This structure matches what you find in most large investment money managers. This also fits our plans to internally manage more of our assets – currently at 45 percent in house – to a projected 60 percent internally managed.”
The Sovereign Wealth Fund Institute also commented on CalSTRS' shift to manage more assets internally stating it's "taking the playbook from sapient Canadian public pensions" saving on fees and looking to take a more activist role:
Besides saving on investment fees and cost, CalSTRS desires to have more control over corporate governance issues. By owning the shares or underlying securities directly, CalSTRS can push forward with activist-based strategies. 
I'm not sure how much of an "activist" role CalSTRS is looking to take or how successful they will be if they do take on such a role, but the shift toward internal management is a smart move and I like the way they restructured their senior staff to implement this shift.

According to Reuters, Debra Smith, the new chief operating investment officer, will oversee the fund's Investment Operations, Branch Administration, and a new unit comprised of Compliance, Internal Controls, Ethics and Business Continuity. And as stated in the WSJ article above, Smith will report to the investment committee twice a year, giving her a direct line to board members.

Pay attention here folks because this is a great move from a pension governance perspective. I've always argued that the head of risk and head of operations at public and private pension funds should report directly to the board of directors, not the CEO or CIO. If there is a disagreement on operational or investment risks being taken, the board can listen to the arguments and decide if the risks are worth taking.

I've also long argued that whistleblowers need to be protected and whistleblower policies need to be beefed up at all public pension funds so that employees who witness shady activity can safely report it without worrying about being fired. If some senior manager is accepting bribes from an external fund manager or from a big vendor peddling the latest most expensive software, there should be a way to detect and report this fraud.

Finally, go back to read my comment on why U.S. pension funds are going Canadian. The reason is simple. It makes sense to manage assets internally, saving on fees and having more control over your investments. CalSTRS isn't the first big state pension fund to do this (Wisconsin is) and it won't be the last.

Of course, to really go Canadian, U.S. public pensions have to pay their senior investment staff big bucks and they have to separate politics from their entire governance process. When I read articles on how John Buck Co., a real-estate investment firm whose executives contributed substantially to the campaign of Chicago Mayor Rahm Emanuel, has earned more than $1 million in fees for managing city pension money, I shake my head in disbelief. This is Chicago-style politics at its worst. No wonder Illinois is a pension hell hole!

Below, Christopher Ailman, CalSTRS CIO, says stay invested and discusses why he would hedge the yen back to dollars and thinks the Japanese market has some potential. I'm bearish on the yen and euro and only bullish on U.S. equities, for now. Choose your stocks and sectors carefully and enjoy the liquidity party while it lasts. Once deflation hits America, the hangover will last for decades.

Tuesday, November 18, 2014

Pension Funds Flock to Riskier Investments?

David Oakley of the Financial Times reports, Pension funds to flock to riskier investments (h/t, Suzanne Bishopric):
Pension fund managers around the world are preparing to invest in riskier assets such as hedge funds and private equity funds as they seek higher returns and their ability to select the best managers improves.

Research by State Street, the US financial group, has found that 77 per cent of pension funds expect their appetite for alternative investments to increase over the next three years.

Oliver Berger, State Street’s head of strategic market initiatives for Europe, the Middle East and Africa, said: “Pension funds are under huge pressure at the moment. With increased market volatility, they are faced with challenging and complex liabilities. To achieve the returns they need, they have to take on more risk.

“However, they are better equipped than ever before to do this. With improvements in data mining and management and reporting, fund managers and asset owners have a better understanding of the risk reward profile of investments,” he said.

The growing appetite for investments in alternative assets such as hedge funds contrasts with a recent decision by Calpers, the largest pension fund in the US, to withdraw its $4bn investments in hedge funds because they had become too complex and costly.
The State Street research, which involved interviewing the executives in charge of 134 different pensions schemes around the world, shows that a large majority were prepared to take more risk as low yields and interest rates have made it harder to meet long-term obligations with safer assets such as government bonds.

Of the asset owners surveyed, 20 per cent also said they expected their risk appetite to increase significantly over the next three years.
The most popular asset class among the so-called alternative asset classes was private equity, followed by real estate, infrastructure and then hedge funds.

Of the survey participants, 60 per cent said they intended to increase their exposure to private equity. This fell to 45 per cent for real estate and 39 per cent for infrastructure.
For hedge funds, 20 per cent plan to increase their allocation, while 3 per cent said they would reduce it.

Regional findings showed that private equity is of the greatest interest to respondents in the Americas, with 68 per cent planning to increase their allocation, compared with 60 per cent in Europe, the Middle East and Africa and only 45 per cent in the Asia-Pacific region.

Asian respondents showed high levels of interest in expanding their investment in hedge funds, with 57 per cent planning to increase their allocation.
Nothing really surprising in these finding except that most pension funds plan to significantly increase (illiquidity) risk at the worst possible time.

It's also interesting that private equity is now more popular than real estate and infrastructure, probably because the returns are higher but so is the risk (keep in mind, endowments have turned negative on private equity).

By the way, Yves Smith (aka Susan Webber) of the naked capitalism blog published another long rant yesterday on private equity going after retail investors where she once again scoffed at the internal rate of return (IRR) as a measure of performance, grossly inflated PE returns and how on a risk-adjusted basis, private equity underperforms stocks.

Poor Yves, she never invested a dime in private equity and is literally clueless on the asset class, shamefully disseminating utter nonsense on her widely read blog. She also removed my blog from her blog roll and refuses to publish my comments (same with Zero Hedge), mostly because I demonstrate how blatantly careless she is when she promotes her grossly biased and uninformed point of view on private equity.

If it was up to Yves, no pension fund would ever invest in private equity. What for? Just let them shove their money in stocks and roll the dice along with the rest of the retail universe. She literally doesn't understand how private equity is an important asset class from an asset-liability perspective and how the top funds consistently trounce stocks on an absolute and risk-adjusted basis (she should research performance persistence in private equity).

Please go back to read my last comment on why pension funds should beware of buyout bullies. I too don't like private equity's push into retail and think we need a lot more transparency on fees and terms, but I don't make wild accusations or castigate one of the most important asset classes for pensions.  Ms. Webber should be a lot more careful in her comments given how popular her blog is.

That's all from me. I'm off to the Montreal Neurological Institute (please donate to them, they're great!) to undergo a long MRI, all part of a study I'm doing for Opexa Therapeutics' (OPXA) Tcelna immunotherapy for progressive MS patients. Apart from battling a little cold, I feel great and look forward to finding out the results of this study after it wraps up late next year.

Below, David Rubenstein, co-founder and co-chief executive officer of Carlyle Group LP, talks about losses sustained by Claren Road Asset Management LLC, the hedge fund firm majority-owned by Carlyle. Rubenstein, speaking with Erik Schatzker on Bloomberg Television's "Market Makers," also discusses market valuations and Carlyle's investment strategy and growth outlook.

Monday, November 17, 2014

Top Funds' Activity in Q3 2014

William Alden, Matthew Goldstein and Michael J. de la Merced of the New York Times report, Alibaba, the I.P.O. Darling, Is Also the Star of Hedge Fund Reports:
Alibaba, the Chinese e-commerce website, was the hot initial public offering of the year on Wall Street. And not surprisingly, shares of Alibaba wound up in the portfolios of many well-known money managers in the third quarter.

Third Point, Viking Global Investors, Paulson & Company and Soros Fund Management were some of the hedge funds that disclosed sizable ownership stakes in Alibaba when they submitted filings to the Securities and Exchange Commission on Friday.

The regulatory filings, known as 13-Fs, are quarterly updates from large money managers about their holdings in stocks traded in the United States.

Viking Global Investors, the fund led by O. Andreas Halvorsen, reported having about 11 million shares of Alibaba, while Daniel S. Loeb’s Third Point reported a stake of 7.2 million shares. Soros Fund Management, which manages the wealth of George Soros, had 4.4 million Alibaba shares. John A. Paulson’s fund said it had 1.9 million shares.

Also reporting a large stake in the Chinese company was Tiger Management, led by Julian Robertson, one of the best-known hedge fund managers. It said it had about 1.2 million shares. Moore Capital, the fund led by Louis Bacon, reported having about 1.5 million shares.

Leon Cooperman’s Omega Advisors and Barry Rosenstein’s Jana Partners disclosed holding smaller stakes in Alibaba. BlueMountain Capital Management disclosed it owned 303,031 shares, while Appaloosa Management said it had 725,000 shares. Even the family office of Stanley Druckenmiller, the billionaire investor, said it had 10,000 shares of the e-commerce company.

Alibaba raised about $22 billion in one of the largest I.P.O.’s ever, and shares soared 38 percent in the first day of trading.

Investor interest in Alibaba had built up well before its stock market debut in September. But a number of prominent hedge fund managers — Mr. Loeb of Third Point, David Tepper of Appaloosa Management and Mr. Bacon among them — pressed for one-on-one meetings with the company in the run-up to the I.P.O.

The 13-F filings offer the first glimpse of which hedge fund managers and mutual funds were able to pick up Alibaba shares. More broadly, they offer a window into the thinking of money managers as they move in and out of stocks. But 13-F filings also do not provide a full picture. They disclose only what money managers, including hedge funds, were invested in as of 45 days ago — something investors should keep in mind when reviewing any 13-F quarterly report. Moreover, October was a particularly volatile month, meaning stock positions could have changed substantially. The filings also do not require investors to disclose short positions, or bets that a stock will fall in price. And sometimes the S.E.C. will permit investors to keep stock positions confidential for a while.

But the filings can reveal some interesting developments.

For instance, Chase Coleman’s Tiger Global Management sharply increased its stake in Soufon Holdings, a Chinese real estate Internet company in the third quarter. The firm reported owning 14 million shares as of Sept. 30, up from 863,648 shares at the end of the second quarter.

Jana, the activist hedge fund run by Mr. Rosenstein, disclosed in its filing that it also owned 842,268 shares of McDonald’s, a move that contributed to a 1 percent gain in McDonald’s share price in early trading on Friday. Moore also reported having 450,000 shares in McDonald’s.

Elsewhere in the world of fast food, another hedge fund, Fir Tree Partners, reported having 1.5 million shares in Burger King Worldwide. In late August, Burger King agreed to buy Tim Hortons, the Canadian chain of coffee-and-doughnut shops.

But while some hedge funds clustered around a few stocks, disagreement was common. The Fortress Investment Group, for example, disclosed owning five million shares in Ally Financial, the onetime financing arm of General Motors. Paulson, meanwhile, sold two million Ally shares, disposing of its entire position.

Mr. Loeb of Third Point sold his position in Hertz, a previously disclosed move. The rental car company said on Friday that it would revise its recent financial statements after discovering errors.

Some new positions reflected headlines. Appaloosa Management disclosed owning 1.4 million shares in Lorillard, the tobacco company that agreed in July to be bought by its larger rival Reynolds American. Soros said it had five million shares in Yahoo, which owns a stake in Alibaba and received a cash windfall in the I.P.O.

Jana, whose activist strategy often involves pressing companies to make changes, took positions in some of the corporate battles of the day. The hedge fund showed a roughly 0.4 percent stake in Valeant Pharmaceuticals, the Canadian pharmaceutical company that has teamed up with the hedge fund manager William A. Ackman in a hostile bid for Allergan, the maker of Botox.

Speaking of Mr. Ackman, his Pershing Square Capital Management finds itself on the opposite side of the debate of Herbalife with Tiger Consumer Management. Tiger Consumer, the hedge fund led by Patrick McCormack, disclosed that it acquired a 1.78 million share stake in Herbalife in the third quarter.

Herbalife has been under assault from Mr. Ackman for nearly two years. Mr. Ackman, who said he spent $1 billion to open a bearish bet on the company’s stock, contends Herbalife is an illegal pyramid scheme and has been openly predicting the company will collapse.

This is not the first time that Tiger Consumer has had position in shares of Herbalife, according to earlier 13-F filings.

The billionaire hedge fund magnate John Paulson disclosed that he bet heavily on corporate inversions, in which United States companies buy foreign rivals in an effort to relocate abroad to reduce their taxes.

His firm, Paulson & Company, disclosed buying 13 million shares in AbbVie, which at the time had agreed to buy the Irish drug maker Shire. The hedge fund also added 5.3 million shares to its holdings in Shire. That deal fell apart last month after the Obama administration clamped down on some of the economic benefits of inversions.

Berkshire Hathaway, the conglomerate run by Warren E. Buffett, added to its telecommunications and media holdings, more than doubling its stake in the cable provider Charter Communications, to five million shares, and buying eight million shares of Liberty Media.
It's that time of the year again when everyone gets all giddy peaking at what top hedge funds and other funds bought and sold last quarter.

Not surprisingly, top hedge funds got allocated a huge chunk of the Alibaba (BABA) IPO in Q3 2014 but the article above fails to mention who the top institutional holder of this company is -- private equity giant Silver Lake Group.

And who is the biggest investor in Silver Lake? The Canada Pension Plan Investment Board (CPPIB). Canada’s largest pension fund invested in the e-commerce company on two fronts: a $100 million direct investment in 2011, and a C$465 million ($450 million) commitment to Silver Lake.

Mark Wiseman, CPPIB’s chief executive, recently told the Financial Post the reason the Canadian pension fund manager was able to make a “very sizeable investment” in what was then “an obscure Internet company” in a city in China few had heard of is because executives had opened an office in Hong Kong back in 2008:
“That investment story which everybody is touting as one of the best investments we’ve ever made, it didn’t happen overnight. That investment started in many respects almost seven year ago,” Mr. Wiseman said.

“It started with a view towards that market, a view that we need to build capabilities in the region, that we need to deepen our understanding of the region, and that we had a long-term view around the Chinese consumer, the importance of the Chinese consumer.”
If Mark Wiseman, CPPIB's senior managers and their board of directors want to truly deepen their understanding of the region and the Chinese consumer, they better carefully read my last comment on why deflation is coming to America.

I'm not very bullish on emerging markets and fear the worst now that Japan has slipped back into recession but I will tell you if I had to invest, I'd be more bullish on India than China over the next decade (CPPIB is also eying Mumbai).

Getting back to what top funds bought and sold in the third quarter, another big Canadian pension fund, Ontario Teachers, bought a big stake in BlackBerry (BBRY) during that quarter. They are not the only ones betting big on BlackBerry. Primecap and Fairfax are still the top holders by far and we shall see if their bets pan out or if this will be another RIM job.

You can read many articles on 13-F filings on Reuters, Bloomberg, CNBC and other sites like insider monkey and whale wisdom. Those of you who want to delve more deeply into these filings can subscribe to services offered by market folly and 13D monitor whose principals also offer the 13D Activist Fund incorporating the best ideas from top activist funds.

But if you want my honest opinion, you should take these filings with a shaker of salt and focus more on a certain group of investors and ignore others. Also, keep in mind by the time the information comes out, many of these top funds have already sold out of their positions and possibly initiated short positions you don't know about.

Another thing I can tell you is all the big action happened early in Q4 and few hedge funds got the energy sector downturn right. I fear a lot of funds are going to get clobbered when deflation eventually comes to America. Macro matters a lot more going forward and many top funds are ill-prepared for the storm ahead.

Please go back to read my October 20th comment on whether it's time to plunge in the stock market where I wrote:
Sure, these [energy and commodity] stocks can bounce up from these oversold levels but I would use any relief rally here to shed positions or short them, not initiate or add to your positions. I can say the same thing about plenty of other energy and commodity stocks. Be very careful buying the dips here because there will be further weakness in these sectors, you will end up regretting it.

And it's not just energy and commodities. This market is becoming more and more selective. I tell all my friends and family to be careful with a lot of stocks, especially high dividend stocks. I think some will outperform in a deflationary environment (because rates will remain low for many years) but others are going to get slaughtered. 
I can't overemphasize just how selective this market has become. If you're in the wrong sectors or stocks, you're dead!!!

I've built a large database over the years and keep adding to it. I screen various stocks and see which ones are overbought/oversold or if there is strength/weakness in a particular sector nd see where the action is on a timely basis.

In addition, I regularly look at the YTD performance of stocks, the 12-month leaders, the 52-week highs and 52-week lows. I also like to track the most shorted stocks and highest yielding stocks in various exchanges.

I can basically tell you in real-time where top hedge funds are focusing their attention. But to get deeper insights into these 13F filings and what's happening real-time you have to pay me big bucks because I'm in no mood to spoon feed many underperforming funds, especially ones that charge 2 & 20 for sub-beta performance (they should drop the 2% management fee).

I already provide way too much information. By clicking on the links below, you will see the top holdings of top funds I've grouped in various categories. I've added quite a few new ones, including  John Lykouretzos' Hoplite Capital Management and David Gallo's Valinor Management, and will keep adding more to this list.

Please remember to use this information wisely and keep in mind, even the best of the best get whacked hard from time to time. Warren Buffett lost more than $2 billion on IBM (IBM) and Coke (KO) in recent weeks. It will be interesting to see if Buffett added to these losing positions in Q4 but he's diversified and has made plenty of money elsewhere, like Direct TV (DTV).

Have fun peering into the portfolios of top funds below. Please remember to support my blog by subscribing or donating via PayPal at the top right-hand side of this web page. Those of you who want deeper insights on what to buy and short should contact me directly for a special consulting mandate (that option is $5000 a year and it's cheap given how lousy most of you hedge funds have been performing).

Top multi-strategy and event driven hedge funds

As the name implies, these hedge funds invest across a wide variety of hedge fund strategies like L/S Equity, L/S credit, global macro, convertible arbitrage, risk arbitrage, volatility arbitrage, merger arbitrage, distressed debt and statistical pair trading.

Unlike fund of hedge funds, the fees are lower because there is a single manager managing the portfolio, allocating across various alpha strategies as opportunities arise. Below are links to the holdings of some top multi-strategy hedge funds I track closely:

1) Citadel Advisors

2) Balyasny Asset Management

3) Farallon Capital Management

4) Peak6 Investments

5) Kingdon Capital Management

6) Millennium Management

7) Eton Park Capital Management

8) HBK Investments

9) Highbridge Capital Management

10) Pentwater Capital Management

11) Och-Ziff Capital Management

12) Pine River Capital Capital Management

13) Carlson Capital Management

14) Mount Kellett Capital Management 

15) Whitebox Advisors

16) QVT Financial 

17) Visium Asset Management

18) York Capital Management

Top Global Macro Hedge Funds and Family Offices

These hedge funds gained notoriety because of George Soros, arguably the best and most famous hedge fund manager. Global macros typically invest in bond and currency markets but the top macro funds are able to invest across all asset classes, including equities.

George Soros, Stanley Druckenmiller, Julian Robertson and now Steve Cohen have converted their hedge funds into family offices to manage their own money and basically only answer to themselves (that is my definition of true investment success).

1) Soros Fund Management

2) Duquesne Family Office (Stanley Druckenmiller)

3) Bridgewater Associates

4) Caxton Associates (Bruce Covner)

5) Tudor Investment Corporation

6) Tiger Management (Julian Robertson)

7) Moore Capital Management

8) Point72 Asset Management (Steve Cohen)

Top Market Neutral, Quant and CTA Hedge Funds

These funds use sophisticated mathematical algorithms to initiate their positions. They typically only hire PhDs in mathematics, physics and computer science to develop their algorithms. Market neutral funds will engage in pair trading to remove market beta.

1) Alyeska Investment Group

2) Renaissance Technologies

3) DE Shaw & Co.

4) Two Sigma Investments

5) Numeric Investors

6) Analytic Investors

7) Winton Capital Management

8) Graham Capital Management

9) SABA Capital Management

10) Quantitative Investment Management

Top Deep Value, Activist and Distressed Debt Funds

These are among the top long-only funds that everyone tracks. They include funds run by legendary investors like Warren Buffet, Seth Klarman, Ron Baron and Ken Fisher. Activist investors like to make investments in companies where management lacks the proper incentives to maximize shareholder value. They differ from traditional L/S hedge funds by having a more concentrated portfolio. Distressed debt funds typically invest in debt of a company but sometimes take equity positions.

1) Abrams Capital Management

2) Baron Partners Fund (click here to view other Baron funds)

3) Berkshire Hathaway

4) Fisher Asset Management

5) Baupost Group

6) Fairfax Financial Holdings

7) Fairholme Capital

8) Trian Fund Management

9) Gotham Asset Management

10) Fir Tree Partners

11) Sasco Capital

12) Jana Partners

13) Icahn Associates

14) Schneider Capital Management

15) Highfields Capital Management 

16) Eminence Capital

17) Pershing Square Capital Management

18) New Mountain Vantage  Advisers

19) Scout Capital Management

20) Third Point

21) Marcato Capital Management

22) Glenview Capital Management

23) Perry Corp

24) ValueAct Capital

25) Avenue Capital

26) Relational Investors

27) Roystone Capital Management

28) Scopia Capital Management

29) Vulcan Value Partners

Top Long/Short Hedge Funds

These hedge funds go long shares they think will rise in value and short those they think will fall. Along with global macro funds, they command the bulk of hedge fund assets. There are many L/S funds but here is a small sample of some well known funds.

1) Appaloosa Capital Management

2) Tiger Global Management

3) Greenlight Capital

4) Maverick Capital

5) Pointstate Capital Partners 

6) Marathon Asset Management

7) JAT Capital Management

8) Coatue Management

9) Leon Cooperman's Omega Advisors

10) Artis Capital Management

11) Fox Point Capital Management

12) Jabre Capital Partners

13) Lone Pine Capital

14) Paulson & Co.

15) Brigade Capital Management

16) Discovery Capital Management

17) LSV Asset Management

18) Hussman Strategic Advisors

19) Cantillon Capital Management

20) Brookside Capital Management

21) Blue Ridge Capital

22) Iridian Asset Management

23) Clough Capital Partners

24) GLG Partners LP

25) Cadence Capital Management

26) Karsh Capital Management

27) Brahman Capital

28) Andor Capital Management

29) Silver Point Capital

30) Steadfast Capital Management

31) Brookside Capital Management

32) PAR Capital Capital Management

33) Gilder, Gagnon, Howe & Co

34) Brahman Capital

35) Bridger Management 

36) Kensico Capital Management

37) Kynikos Associates

38) Soroban Capital Partners

39) Passport Capital

40) Pennant Capital Management

41) Mason Capital Management

42) SAB Capital Management

43) Sirios Capital Management 

44) Hayman Capital Management

45) Highside Capital Management

46) Tremblant Capital Group

47) Decade Capital Management

48) T. Boone Pickens BP Capital 

49) Bronson Point Management

50) Senvest Partners

51) Bloom Tree Partners

52) Hoplite Capital Management

53) Valinor Management

54) Viking Global Investors

55) Zweig-Dimenna Associates

Top Sector and Specialized Funds

I like tracking activity funds that specialize in real estate, biotech, retail and other sectors like mid, small and micro caps. Here are some funds worth tracking closely.

1) Baker Brothers Advisors

2) SIO Capital Management

3) Broadfin Capital

4) Healthcor Management

5) Orbimed Advisors

6) Deerfield Management

7) Sectoral Asset Management

8) Perceptive Advisors

9) Consonance Capital Management

10) Camber Capital Management

11) Redmile Group

12) Bridger Capital Management

13) Southeastern Asset Management

14) Bridgeway Capital Management

15) Cohen & Steers

16) Cardinal Capital Management

17) Munder Capital Management

18) Diamondhill Capital Management 

19) Tiger Consumer Management

20) Geneva Capital Management

21) Criterion Capital Management

22) Highland Capital Management

23) Lee Munder Capital Group

Mutual Funds and Asset Managers

Mutual funds and large asset managers are not hedge funds but their sheer size makes them important players. Some asset managers have excellent track records. Below, are a few funds investors track closely.

1) Fidelity

2) Blackrock Fund Advisors

3) Wellington Management

4) AQR Capital Management

5) Sands Capital Management

6) Brookfield Asset Management

7) Dodge & Cox

8) Eaton Vance Management

9) Grantham, Mayo, Van Otterloo & Co.

10) Geode Capital Management

11) Goldman Sachs Group

12) JP Morgan Chase & Co.

13) Morgan Stanley

14) Manulife Asset Management

15) RCM Capital Management

16) UBS Asset Management

17) Barclays Global Investor

18) Epoch Investment Partners

19) Thornburg Investment Management

20) Legg Mason Capital Management

21) Kornitzer Capital Management

22) Batterymarch Financial Management

23) Tocqueville Asset Management

24) Neuberger Berman

25) Winslow Capital Management

26) Herndon Capital Management

27) Artisan Partners

28) Great West Life Insurance Management

29) Lazard Asset Management 

30) Janus Capital Management

31) Franklin Resources

32) Capital Research Global Investors

33) T. Rowe Price

34) First Eagle Investment Management

35) Frontier Capital Management

Canadian Asset Managers

Here are a few Canadian funds I track closely:

1) Letko, Brosseau and Associates

2) Fiera Capital Corporation

3) West Face Capital

4) Hexavest

Pension Funds, Endowment Funds, and Sovereign Wealth Funds

Last but not least, I track activity of some pension funds, endowment funds and sovereign wealth funds. I like to focus on funds that invest in top hedge funds and have internal alpha managers. Below, a sample of pension and endowment funds I track closely:

1) Alberta Investment Management Corporation (AIMco)

2) Ontario Teachers' Pension Plan

3) Canada Pension Plan Investment Board

4) Caisse de dépôt et placement du Québec

5) OMERS Administration Corp.

6) British Columbia Investment Management Corporation (bcIMC)

7) Public Sector Pension Investment Board (PSP Investments)

8) PGGM Investments

9) APG All Pensions Group

10) California Public Employees Retirement System (CalPERS)

11) California State Teachers Retirement System (CalSTRS)

12) New York State Common Fund

13) New York State Teachers Retirement System

14) State Board of Administration of Florida Retirement System

15) State of Wisconsin Investment Board

16) State of New Jersey Common Pension Fund

17) Public Employees Retirement System of Ohio

18) STRS Ohio

19) Teacher Retirement System of Texas

20) Virginia Retirement Systems

21) TIAA CREF investment Management

22) Harvard Management Co.

23) Norges Bank

24) Nordea Investment Management

25) Korea Investment Corp.

26) Singapore Temasek Holdings 

27) Yale Endowment Fund

Below, CNBC's Kayla Tausche provides a look at hedge funds reporting 13F filings, including Third Point's Dan Loeb, Appaloosa's David Tepper, and Omega's Leon Cooperman.

And my favorite radio personality, Howard Stern, rants on why the stock market is bullshit (2010). I pissed of laughter listening to this clip and even though stocks are more likely to melt-up than melt down, Stern is right, in this crazy market, beware of charlatans peddling lousy advice on the radio and TV (warning: a lot of profanity in this clip but it's f@#king hilarious!).