Being Smart And Passing A Verdict On The Market May Hurt The Purse

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by Tyler Durden
Friday, Nov 12, 2021 - 10:22 AM

By Ven Ram, Bloomberg Markets Live Commentator and analyst

It’s a daunting, if painful, business calling the tops and troughs of a market. 

While that may seem pretty self-evident, every now and then, investors pay heavy tuition to learn that lesson by deploying their money in funds that charge an arm and a leg as fees.

Now, everyone and their uncle think they have a dozen compelling reasons as to why stocks are headed for a major correction imminently. That’s a great and engaging game to play at the pub, but like last night’s drink, it’s best forgotten the next morning. Otherwise, the hangover can linger, with embarrassment being a key side effect. In the past six months alone, a number of bulge-bracket banks have swallowed a bitter pill and recanted their call for a slide in the S&P 500 as the index heads for a third successive year of eye-popping returns.

Make no mistake, these are very smart people who spend considerable energy, time and effort crunching numbers to back up their thesis. Of course, there is little question that the markets are expensive, but putting a time line on when a bull run will end is best left to market forces.

So it should come as little surprise that some well-known funds are going through a lean patch. For instance, Russell Clark Global Fund, well known in hedge-fund circles, has thrown in the towel after a decade of trying to short the market. Element Capital, another high-profile name, has evidently sustained a loss of roughly $1 billion last month, hurt by bond-market turmoil.

Of course, for every fund that bites the dust, there are several that make money, but there is just no way for investors to know which fund will be the one that will successfully complete the marathon. Instead, it may be wiser to remember one simple dictum when investing: sometimes, it’s not what you know that matters so much, it’s what you don’t know that will come back to haunt you.