A Sobering Account: The Corruption of America

Here is a very sobering report on the many problems that face America -- and the world. In particular, the report, entitled "The Corruption of America" by Stansberry Research -- discusses corruption within the government, corporate America, the consumer (and debt), and more.

We have lost our sense of honor, humility, and the dedication to personal responsibility that, for more than 200 years, made our country the greatest hope for mankind. I want to detail some of the factors that gave rise to the current entitlement society. We have become a country of people who believe their well-being is someone else's responsibility.I've labeled these problems: The Corruption of America.

Read more here:

http://www.stansberryresearch.com/pub/reports/201112PSI_issue.html#continue

Gold at a Crossroads

Here's an excerpt from an article on Commodities & Gold:


As gold surged towards the $1900 per ounce price level over the past few months, there has been growing interest in gold as part of a well-diversified portfolio – and as a safe-haven investment. Indeed, the gold positions of large and well-respected institutional investors such as the University of Texas endowment, and hedge fund manager, Paulson & Company, have been in the news.

Interestingly, many of these headlines came around the time when gold was rallying towards its all-time highs in the $1900 range. We note that many of these large investors have already profited from their stakes in the precious metal. Since peaking at around $1900 per ounce in September 2011, gold sold off rapidly to $1550 within a few weeks. Gold has been consolidating mainly in the $1600-$1800 range since that time. Where will gold head from here? In this article, we look at gold – which stands at a crossroads, as we prepare for 2012.

...

Our CTA’s proprietary trading models cover the gamut of time-frames, which include long-term and short-term trend-following. Briefly, our futures trading strategy can be described as:

• intermediate to long-term trend following, with
• pattern recognition and machine-learning components, and
• (short-term) risk management approaches that help set us apart from others.

In particular, some industry professionals like the fact that our pattern recognition and short-term risk management components have a slight mean-reversion flavor.

As intermediate-to-long-term futures traders, our outlook remains bullish, but the bullish case has started to crumble. As usual, we will follow our computer models and trading strategies to give us direction.

As our clients and investors know, we apply a “barbell” approach to help us maximize “forward information.” Systematic and computerized trading strategies keep us disciplined – and market action will dictate our positions. 

Read more here:

http://seekingalpha.com/article/315072-commodities-gold-at-a-crossroads

Carlton Chin, CFA, is the portfolio manager for ADAMAH Capital, which specializes in Computer Aided Research & Advanced Technology (CARAT). He is a specialist in quantitative investment strategies, managed futures, alternative assets, global macro & strategic asset allocation. Carlton combines a CTA hedge fund background with portfolio optimization work for institutional investors. He founded Adamah with his long-time friend and associate, George Parr. Carlton has been quoted and featured in the Wall St. Journal, NY Times, MARhedge, Futures Magazine, and Financial Trader. He holds both undergraduate and graduate degrees from MIT.

AN INVESTMENT IN FUTURES CAN RESULT IN LOSSES.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

On Diversification & Active vs. Passive Management

In our work and research related to portfolio optimization, asset allocation and quantitative investment strategies, we use historical data and seek to maximize “forward information.” Our goal is to improve risk-adjusted returns and achieve prudent diversification.

In a recent article on Managed Futures and Commodities, we reviewed the performance of several asset classes during 2011 (through the end of November). Some investors noticed that the actual performance of some key asset classes outperformed professionally-managed funds. For instance, the S&P 500 is actually positive (+1%) as of the end of November, beating many actively-managed funds. In addition, because the S&P 500 was positive – along with government bonds (intermediate-term government bonds are +8% through November) – some investors are surprised to see Global Macro approaches down for the year.

Active versus Passive Management

Based on the performance of the S&P 500 and government bonds so far in 2011, we can see that a simple 60% stock / 40% bond mix would have eked out a small, but positive return, through the end of November. Why, then, are Global Macro, as well as many stock funds – and so many hedge fund categories, down for the year?

Professional portfolio managers are paid to manage risk. In the case of the stock market, we have seen very large swings – and money managers need to protect their clients and portfolios from large declines. In 2011 alone, the S&P 500 had at least five declines of 100 S&P points, or relatively large declines of about -7.5%. These declines took place in March, May, August, October and November. The August decline totaled about 200 S&P points, or about a -15% decline.

Read more here:
http://seekingalpha.com/article/314209-diversification-active-vs-passive-management

Carlton Chin, CFA, is the portfolio manager for ADAMAH Capital, which specializes in Computer Aided Research & Advanced Technology (CARAT). He is a specialist in quantitative investment strategies, managed futures, alternative assets, global macro & strategic asset allocation. Carlton combines a CTA hedge fund background with portfolio optimization work for institutional investors. 

MF Global: About 72% of Assets Transferred

As of Thursday, Dec. 15th, about 72% of client assets have been transferred to clients.  Over time, we expect that more assets will be transferred.  We believe that ultimately, efforts will be made to make clients "whole."

Please let us know about your MF Global client transfers.
_____

Here is an excerpt from an article about this transfer:

A U.S. bankruptcy court judge on Friday approved a $2.2 billion bulk transfer that would bring the recovery of nearly all U.S. commodities customers of fallen brokerage MF Global to about 72 percent of their accounts.

http://www.msnbc.msn.com/id/45110162/ns/business-stocks_and_economy/t/mf-global-billion-transfer-customers-approved/#.Tut9MGNFu7s

Some of the more Hopeful MF Global News for Customers

From Futures Magazine:


The Trustee for MF Global's SIPA liquidation proceeding filed an omnibus reply to objectors yesterday in which he clearly defined customer property and affirmed the super-priority status of segregated customer funds that the CCC has sought since its inception.  The reply defines customer property as not only “all segregated funds, but also all property that was unlawfully converted and is property of the debtor’s estate, and if there is shortfall in customer segregated assets, all other property of the debtor’s estate.” The Trustee’s reply goes on to state that “there is virtually no scenario under which any property of MF Global’s estate would be treated as non-customer property in the event of commodity customer shortfall.”  Read the full reply here: http://goo.gl/IpE0c.

For the first time since the bankruptcy proceeding began, the Trustee has affirmed that commodity customers will have a right to claw back assets of MF Global’s estate in the event of a shortfall of funds.

Mr. Roe added:

We are closer to our stated goal of the return of 100% of customer segregated funds.  

http://www.futuresmag.com/News/2011/12/Pages/MFGI-trustee-affirms-customer-property-and-priority-status.aspx?utm_source=DailyMarketFocus&utm_medium=eNL&utm_campaign=FUT_eNL

Managed Futures & Commodities: Overview & 2012 Outlook

Below is an excerpt from an article by Carlton Chin on Managed Futures, Commodities and corresponding indices, including a Liquid Commodities Index and an Investable Managed Futures Index -- as well as Barclays & NewEdge Indices: 

The performance of the Managed Futures industry and CTAs (Commodity Trading Advisors) is generally uncorrelated to the stock market and other hedge fund strategies. The year 2011 has seen most CTAs flat- to-slightly down, along with most other investment strategies and asset classes.

Here is a sampling of several Managed Futures industry benchmarks through the end of November:

• Barclays CTA Index -3.1%
• Barclays BTOP 50 Index -4.0%
• NewEdge CTA Index -4.7%
• NewEdge Trend Sub Index -8.4%
• Investable Managed Futures Index 0.0%

Although CTAs would have loved to achieve positive returns this year – to further its diversification arguments – the Managed Futures industry has already proven its diversification mettle in 2008, when CTAs produced double-digit returns during the start of the financial meltdown. In particular, the Barclays CTA Index was up 14.1% and the Investable Managed Futures Index was up 25.5% in 2008, when the S&P 500 was down -37.0%.


AN INVESTMENT IN FUTURES CAN RESULT IN LOSSES.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Managed Futures and S&P 500 Annual Performance

Notes:

• Annual returns for S&P 500 and Investable Managed Futures Index.
• 2011 Returns are year-to-date as of November 30, 2011.

The author, Carlton Chin, CFA (CTA and portfolio manager at Adamah Capital) is a specialist in systematic and quantitative investment strategies as well as dynamic asset allocation.  He believes that alternative assets can help diversify traditional portfolios of stocks & bonds -- and improve risk-adjusted returns. 

Read more here:

http://seekingalpha.com/article/312307-managed-futures-and-commodities-overview-and-outlook-for-2012




Carlton Chin, CFA, is the portfolio manager for ADAMAH Capital, which specializes in Computer Aided Research & Advanced Technology (CARAT). He is a specialist in quantitative investment strategies, managed futures, alternative assets, global macro & strategic asset allocation. Carlton combines a CTA hedge fund background with portfolio optimization work for institutional investors. He founded Adamah with his long-time friend and associate, George Parr. Carlton has been quoted and featured in the Wall St. Journal, NY Times, MARhedge, Futures Magazine, and Financial Trader. He holds both undergraduate and graduate degrees from MIT.

Stock System Indicators: Turn Bearish 12/7/11 11:35am (ET)

Our stock market indicators have turned bearish, with the S&P currently at 1254.  Our last update to our stock market systems was on November 23, 2011, when the S&P 500 stood at 1167.  Stocks have had a nice run-up -- and our intermediate-term overbought indicators, in particular, have flipped to bearish.

• Our long-term indicators remain bearish but have ticked up to "slightly bearish" from its bearish stance on 11/23/11.  
• Our intermediate indicators have flipped to moderately bearish from its moderately bullish stance two weeks ago.

The MF Global Mess continues to drag on...

Some telling events (or lack of events) as detailed by this website, MFGfacts (http://mfgfacts.com/), which questions:



... Why the CFTC has not compelled the MF Global Trustees (Giddens and Freeh) to provide an audited accounting of all inter-company transactions between MFGI and MFG Holdings over the past  months, and especially since the bankruptcy and specifically relating to these accounts...


Read more here:
http://mfgfacts.com/2011/12/01/trustee-declares-customer-shortfall-no-matter-what/

Other facts:

http://www.buytherumorsellthefact.com/2011/11/25/mf-global-situation-becomes-less-clear/?utm_source=DailyMarketFocus&utm_medium=eNL&utm_campaign=FUT_eNL

Holiday Shopping List: Investing Books

Some of our readers asked us about our favorite investment books (after our last post on "What Works on Wall Street.")...  Here are some of our favorites:

What Works on Wall Street

One of our favorite websites, CXO Advisory, had a nice summary of O'Shaughnessy's Book.

From Chapter 21, “Using Multifactor Models to Improve Performance” (Page 470): “…you can do vastly better than a passive investment…by using more than one factor to select a portfolio of stocks. …Investors are best served by buying stocks that have jumped a series of hurdles rather than just one.”

From Chapter 24, “Sector Analysis” (Page 545): “…what works in the All Stocks universe also works quite well at the sector level. …what we should avoid investing in at the All Stocks universe level should also be avoided at the sector level.”

From Chapter 25, “Searching for the Ideal Growth Strategy” (Page 567): “One of the very best ways to use price momentum is to marry it to a value constraint [composited value factors]. …six-month price appreciation is a more effective final momentum filter than 12-month price appreciation.”

While the author takes steps to mitigate data snooping bias, there are so many characteristics/combinations tested on the same data sets in search of best portfolio strategies that discrimination among strategies/variations may derive materially from luck.

http://www.cxoadvisory.com/17768/fundamental-valuation/a-few-notes-on-what-works-on-wall-street/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+cxo+%28CXO+Advisory+Blog+-+Investing+Notes%29