A Hedge Fund Insider Explains Why Retail Investors Should Flee The Stock Market

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Thu, 12/01/2011 - 23:22 | 1937189 SilverIsKing
SilverIsKing's picture

Gold, silver, nuff said.

Thu, 12/01/2011 - 23:40 | 1937215 Doña K
Doña K's picture

His message is true and clear. The messenger is not too elloquent. I don't get it. No one can better your odds in a no win situation.

Gold, Silver, Agri-land with good water source, guns and ammo for the next ten years. Real eatate after that.

 

Thu, 12/01/2011 - 23:55 | 1937244 nope-1004
nope-1004's picture

I remember coming to this same conclusion back in the summer of 2009.  The market made no sense.  Financials started taking off, yet FASB was a complete fraud and farce, enabling only those on the "inside" to syphon more public money from the sheeple believing the headlines.

Any retail investor trading this market is an idiot with their head up their ass, believing in a fairytale outcome.

Market is rigged.  Government is criminal.  Joh Corzine and JPM just stole millions of dollars.  WAKE UP people.  The devil is at work here, keep away from this ponzi.

 

 

Fri, 12/02/2011 - 00:25 | 1937336 FEDbuster
FEDbuster's picture

But we have Jim Cramer (just kidding).

When the shit really hits the fan, food is the one item you'll want to have plenty of.  Study a little history, and you will find there is always a shortage of food.  As an American who has never known real hunger (and I never want  to), I have many days where I buy in to the "it can't happen here" mentality.  Now I seem to have more "why can't it happen here" days. 

Fri, 12/02/2011 - 00:57 | 1937350 Oh regional Indian
Oh regional Indian's picture

Hhhhh....the real joke fedbuster is that THAT is where it all started. Of course it's happening all along. Right here (there actually, but sometomes I feel like I'm still THERE).

I remember, once I had understood the whole "Accredited Investor" scam, I knew. Strict upward mobility filter. Rich get richer. It's who you know. Money begets money..... etc.

ORI

the-plan/

Fri, 12/02/2011 - 01:50 | 1937398 flacon
flacon's picture

When I used to work for Merrill Lynch it was an "open secret" that the "derivative group" was CONTRAVERSIAL. I left in summer 2007, 6 months after I knew that... fuck you Stan O'Neal! Yes and I worked for a month for BlackRock when they bought MLIM, fucking bastards! It's all coming down MARK MY WORDS!

 

http://www.youtube.com/watch?v=J0SPio6RE-s

Fri, 12/02/2011 - 03:24 | 1937566 Michael
Michael's picture

Average income individuals who dabble in the stock market are playing Russian roulette with themselves.

I find it quite funny seeing people blow their own brains out(figuratively speaking) playing in the market. I know a few people who lost well in the six figure range and their life savings to the house. I'm sorry, it's just funny as hell to me to see stupid sheeple losing massive amounts of personal wealth to the market manipulators.

Better to not work extra hours making extra money to dump into the stock market, they'll only steal it from you and you'll have pissed away a large chunk of your life for nothing if that's what you do.  

Fri, 12/02/2011 - 04:20 | 1937624 oldman
oldman's picture

if you wanna play

you gotta pay

Fri, 12/02/2011 - 05:02 | 1937665 ucsbcanuck
ucsbcanuck's picture

Here's the problem though - most of my retirement accounts are in cash or CDs. You earn shit returns on those things and government bonds. Maybe the truth is that it's better to be doing things that way than even trying to get involved in the stock market. 

Fri, 12/02/2011 - 05:47 | 1937704 topcallingtroll
topcallingtroll's picture

Long term usa treasurys have the best thirty year return of any asset class. Why didnt you buy bonds?

Richard russell says the real bull markets are so stealthy no one ever rides them all the way.

I guess he is right.

Who around here is in treasurys? Or was long usa bonds these last thirty years?

Fri, 12/02/2011 - 09:07 | 1937875 mrdenis
mrdenis's picture

 go to TIPS ......

Fri, 12/02/2011 - 12:48 | 1938941 ucsbcanuck
ucsbcanuck's picture

And they're overpriced right now, clown.

Fri, 12/02/2011 - 07:31 | 1937754 Confused
Confused's picture

Shit returns on cash and CD's is what helps feed the beast, by forcing us to search for higher returns in equities. 

 

Cash for PMs. My retirement account either won't be worth anything, or I won't make it to retirement. 

Fri, 12/02/2011 - 07:44 | 1937759 Bobbyrib
Bobbyrib's picture

Bernanke is to blame for why so many retail investors are in the stock market. ZIRP is killing the average saver to the point that they look for another vehicle for higher returns. That's when the stock market comes into play. End the Fed. Let interest rates adjust.

Fri, 12/02/2011 - 09:51 | 1938065 pelican
pelican's picture

100% correct Michael.  I am young still, however everything you said was done to me.  Housing Market crash, stock market crash, it is all a lie.  At least I figured this out and have the second half of my life left (I hope)

Never work an extra hour for an employeer.  They will lead you along with a carrort and then eat you for dinner.

Fri, 12/02/2011 - 09:33 | 1937891 Widowmaker
Widowmaker's picture

Accredited investor is pinstripe speak for those with an attorney.

Using a Blue Sky Agreement, one may typically get around the fancy language and min net worth bullshit.

It's all bullshit, but one thing for certain is if you want to lose money there is ALWAYS a way in.

Feel richer yet?

Fri, 12/02/2011 - 00:38 | 1937354 The Big Ching-aso
The Big Ching-aso's picture

 

 

Ya, but in a casino a scantilly-clad babe hands me a drink, wishes me good luck, and winks at me.      

Whenever my wife reads my latest 401k casino statement, she yells at me, calls me an idiot, and gives me the finger.

Fri, 12/02/2011 - 09:58 | 1938104 tooktheredpill
tooktheredpill's picture

like it

 

yeah, maybe buy casino equity as well

Fri, 12/02/2011 - 10:00 | 1938108 midtowng
midtowng's picture

I figure out that the 401k/IRA system was fucked up back in 2003, only after I put in tens of thousands of dollars that are now trapped.

Nevertheless, I figured it out before the bubble, so I don't regret much. I figured out that we were all being lied to, so I bet against whatever the market was pushing. In doing so my assets have multiplied several times over (energy stocks from 2003-2007, and gold from 2002 to present).

The simple fact that I made lots of return on that trapped money by betting AGAINST whatever I was being told just shows how fucked up the market is.

Fri, 12/02/2011 - 00:41 | 1937359 Sophist Economicus
Sophist Economicus's picture

I'm down with the gold and farm land - been acquiring both for years.    That said, this writer is a putz!   I don't believe he works for a hedge fund.   I don't see anything in his incoherent rant that means anything.    For all of the brilliant 'analysts' Goldman has, they go on record being long the Euro and Short the Euro - and on these 'pages' are the butt of jokes.    The we have Paulson with his 'up to the eyeballs' BAC and selling gold to get more, we have a gazillion funds staring at record redemptions, etc.    Two years ago, the entire industry SHOULD HAVE just gone under - some inside information!

 

Is there dirty dealings going on -- sure there is.   But that will be true anywhere people gather - no matter in what profession.   Spare me the hysteria you snivelling idiot - you probably work for an NGO....

Fri, 12/02/2011 - 00:56 | 1937380 JPM Hater001
JPM Hater001's picture

"That said, this writer is a putz!   I don't believe he works for a hedge fund.   I don't see anything in his incoherent rant that means anything."

Your belief is never required. A brick wall will stop you whether you believe it is brick or not.

And so has this kids analysis. Seriously, open at least one eye while posting on ZeroHedge.

Fri, 12/02/2011 - 01:39 | 1937425 beaker
beaker's picture

I agree w/JPM - this guy is a Putz and a newbie putz, at that. Yes, there are some nuggets of truth here.  True enough about the spreads, and lack of access to exotic derivatives, but so what? I mean, WTF is this we hear all the time about hedge funds blowing up?  How does that happen? I've been a commodity trader for 35 years and here's the truth in this story: All these hedge funds are fucking other hedge funds with all the shit they create and trade. If they had all the answers, they'd have all the money. Go ahead and check out this fabulous track record of hedge funds.  It has de-volved into the S&P 500 returns. Here's the loop:  Manager A finds a market inefficiency and makes money.  He markets the system and track record. Money floods to him.  The system works until he cannot trade the logistics of tens of millions of dollars like he could when he was trading a million dollars. Where he was buying 100 cars, now he's buying 10,000 cars.  Try exiting positions like that and he ends up getting spreads like the pink sheets.  Returns flatten out.  Another system slides into obscurity until the next yahoo comes along. The "house" that is really winning are the managers who collect their 2% annual fee and 20% in a couple of the intermittant good years.  Everyone is picking each other's pockets at all the levels of this game.  It is a zero sum because no wealth is being created.  It's a big circle jerk.  This whole thing is like technology turning on its greedy unethical creators so everything is all fucked up like we have it today.

Indeed, buy farmland to create wealth and store it in gold. There's no counter-party risk.

Fri, 12/02/2011 - 01:50 | 1937457 The Big Ching-aso
The Big Ching-aso's picture

 

 

I gave ya some green because obviously you really know your shit.

 

Fri, 12/02/2011 - 02:36 | 1937527 Freddie
Freddie's picture

Go ahead and check out this fabulous track record of hedge funds. It has de-volved into the S&P 500 returns.

+1

Yup - the vast majority are like scammer Raj Rajarian or whatever that fat f**ks name is.  Stevie C who can afford to buy people off. 

This is also why some of us respect guys like Hugh Hendry, Kyle Bass, Ray Dalio/Bridgewater and maybe Chanos.  Also Marc Faber and Jim Rogers who are not exactly hedgies.   These guys really think. 

 

Fri, 12/02/2011 - 03:10 | 1937561 dark pools of soros
dark pools of soros's picture

i agree what you say but you have to take that and apply it to what you said.  Buying farmland was the last 'yahoos' game and the price of good farm land is through the roof and everyone is selling the small farms away...  good luck small guy ANYWHERE even finding choice land under a bridge will be tough for the serfs

 

http://millslegacy.wordpress.com/2011/11/21/land-price-boom-closing-down-the-concept-of-the-family-farm-as-we-knew-it-in-the-past/

 

 and before you think you can go be a hog or chicken farmer, that is even more fucked

http://www.localfutures.org/publications/online-articles/the-farm-crisis

"Many hog and poultry farmers no longer own any animals. The farmers get the chicks and hogs from the multinationals. Even the grain the animals are fed is provided by the company. At the end of the season, the full-grown animals are trucked to the company's processing plants where they're weighed. After rating each farmer's performance in pounds, the company deducts its charges for the chicks or hogs, feed, transportation, and any other services or products it supplied, such as propane to heat the buildings. If there's anything left over, the farmer is compensated. The only thing that the company allows the farmer to own are the heavily-indebted buildings and land where the company raises 'its' animals."

 

 

Fri, 12/02/2011 - 09:39 | 1937989 beaker
beaker's picture

I have never understood the attraction to livestock.  It is a very tough business model, but I do not call that farming.  Yes farmland prices have been bid up but the market is only giving about a 4.5% cap rate at the high end.  The crazy $16,000/ac" stories tat you read about occur at some rural auction where a couple of neighboring farmers are bidding up a small parcel to square a section.  No serious farmland investor is accepting much under 4%.

Fri, 12/02/2011 - 11:53 | 1938646 Alex Kintner
Alex Kintner's picture

Well, since Obama opened the door to Selling Horse Meat For Human Consumption, you have an alternative to hogs now. I guess since the Cat Food commission failed, he felt he had to do something.
http://www.dailykos.com/story/2011/11/30/1041092/-Horse-Slaughter-now-Le...

Fri, 12/02/2011 - 06:04 | 1937712 Scribbles
Scribbles's picture

Great post.

One thing about farmland - there IS counter-party risk when Barry O. confiscates it to create a network of hole-digging communes.

You can, of course, reduce that risk through the purchase of other assets, such as those products available from Smith & Wesson.

Fri, 12/02/2011 - 06:35 | 1937733 Doc
Doc's picture

Author is very naive. Funniest part is about the 0.1% the elusive "super-rich".

I've heard of a lot of Hedge Fund Managers who've made it onto the Forbes lists, I ain't never heard of a client making it on there... even the 0.1%.

The author doesn't address a central fact which is even before the 2000s over 75% of active asset managers don't beat their benchmark.

 

My dislexic aunt who can't even read a fucking income statement or balance sheet has compounded at about 15% a year since the mid 80s buying oil & gas royalty trusts. All she did was reinvest all the income and always check the reserves to make sure the trusts weren't running out of oil in the near future... markets can be outperformed if an investor is dilligent, patient, understands the investment thesis and underlying product, and can bear the volatility. Just don't expect John Paulson type grand-slams (and then grand crashes)...

Look at all the ZH posters who've made money in silver & gold over the past 3, 5, 10 years, taking all the big drops in stride and just building their positions. Again, proof that dilligent and unemotional investors can and do beat the market!

Fri, 12/02/2011 - 08:26 | 1937792 twotraps
twotraps's picture

agree, thanks for saving me the fucking rant I was cooking up.  Sure, there are differences in cost and access, when was it ever fair??  Love the old story about the vote to bring phones to the NYSE floor.....people were agast, 'then anyone can trade' was the cry, people saw progress and volume/business exploded, you can't go back.     So, now we have super-computers and you get quotes on your iphone.  Not likely we go back in time but it must evolve.  Actually, if you've been in it 35, to my 25, you might remember the $75 fees!  

 

Hate to see govt intervention and manipulation but at the end of the day I know I don't have all the information, I know I am behind with access but I still have to decide to trade or not.  Still must make risk decisions, deciding not to trade is a trade.  

Fri, 12/02/2011 - 23:29 | 1940755 count_zero
count_zero's picture

^ +1

Active managers keep most of the alpha for themselves, whether hedge funds or mutual funds. Hedge funds suffer from survivor bias also. After down turns hedge fund managers are stuck with a high water mark to overcome before getting that 20%, so they shutdown.

Don't play the zero sum game. Index! Let others pay for price discovery. If you're concerned about currency risk (as I believe most here are), consider Harry Brown's Permanent Portfolio. (Yes, the same one who ran for president as a Libertarian.)

25% gold (hedges currency risk)

25% t-bills (for interest risk)

25% long-term treasuries (for deflation risk)

25% US stock (eg, VTI, SPY) (for generating wealth)

Four low correlation assets that damp each other, for a slow, steady return. The bond barbell gives higher convexity (lower losses if rates rise) in exchange for a little less yield, vs intermediates.

Fri, 12/02/2011 - 09:50 | 1938057 tooktheredpill
tooktheredpill's picture

what makes u think that PM's are not manipulated also?

If you don't make a living of it like Einhorn and Greenblatt, focus on earning power and stick it somewhere safe with shite interest. Fucking boring but at least 30 years later you haven't blown a large chunk of it.

Thu, 12/01/2011 - 23:49 | 1937239 yabyum
yabyum's picture

Gold silver, can't argue w/that. What abot pslv? phys? miners? as tools to turn fiat into the physs?? Miners have been tough(no shit) time to keep some quality and flip the rest in to metals (or a small acerage w/well)

Thu, 12/01/2011 - 23:53 | 1937245 1000pips
1000pips's picture

Silver is $32.85 an oz.; Gold at $1747...Zero Hedge, and many of you who post here, constantly said many times last year that Gold would be $2500 oz., and Silver well over $100 by the end of 2011.  

Also, you said, the USD was suppose to crash and not be the world's reserve currency by the end of 2011.  

None of this has happened, nor will it.  

The Stock Market will reach new highs in 2012, USD will remain the reserve currency, and Gold and Silver will probably go down in value as 'the end game' never seems to happen and people go on with their daily lives.  

Gold is not a religion, it is a mineral, you buy Gold with Dollars, to wear and show off with, it's 'Bling', not money.

It's time everyone gets back to reality, the world is not going to end, but the Gold bubble is.

Thu, 12/01/2011 - 23:55 | 1937250 RmcAZ
RmcAZ's picture

Don't feed the trolls.

Fri, 12/02/2011 - 00:04 | 1937270 1000pips
1000pips's picture

no troll here, just stating that the predictions of gold being at $2500 by the end of 2011 did not happen, what say you about that?  

Also the USD is still the reserve currency, what say you about that?  

State your logic, oh, you cannot, because now it is a FACT that these predictions of 'the end game' never happened.  What say you about that?  

You are the troll...

Fri, 12/02/2011 - 00:09 | 1937281 nope-1004
nope-1004's picture

Actually, some idiots said gold would be at $500 and silver under $10.

What say you about that?  For a guy that's been a member for 4 weeks, you sure are up on the history of this site.

LOL.

Fri, 12/02/2011 - 09:54 | 1938083 tooktheredpill
tooktheredpill's picture

yes, you get idiots on both sides

but c'mon, equities suck so that must mean buy PM's? fuck me

Fri, 12/02/2011 - 00:16 | 1937307 Backspin
Backspin's picture

You also stated that gold is not money.  That will get you some down arrows around here.

Fri, 12/02/2011 - 01:47 | 1937419 Raphio
Raphio's picture

You also stated that gold is a mineral. Sorry to inform you that gold is actually an element not a mineral.

Fri, 12/02/2011 - 01:54 | 1937464 1000pips
1000pips's picture

No my friend, sorry to inform you that GOLD IS A MINERAL...


  1. Gold - Mineral Fact Sheets - Australian Mines Atlas www.australianminesatlas.gov.au/education/fact_sheets/gold.jsp

    Gold had a significant historical role in Australia, which had its first gold rush in 1851 after the mineral was found near Bathurst in New South Wales. ...

  2. google before  you post disputing me, your lack of education can be hidden the less you say,,,

Fri, 12/02/2011 - 02:42 | 1937531 El Gordo
El Gordo's picture

I thought it was an element listed on the periodic table.

Fri, 12/02/2011 - 02:52 | 1937545 1000pips
1000pips's picture
min·er·al 

 (mnr-l)
n.
1. A naturally occurring, homogeneous inorganic solid substance having a definite chemical composition and characteristic crystalline structure, color, and hardness. 2. Any of various natural substances, as:
a. Such as gold or silver. b. An organic derivative, such as coal or petroleum. c. A substance, such as stone, sand, salt, or coal, that is extracted or obtained from the ground or water and used in economic activities. 3. A substance that is neither animal nor vegetable; inorganic matter. 4. Inorganic, such as calcium, iron, potassium, sodium, or zinc, that is essential to the nutrition of humans, animals, and plants. 5. An ore.

Fri, 12/02/2011 - 03:43 | 1937585 Raphio
Raphio's picture

I stand corrected. I thought I remembered my first year Geology courses correctly  - that minerals are, by definition, composite substances,,ie. compounds. I was not aware that pure elements could also be considered "minerals".

Fri, 12/02/2011 - 05:04 | 1937667 ucsbcanuck
ucsbcanuck's picture

Gold is a metallic element not a mineral.

Fri, 12/02/2011 - 05:26 | 1937687 Eurodollar
Eurodollar's picture

Unfortunately people want someone to lead the way so they don't have to think themselves. It is nothing new. Human beahviour! Simple psychology! It's more comfortable commenting: the world is blowing up bitchez, than to actual spend a whole day analyzing whatever subject should have been analyzed.

 

That said; Tyler is doing a good job by all comparisons. The flow of information here is only good for us "the masses" to digest.

Sat, 12/03/2011 - 20:22 | 1942593 Stoploss
Stoploss's picture

GOLD:

Symbol = AU

Periodic Number = 6

Atomic number = 79

Atomic weight = 196.96654

Element Classification = Transition Metal

Discovered by/Known to the ancients

Discovery Date is unknown

Name Origin = Anglo Saxon: geolo (Yellow); Symbol from Latin aurum (Shining dawn)

Density: (g/cc); 19.3

Melting Point(K) = 3080 degrees Farenheight

Appearance: Soft, Maleable, yellow metal.

Atomic Radius (pm) = 146

Atomic Volume (cc/mol) = 10.2

Covalent Radius (pm) = 134

Ionic Raduis = 85 (+3e) 137 (+1e)

Specific Heat @ 20c j/g mol = 0.129

Fusion Heat kj/mol = 12.68

Evaporation Heat (kj/mol) = ~340

Debye Temperature (K) = 170.00

Pauling Negativity Number = 2.54

First Ionizing Energy (kj/mol) = 889.3

Oxidation States = 3,1

Electronic Configuration =  [Xe] 4f to 14th 5d to 10th 6s to 1st

Lattice Structure = Face-Centered Cubic (FCC)

Lattice Constant (A) = 4.080

Lattice C/A Ratio = N/A

 

Is there anything else you require?? If so, please call:

1-800- i-donthaveafuckingclueaboutpmsorhowtosatisfymywifeinanywayshapeorform.

Thank You from our readership, for your concern, we do not need your help. (We have better computers)

 

Sat, 12/03/2011 - 20:29 | 1942628 Stoploss
Stoploss's picture

Gold is a metallic chemical element.  See above. pips is retarded.

Fri, 12/02/2011 - 00:18 | 1937309 J 457
J 457's picture

I'm old enough to recognize that this time its not business as usual. The USD reserve has never been under as much pressure as it currently is today. The debt @ 15 trillion, the 1.4 trillion annual deficit and 600 billion trade gap. Look back only a short decade ago and see the huge disparity from today.

Yes, the world and the US will continue, but I firmly believe there will be significant change in the next 2-5 years. Our current path is not sustainable and no amount of deficit reduction or tax increases will be enough to satisfy the debt without smothering our service comsumption driven ecomony. We're now in a tight corner.....

Fri, 12/02/2011 - 04:52 | 1937653 The Navigator
The Navigator's picture

Quite correct J 457 - Exponential numbers - Chris Marenson at http://www.chrismartenson.com/crashcourse does a great job explaining how things seem ok untill the last second, when number go exponential and then BANG, its over.

Don't be dissapointed when you think "WTF, it shsould have happened by now" - ZH is way ahead of the curve, 6 months to a year ahead - a better (not perfect) crystal ball once you understand the timing aspect of ZH.

Do NOT follow this link or you will be banned from the site!