Some random thoughts on articles that caught my attention in the last month. Note that I try to write notes on articles immediately after reading them, so there can be a little overlap in themes if an article grabs my attention early in the month and is similar to an article that I like later in the month.
Still reading this but about your posed q: "how do you evaluate a manager who has invested in several frauds/blowups but has a good track record?"
Depending on the way they blew up it can be a strike against or not relevant. Also depends on the manager's stated strategy. For example; you're evaluating some black-box quant thing (about the same thing for us value guys trying to evaluate ARKK :)
If they state their strategy outperforms because their engine picks up fraud and then they blow up a position on a fraud... that's bad.
But if it's a momentum quant it's kind of par for the course.
If it's not a quant strategy essentially the same rules apply.
One more thing about manager selection. It is just much easier to ascertain a great manager if they have a strategy that relies on hitting singles or some mean reversion strategy. It is also much easier if they don't concentrate.
If they concentrate and generate the VC distribution of outcomes, yeah... I just think there's no way (from the track record) to find out within a lifetime whether it's luck or skill.
I'm a big fan of ascertaining skill from materials put out there (writing and/or talks) however this can also get you into trouble because there are amazing storytellers with no alpha.
Final point. It is also a bit easier to ascertain skill if a manager is active in an arena where the variability of results between the best and worst managers is very high. The distributions are wider and there are more inefficiencies to take advantage of. I do think the skill translates to other environments. People sometimes argue the advantage came from the environment. That's true but the manager is still skilled. That doesn't mean it will be enough for huge returns if you have to apply it to S&P 500 only.
Holding controversial positions is a positive sign. I believe that's a predictor of some alpha (could still not be enough to cover fees).
Concentrated positions (or actually deviations from benchmark) are a positive sign. However, I really don't agree with the notion that's popular on Fintwit where everyone is looking to concentrate into positions and run a concentrated book.
As a manager, in my very humble opinion, you should always be looking to concentrate towards your best ideas but have a great preference to be highly diversified. Concentration should happen because you find things and you just can't do anything else. The opportunity is SUCH A LOCK you just have to upsize. You can't ignore it and then you hate it but you do it.
But not the other way around where you go looking for 5 things and pile 20% into each. That's one of the worst portfolios imho. It could be somewhat acceptable for an activist team.
TLDR: not necessarily a red flag and not really a sign either.
P.S. With ARKK there's a "control" period which is K.W. time at A.B. The volatility is somewhat similar. The returns aren't. That data isn't as valuable as the more recent data but I'd include it to do any performance analysis. Still, it probably isn't enough given her style.
P.S. II talking about ARKK and signs; analyst turnover is probably a negative sign.
In my neighborhood no one is happy with the choppy service from Optimum, those that keep it is because most networks don't cover us right now. Additionally, they were sending us in the mail twice every week specials and discounts to try to get customers. Those usually included pretty big discounts for the first year and then you just cancel (or they have to extend the deal)…
If you watch stocks and stonks trade daily and closely, like I do , you realize there is an infinite amount of cash , fomo, money laundering, manipulation, and other assorted obscenities in the market today.
SEC seems not to care a whit about even the most obvious transgressions.
Tether ? Does it even matter if its legit , when 99.9% of hte crypto space is vaporware ?
I dunno, I think Sam Bankman-Fried is a smart dude and you're not giving him quite enough credit here. He didn't give a ringing endorsement of Tether, but he spoke from his experience actually dealing with them and various ecosystem counter-parties and seeing billions of dollars (USD) flow into the thing and saying he thinks people are a little hysterical about the situation — which seems fair!
If someone told you your money market fund fell to 0.88, you'd (rightfully) think it must've been the heist of the century; you'd be outraged and angry and there'd be a lawsuit armageddon.
Sam's key point/insight here is that there are (at least) legitimate *inflows* to Tether that he's seeing, and that de-risks the proposition that the coin is just purely illusory. *Someone* has that money, and it's almost physically difficult to lose so many billions of dollars so quickly. There aren't factories failing to produce products that are flopping in the market here; it's just cash shuffling around. The very fact that it's *billions* of dollars being shuffled instead of millions makes a smash-and-grab just very hard to do, logistically speaking. Where would you go? How could you possibly use that money, even if you got it into, like, uncut diamonds or something? You'd be more wanted than Bin Laden.
The fact that it's conceivably already taken a 10% haircut under the hood is incredibly outrageous in its own right, really, and evidence that the crypto community just has incredibly higher tolerance for risk and instability than "traditional" finance, but I'm very open to his point of view that a true 0 on USDT isn't really conceivable. That's not a real endorsement, that's someone who's used to systems thinking trying to match his facts & perceptions with truly conceivable outcomes after thinking through different possibilities.
Curious no updated thoughts on PSTH!?
Still reading this but about your posed q: "how do you evaluate a manager who has invested in several frauds/blowups but has a good track record?"
Depending on the way they blew up it can be a strike against or not relevant. Also depends on the manager's stated strategy. For example; you're evaluating some black-box quant thing (about the same thing for us value guys trying to evaluate ARKK :)
If they state their strategy outperforms because their engine picks up fraud and then they blow up a position on a fraud... that's bad.
But if it's a momentum quant it's kind of par for the course.
If it's not a quant strategy essentially the same rules apply.
One more thing about manager selection. It is just much easier to ascertain a great manager if they have a strategy that relies on hitting singles or some mean reversion strategy. It is also much easier if they don't concentrate.
If they concentrate and generate the VC distribution of outcomes, yeah... I just think there's no way (from the track record) to find out within a lifetime whether it's luck or skill.
I'm a big fan of ascertaining skill from materials put out there (writing and/or talks) however this can also get you into trouble because there are amazing storytellers with no alpha.
Final point. It is also a bit easier to ascertain skill if a manager is active in an arena where the variability of results between the best and worst managers is very high. The distributions are wider and there are more inefficiencies to take advantage of. I do think the skill translates to other environments. People sometimes argue the advantage came from the environment. That's true but the manager is still skilled. That doesn't mean it will be enough for huge returns if you have to apply it to S&P 500 only.
Holding controversial positions is a positive sign. I believe that's a predictor of some alpha (could still not be enough to cover fees).
Concentrated positions (or actually deviations from benchmark) are a positive sign. However, I really don't agree with the notion that's popular on Fintwit where everyone is looking to concentrate into positions and run a concentrated book.
As a manager, in my very humble opinion, you should always be looking to concentrate towards your best ideas but have a great preference to be highly diversified. Concentration should happen because you find things and you just can't do anything else. The opportunity is SUCH A LOCK you just have to upsize. You can't ignore it and then you hate it but you do it.
But not the other way around where you go looking for 5 things and pile 20% into each. That's one of the worst portfolios imho. It could be somewhat acceptable for an activist team.
TLDR: not necessarily a red flag and not really a sign either.
P.S. With ARKK there's a "control" period which is K.W. time at A.B. The volatility is somewhat similar. The returns aren't. That data isn't as valuable as the more recent data but I'd include it to do any performance analysis. Still, it probably isn't enough given her style.
P.S. II talking about ARKK and signs; analyst turnover is probably a negative sign.
In my neighborhood no one is happy with the choppy service from Optimum, those that keep it is because most networks don't cover us right now. Additionally, they were sending us in the mail twice every week specials and discounts to try to get customers. Those usually included pretty big discounts for the first year and then you just cancel (or they have to extend the deal)…
MSGE will likely get a big payout for naming rights of MSGN & the garden... Market sleeping at this valuation.
If you watch stocks and stonks trade daily and closely, like I do , you realize there is an infinite amount of cash , fomo, money laundering, manipulation, and other assorted obscenities in the market today.
SEC seems not to care a whit about even the most obvious transgressions.
Tether ? Does it even matter if its legit , when 99.9% of hte crypto space is vaporware ?
I dunno, I think Sam Bankman-Fried is a smart dude and you're not giving him quite enough credit here. He didn't give a ringing endorsement of Tether, but he spoke from his experience actually dealing with them and various ecosystem counter-parties and seeing billions of dollars (USD) flow into the thing and saying he thinks people are a little hysterical about the situation — which seems fair!
If someone told you your money market fund fell to 0.88, you'd (rightfully) think it must've been the heist of the century; you'd be outraged and angry and there'd be a lawsuit armageddon.
Sam's key point/insight here is that there are (at least) legitimate *inflows* to Tether that he's seeing, and that de-risks the proposition that the coin is just purely illusory. *Someone* has that money, and it's almost physically difficult to lose so many billions of dollars so quickly. There aren't factories failing to produce products that are flopping in the market here; it's just cash shuffling around. The very fact that it's *billions* of dollars being shuffled instead of millions makes a smash-and-grab just very hard to do, logistically speaking. Where would you go? How could you possibly use that money, even if you got it into, like, uncut diamonds or something? You'd be more wanted than Bin Laden.
The fact that it's conceivably already taken a 10% haircut under the hood is incredibly outrageous in its own right, really, and evidence that the crypto community just has incredibly higher tolerance for risk and instability than "traditional" finance, but I'm very open to his point of view that a true 0 on USDT isn't really conceivable. That's not a real endorsement, that's someone who's used to systems thinking trying to match his facts & perceptions with truly conceivable outcomes after thinking through different possibilities.
My pick for a fantasy series is Sanderson's Way of Kings, check it out if you haven't already.