Tag: Wall Street assholes

STRANGER IN A STRANGE LAND

“Secrecy begets tyranny.” ― Robert A. Heinlein, Stranger in a Strange Land

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“Thinking doesn’t pay. Just makes you discontented with what you see around you.” ― Robert A. Heinlein, Stranger in a Strange Land

When I read quotes by men like H.L. Mencken and Robert Heinlein, I realize I’m not really a stranger in a strange land, even though I feel that way most of the time. These cynical, critical thinking, libertarian minded gentlemen understood government tended towards corruption and tyranny, the populace tended towards ignorance and distraction, and reality eventually teaches a harsh lesson to fools, knaves and dumbasses.

Sometimes we think the current day worldly circumstances are new and original, when human nature, politicians, and governments never really change. When Mencken and Heinlein were writing and providing social commentary during the 30’s, 40’s and 50’s, they observed the same fallacies, foolishness, lack of self-responsibility, government malfeasance, and inability of the majority to think critically, that are rampant in society today.

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How hedge-fund geniuses got beaten by monkeys — again

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The dumbest simple index will beat the smartest guys on the Street

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These guys beat the average hedge-fund manager.
Insider Monkey provides high-quality evidence-based articles to inform individual investors about the intricacies of investing.

The average hedge fund has produced a worse investment performance in the first half of this year than a portfolio consisting of a savings account at your local bank and a random collection of stocks picked by a blindfolded monkey.

Stop me if you’ve heard this one before.

According to the benchmark HFRX Global Hedge Fund Index, tracked by Hedge Fund Research Inc., the average hedge fund has earned its investors just 2.4% so far this year net of fees.

By contrast, the average stock in the MSCI World index of the developed countries’ equity markets is up 7.7%.

Hedge-fund defenders object that it’s not fair to compare funds directly to the stock market, because hedge funds are “managing risk” and so on. You have to compare them to an overall balanced portfolio of stocks, bonds and cash, right?

OK.

A few years back a study conducted on behalf of the endowment of Cambridge University’s Clare College found that, historically, the best risk-managed simple portfolio for a long-term investor had usually been a balance of 80% stocks and 20% cash (or equivalent, such as Treasury bills), rebalanced once a year.

You can play around with simple portfolios but this will do as well as any. It’s about as simple as you can get.

Someone who put 20% of their money in a federally insured bank savings account, and the other 80% in a random collection of stocks from around the world, picked by monkeys, would be up about 6.2% so far this year. (And that’s assuming for the sake of simplicity that you earned 0% interest on the savings. In reality, you could have done slightly better)

In other words, they would still have earned more than twice the returns of the average hedge fund.

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