I strongly suspect that Ms. Holmes' delusions that she's going to pull herself out of this mess will, at long last, be dismissed when the reaction she gets to this "3 for 1" offer is the sound of crickets.
From his optimistic outlook for the US economy, immigrants, and capital markets, to this favorable take on buybacks and passive investment, to his slamming of hedge funds and active managers, all this and more is covered in Buffett's latest annual letter, whose highlights are summarized below.
"There may have been some market impact from our trading earlier this week...Our exposure was greatly exaggerated, and our impact on the market was greatly exaggerated... we’ve covered our positions..."
Investors need to be cognizant of, and understand why, the chorus of arguments in favor of short-sighted and flawed strategies are so prevalent. The meteoric rise in passive investing is one such “strategy” sending an important and timely warning. Just remember, everyone is “passive” until the selling begins.
As a result of continued market underperformance, assets under management at Jeremy Grantham's iconic GMO have tumbled to about $80 billion, down from a peak of $124 billion in June 2014, a drop of 35% in two and a half years.
"The punchline is that the passive / smart beta / risk-parity / risk-control systematic universe often times ARE the entities in the market causing counter-intuitive trading behavior, such as today’s price-action."
In his latest Global Equity Strategy update piece, Credit Suisse strategist Andrew Garthwaite takes a random walk across Wall Street's trading desks, and confirms what many know: namely, that nobody actually knows anything.
On the day in which the government reported modestly stronger than expected retail sales for the month of May, signalling a return to strength for spending and the US consumer - the driving force behind 70% of US GDP - a far more ominous statistic was revealed by credit card company Synchrony Financial, which earlier today announced in a regulatory filing that it expects write-off rates to climb 20 to 30 basis points over the next 12 months, and will increase reserves for soured loans beginning this quarter.
Hedge funds attracted a net $44 billion in assets globally last year, the smallest amount since 2012. As these increasingly desperate funds try to change that in 2016, one enormous target has been identified in Australia.
"Instead of looking for manager’s and investment opportunities to beat the market, investors are opting to be the market and are likely creating the most crowded trade in history. Stagnant monetary policy fosters a groupthink outlook. The Fed Put prompts the same positioning. Computerized programs trade correlations and relationships established during an extended period of abnormal policy. Active managers continue to retrench as the market diverges from the fundamentals, but the blind buyers continue to participate - it does not matter if the market is 10x, 15x, or 20x earnings, they buy for one reason, it is the market."
When Tom Bentley tried to pull his money from a mutual fund troubled by its large stake in Valeant Pharmaceuticals International Inc., he instead received shares in a Springfield, Mo. auto-parts retailer. Sequoia Fund Inc. sent the retired computer hardware engineer about 5% of his money in cash and the rest was stock in one company–O’Reilly Automotive Inc. Mr. Bentley said he sold the shares as soon as they appeared in his account on April 7, but they had already dropped in value. "It has been pretty horrendous," Mr. Bentley said.