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This week it was reported that Tudor Investment Corp., one of America’s most expensive hedge funds, will be cutting its very high fees from 2.75% of assets and 27 percent of profits to a still very high 2.25% and 25% respectively. Still much higher than most of the confiscatory fees one will find among hedge funds. After hearing this I recalled what Dick Young wrote in his Intelligence Report a couple months ago, Hedge Funds Fail.
Hedge Funds Fail
Given the above, it was with some astonishment that I read Tim Martin and Rob Copeland’s recent Wall Street Journal exposé “Investors Pull Cash From Hedge Funds as Returns Lag Market.” “Lag market” is being kind. As the article explains, hedge funds have now lagged a “traditional mix of stocks and bonds for six straight
years.”
2% and 20% of Profits
Rubbing salt on the wound is that hedge funds traditionally charge pension funds greedy and unrealistic fees—2% of assets under management and 20% of profits. As a basis for comparison, a diversified stock portfolio over many cycles might provide an average gross 10% annual total return (6% return from capital appreciation and 4% from yield). But layer on an anchor of a 2% management fee and a 20%
fee on profits, and gross returns are slashed by a startling 40%, to only 6%. Look, investing is a zero-sum game. Each transaction includes a buyer and seller. One—never both—will be a winner, which means at least 50% of a given group of investors ends up as underperformers. And that is before the addition of usurious fees.
I Became a Former Trustee
Three decades ago, when I was a trustee at a major business school, I stood out like a sore thumb because of my opposition to hedge funds. And perhaps not shockingly, I soon became a former trustee. Well, 30 years later, I would still cast the same vote for the same reasons I have just outlined. You could argue that maybe I’ve not learned much over the decades, but my 50-year track record of
generating few sizable portfolio losses proves otherwise.
My Prudent Man Rule
So I do not condone most hedge fund tactics, and I do not suffer the debilitating level of fees outlined above. Rather, I practice the Prudent Man Rule of investing and tightly follow my long-time theme of patience, time, and compound interest. Can this effortless investing strategy really create millionaires? Well, for illustration, I’ll give you a little basic arithmetic and let you
be the judge. My overriding goal here is to make absolutely certain you come away from reading this issue with a whole new and profound appreciation for the two most important words in the investment universe—compound interest.
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If you have ever spent any time in New Haven or Hartford, CT, or many areas of Springfield, MA, you likely were concerned about safety. These are certainly not areas known for civility. And if these areas are the metros most representative of America today, as Five Thirty Eight tells
readers, you have no better reason to understand the momentum behind Donald Trump. Americans are scared and fed up with the elite politicians on both sides of the aisle. Americans want something done about the immigration laws that have swamped America with illegals and gang members like MS-13 , never mind the horde of Muslim immigrants, especially potentially troublesome single young males. Donald Trump appears to
have grasped America’s concern for safety and a return to an America First point of view.
Looking across metros of all sizes, the places that look most like America tend to be larger metros, though not the largest ones. The similarity index is highest, on average, for metros with between 1 million and 2 million people. The metros that look least like America are those with fewer than 100,000 people.
But the places that look today most like 1950s America are not large metros but rather smaller metros and rural areas. Looking across all of America, including the rural areas, the regions that today look most demographically similar to 1950 America are the portion of eastern Ohio around the towns of Cambridge and Coshocton and the Cumberland Valley district in southeastern Kentucky.
More from FiveThirtyEight here:
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Here The American Conservative’s Daniel Larison succinctly explains why both Daniel and Dick Young are such strong supporters of The Americans Conservative.
Since its founding, the magazine and its website have been the principled voice of conservative opposition to the many follies of the Bush and Obama eras, and they have also been the reliable defender of local communities, constitutional government, a broad distribution of power and wealth, and the causes of liberty and peace.
Over the last twenty-one months, TAC has been a consistent critic of the ill-conceived military intervention in Iraq and Syria, and we have been leading opponents of calls to escalate that war in recent months.
We continue to warn against the folly of wars of choice and the dangers of enabling reckless client states, but we have also been arguing for the importance of diplomatic engagement with Iran and Cuba.
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Make sure you have a chance to appreciate where you’re going and where you’ve been.
Jimmy Buffett put on a pop-up show Monday in Austin, TX in preparation for his summer tour “I Don’t Know”. A client of mine is driving up to Nashville, TN for tonight’s sold-out show at the Ascend Amphitheatre. Here’s a great video of Buffett and Jerry Jeff Walker. Walker (Mr. Bojangles) was the person who gave Buffett refuge in Coconut Grove, FL after he fled Nashville. It was in Walker’s Packard that they drove to Key West for Buffett’s first visit. It was there where they met Phil Clark, the “Pirate” in “A Pirate Looks at
40.”
The real pirate’s name was Phillip Clark. He was one of the most unforgettable characters I met when I first lived in Key West, back in the days before it turned into a boutique. When I finished the song, I knew I had done him justice, and it is a fitting eulogy to an old friend. He died a few years ago under an alias, washed up on a beach near San Francisco. They flew his body back to Key West
where some of his ashes were scattered at sea, and some still sit above the cash register in the Full Moon Saloon.
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Happy Memorial Day Weekend. Time for remembrance. Time for summer. Time to get to work.
When I was a kid I had three different jobs: a paper route, cutting lawns, and scooping ice-cream. One person I met at all three was, “the customer.” At the first job, the paper-route, I didn’t see the customer every day, but I would if I missed a house, got bit by their dog, was late, or needed to collect money. At the second job, cutting lawns, I’d see them if I missed a spot,
got stung by a bee from their bee box or needed to collect money. And at the third-one, scooping ice-cream , there was a never ending line of them out the door, especially on hot summer nights. I met the Little League teams, the vacationers, the daters, and the rest of small town Mattapoisett .
The best feeling in the world was knowing the customer was happy. And I would know that by how I felt inside. And, to me, that’s capitalism. It’s not Wall Street or leverage. It’s a simple, special relationship between you and the customer—someone I will make sure both of my kids meet at
an early age. Because at the end of the day we all need the customer.
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Michael Scheuer, former CIA bin Laden unit chief, represents fed-up Americans expecting answers and action from candidate Donald Trump, pronto or else.
Why do you refrain from explaining to Americans that the United States cannot financially afford more of the unnecessary interventionist wars – fought for the lethal illusion that America can give democracy, liberty, and women’s rights to foreigners — that are always lost, deepen the debt, waste the lives of U.S. service personnel, and erode civil liberty?
Why have you stopped explaining to voters the need for America to rid itself of a deadly and unneeded treaty commitment by withdrawing from NATO, an alliance that hangs around the republic’s neck and helps choke it to death?
Why are you meeting and/or chumming about with giants of the war-wanting Israel-First and Neocon movements, men like Lindsey Graham, Speaker Gingrich, Sheldon Adelson, and that engineer of our Vietnam catastrophe, Henry Kissinger.
None of this is much to ask, Mr. Trump, and all of it is encompassed in the phrase America First. If it begins to be clear that you do not intend to run a national government grounded on that principle, you are apt to see your support begin to whither and then flee.
Americans with a sense of desperation are not going to give up and turn silent and submissive if you betray them. These citizens perceive, I think, that if this election cycle yields another iteration of the status quo, the chance of vote-driven improvement is over, and another tack must be devised. Indeed, this perception probably is the main motivation behind the enormous growth in gun purchases that
has occurred since 2007.
For many Americans, and especially your supporters, Mr. Trump, these issues must be addressed to their satisfaction or at least a credible effort to do so must be made.
The 2016 election is the last straw, and a victory for the status quo will render a new approach mandatory. Desperation and perhaps a touch of despair will lead these citizens to action.
More on Why the U.S. Should Stop Intervening in Foreign Problems Here:
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Dick and I are back in Paris after several days in Beaune, France, the heart of Burgundy and its wine. Once again we stayed at our favored L’Hote de Beaune, first introduced to us by a Butterfield & Robinson bike tour we took about five years ago. Biking through Burgundy on the mythical Route des Grands Crus is how we became interested in the complex subject of Burgundy wines, as we visited the
revered wine villages of Gevrey-Chambertin, Chambolle-Musigny, Vougeot, Vosne-Romanée, Aloxe-Corton, and Puligny-Montrachet.
The Butterfield tours at the L’Hotel de Beaune are off about two-thirds, we were told. According to a manager, Americans are concerned about terrorism and are opting instead to stay and travel in the U.S.A.
We had lunch yesterday in Paris at the Patricia Wells-recommended Cafe Varenne on the corner of Rue de Bac in the 6th arrondissement. Same friendly service and delicious food as earlier in May, but this time, policier sporting serious looking Uzi-like weapons outside the restaurant. Not sure what it was about, and we were not concerned (since no one else seemed to be), but it
was interesting after talking with so many French about their concern over weakening tourism.
Our Burgundy friend David (Bourgogne Avec Chauffeur) has taken us on tours of the vineyards and transported us to and from Paris-Beaune several times. As he explained, another incident (terrorist) is going to make an already teetering industry come to an abrupt halt.
Strikes by unions are also not helping. Unions protesting France’s labor laws have closed six of France’s eight refineries (right before the soccer games). Many petro stations have run dry, stranding motorists, according to the Independent:
A third of petrol stations were dry or dangerously low on fuel after days of blockades at refineries by union activists.
British motorists traveling to France in the next few days would be well advised to arrive with full tanks. Some of the worse stricken areas are around the Channel tunnel and ferry ports in northern.
The French government already faces a nerve-racking time during the month-long soccer competition. More than 500,000 fans from the UK alone are expected to cross the Channel – half of them without tickets. France is still on high security alert following the November jihadist attacks, in Paris.
On our drive back to Pairs from Burgundy, David stopped to fill up on the highway because some stations in Burgundy are already running low on petrol. Wish I had taken pictures of the long lines.
On purely anecdotal evidence, Dick and I would say most cafes and bistros are only half full. Walking past Café Flore, it was hard not to notice how disturbingly empty it was. We had no trouble getting a table at our favorite Basque restaurant off Rue St. Dominique in the 7th. Pottoka is usually reservations only, even at lunch.
The manager of one of the lovely Palace hotels in the 8th arrondissement was boasting that his hotel’s occupancy rate was 80% in May, the only one in Paris, he said. A high-end shopping guide has lived in Paris for years. Her business is off 80% from same time last year. She counts on May and June to carry her through the less-touristy summer months and now is unsure her days as a tour
guide continue to be viable.
And finally, Dick just received an email from a friend of ours who is a wine rep in Rhode Island. The strike is killing his business, he reported.
C’est la vive from Paris.
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Read from NPR the manipulative editing Katie Couric, executive producer and narrator, was involved in while interviewing a Virginia gun rights organization. In the footage for the documentary “Under the Gun,” the editing makes the participants look shocked and rather stupid, as though they are stumped by Katie Couric’s key question on background checks.
Fortunately, one of the participants audiotaped the extemporaneous answers from the Virginia participants during the interview, and you can hear their immediate responses to Ms. Couric’s question. Read more here.
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NRA-PVF told readers, pre-Obama’s election, that Biden will be the most anti-gun V.P. in American history.
Few in the Senate have as much experience as Biden in attacking our Right to Keep and Bear Arms.
Just like fellow Democrats Edward Kennedy, Charles Schumer and Dianne Feinstein, Biden has voted for, and actively pushed, major anti-gun bills, including those:
- Banning semi-automatic firearms;
- Banning hunting, sporting and self-defense ammunition;
- Banning magazines holding more than 10 rounds; and
- Imposing a waiting period on handgun sales.
Biden also voted against the law that prohibits lawsuits designed to bankrupt law-abiding firearm manufacturers and dealers. And he voted against the confirmation of Supreme Court Justices who support the Second Amendment.
…
Biden voted to confirm only one of the five justices who ruled against D.C.’s handgun ban in Heller.
Remember this?
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