Affluential Hedge Funds Suffer in September

Oh how the mighty have stumbled. In a market where everyone is feeling the heat, even the well-respected, historical top performers are now finding it rough out there. We recently got some performance updates from numerous iconic hedge funds and found out that September was not kind to them. Let's take a look at some of the information.

• Moore Capital Management, a group of global macro hedge funds ran by notable risk manager Louis Bacon has seen three of its funds 'stumble' in the recent weeks, coming in -5% in September. You can view Moore Capital's equity portfolio holdings here.
• Maverick Capital, a $10 billion hedge fund ran by Lee Ainslie was -19.5% in the month of September alone and is now -21.2% year-to-date. As you can see, they were actually holding up pretty well all year until September hit them hard. Oh how one month can change things. Maverick's levered fund was -35.5% for the month of September. You can check out Maverick's most recent portfolio holdings here.
• Third Point Offshore, a fund ran by notable activist Daniel Loeb's Third Point LLC was -11% for the month of September and is now -18.4% for the year. You can check out some of Third Point's most recent holdings here.
• Paul Tudor Jones' Raptor Fund (Tudor Investment Corp) was -2% in the month of September and is now -12% year-to-date. Although Tudor employs a global macro strategy, the Raptor Fund is their equities fund. The Raptor Fund is currently run by James Pallotta; but, as I wrote about earlier, Pallotta is leaving Tudor to start his own equities fund. And, you can view Tudor Investment Corp's most recent equity holdings here.
• Greenlight Capital, the hedge fund run by David Einhorn, was -12.8% in September and is -16.4% for the year. You can check out some of Einhorn's portfolio holdings here.
• Lone Pine Capital, another 'tiger cub' fund managed by Stephen Mandel saw its Lone Cyprus fund -14.7% in September. That fund is -26.5% for the year. You can check out Lone Pine's recent activity here and portfolio holdings here.
• Timothy Barakett's Atticus Capital woes continue. His Atticus European Fund was -15.8% percent in September and his Atticus Global Fund -2.8% in September. Atticus European is now -42.5% for the year and Atticus Global is -27.2% for the year. You can view Atticus' most recent SEC filings disclosing their portfolio holdings here.
• Jeffrey Gendell's Tontine Partners wer -59.30% in September and are now -66.7% for the year... unreal. Here are Tontine's most recent portfolio holdings.
• Bret Barakett, brother of Atticus' Timothy Barakett, is also feeling the pain. His Tremblant Capital was -19.3% for the month of September and is -28% for the year. You can check out Tremblant's recent activity here and their portfolio holdings here.
• Shumway Capital's levered fund was -16% for September, and their Ocean fund was -8.6% for the month and is now -9% year-to-date. (Yet another case of one month doing extreme damage to a fund).
  
• Chris Coleman's Tiger Global was -14.3% for September and is now -13.7% for the year.
• Stephen Cohen's SAC Capital Multi-strat fund was -10.7% for September.
• Farallon Capital Management was -10.5% for the month of September.
• David Stemerman's Conatus Capital was -10.4% for September and is -8.10% year-to-date. Stemerman recently left Lone Pine Capital (referenced above) to start his own fund, which I wrote about here.
• Jana Partners was -9% for September and is -14.7% for the year
• Andreas Halvorsen's Viking Global, who I will be profiling next week, was -7.9% for September and is 0.30% for the year. (Wow, a fund that is actually still UP on the year).
• Bill Ackman's Pershing Square was 0.10% for the month of September and finds himself 1.9% for the year. (Another fund actually UP on the year).
• Ken Griffin has been hit hard as well. Citadel Capital's flagship fund was -15% for September and -18% for the year. The fund has lost around $2 billion.
  

So, don't feel so bad if your portfolio is underwater because even those regarded as 'some of the best in the game' are finding this market troublesome. No one is invincible in this environment.

Well, almost no one. John Paulson certainly could argue that he is invincible. Paulson runs Paulson & Co and is famous for making a fortune by betting against sub-prime when this whole mess began to unfold. And, it appears as if Paulson is still up to his fortune-making ways. One of his funds has generated a 589% return, which could easily be up there amongst the largest returns by a single hedge fund in a year. Paulson's Advantage Plus fund has returned 19.44% year-to-date as of the end of August. This is the same fund that gained 158% the year prior and has grown to almost $9 billion. And, that's not all. Paulson has multiple funds performing well in this environment. Taken from DealJournal,

"Paulson’s Advantage fund was up 13.22% for the year to the end of August, having made 100.15% last year. Its Credit Opportunities fund was up 12.95%, having made 351.72% last year; its Credit Opportunities fund was up 12.46%, having made 589.62% last year; its Enhanced fund was up 8.17%, having made 116.48% last year; and its International fund was up 5.17%, having made 51.7% last year. Paulson turned a $500m investment in its Credit Opportunities fund into $3.5bn over the course of last year, considered by investment consultants and investors the largest dollar amount ever generated by a hedge fund in a year."

After making a fortune by betting against sub-prime, Paulson has turned his focus to shorting UK banks. Paulson is on quite a roll and we'll keep an eye on his performance over the next year and see if he can hit a home run three years running.

Overall though, this has been the worst year for hedge funds in quite some time. As evidenced above, even some of the historically brightest managers in the game are stumbling a bit. And, undoubtedly, such struggles will lead to investor redemptions and continued deleveraging.


For more information and background on some of the iconic hedge funds mentioned above, head over to my posts on hedge fund manager interviews and Alpha's hedge fund rankings.




Sources: Anonymous investors in various funds, NYT , Bloomberg, FT, & WSJ DealJournal

Goldman Sachs Conviction Buy List Update

Yesterday (10/2), Goldman Sachs (GS) was out making some changes to its esteemed conviction buy list. They removed Freeport McMoran (FCX) from the list, but still reiterated a normal 'buy' rating on the name. Additionally, they have added Suncor (SU) to the list.

Copper mining giant Freeport McMoran (FCX) hit a new 52-week low of $45.17 yesterday as it continues to get obliterated. Just a few months back, it was trading as high as $125. Nowadays, amidst the commodity sell-off, deleveraging, and hedge fund redemptions, FCX is getting no love. Its valuation is borderline absurd, trading at around a 5 trailing PE and a 3.9 forward PE. But, valuation got thrown out a long time ago in this market environment. Hedge fund giants such as Timothy Barakett's Atticus Capital and Philip Falcone's Harbinger Capital had massive positions in FCX as of their most recent respective 13F filings with the SEC. Undoubtedly, the decline in FCX's share price has hit these funds hard. And, they most likely have been contributing to the selling. Last time we checked various hedge fund's year-to-date performances, Atticus was down 25% for the year and Harbinger, after being up 42% for the year, now finds themselves up only 2% (more numbers here). You can view Atticus' portfolio holdings here and Harbinger Capital's portfolio holdings here. Additionally, you can read more about Harbinger's exploits here.

Suncor (SU), on the other hand, was being added to the conviction buy list as shares continued to tumble. SU has fallen from a high of $73 to current levels of $33. Canadian Oil Sands giant Suncor (SU) is owned by numerous hedge funds, including legendary oil maverick T. Boone Pickens' BP Capital. And, as you can imagine, the share price depreciation in SU has affected Boone's portfolio in a negative way. Although not the sole reason for his funds' decline, Boone still finds himself down $1 billion for the year. You can view all of T. Boone Pickens' BP Capital equity holdings here.


Source: StreetInsider 1, 2

Hedge Fund Tracking: Harbinger Capital's 13F Filing (Managed by Philip Falcone)

(Note: Before reading this update, make sure you check out the preface to the series I'm doing on Hedge Fund 13F's here).

It's time to continue the Hedge Fund tracking series. If you've missed them, I've already covered Jeffrey Gendell's Tontine Partners, Bret Barakett's Tremblant Capital, Peter Thiel's Clarium Capital, Stephen Mandel's Lone Pine Capital, Lee Ainslie's Maverick Capital, John Griffin's Blue Ridge Capital, Boone Pickens' BP Capital, Louis Bacon's Moore Capital Management, Paul Tudor Jones' Tudor Investment Corp, Bruce Kovner's Caxton Associates, and Timothy Barakett's Atticus Capital. And, if you want to hear some insightful thoughts from many of the hedge fund managers listed above, head over to my post on Hedge Fund manager interviews. This week, I'm taking a slightly different approach to the hedge fund tracking series. I'm doing so because the 13F SEC filings are filed on a quarterly basis, so these materials are time sensitive and the next ones are due out in November. I stated in my series preface that you need to treat these as a lagging indicator, because that's what they are. The holdings discussed below reflect portfolio holdings as of June 30th, 2008. So, since these forms are so tedious to sort through, I've condensed the rest of the hedge funds I track to summarize their major moves and top holdings.

Harbinger Capital is a $13.8 Billion firm ran by Philip Falcone. Taken from StreetInsider, Harbinger is "a disciplined, value investor with an emphasis on intensive credit research. Its focus is on middle market companies that tend to be misunderstood or under-researched by the market. Investment approaches include: Restructuring/Bankruptcy, Turnaround, Liquidation, Event Driven, Capital Structure Arbitrage, Short Sale and Special Situations." At one point during this year, they were up as much as 42% (more on that below). And, if you're interested in more on the manager of Harbinger, then head over to my post about Philip Falcone.

So, now that we've got a background on Harbinger Capital, let's take a quick look at their portfolio highlights. Keep in mind that this is merely a brief summary of their top holdings. Due to the time sensitive nature of the 13F material, I wanted to get this information posted before the next set of filings come out in November.

Top 20 Holdings by % of Portfolio
1. Freeport McMoran (FCX) - Added to position by 4.3%
2. Cleveland Cliffs (CLF) - Boosted stake by 127%
3. AK Steel (AKS) - Added to position by 12%
4. Mirant (MIR) - Added to stake by 7.5%
5. Sprint Nextel (S) - New position
6. Ultrashort Financials (SKF) - Decreased stake by 10%
7. Atlas Air Worldwide (AAWW) - Barely moved stake, literally only sold 4 shares
8. Leap Wireless (LEAP) - No change in position
9. Ashland (ASH) - Increased position by 17.4%
10. New York Times (NYT) - Sold literally only 12 shares
11. Owens Corning (OC) - Boosted stake by 4.8%
12. Cablevision (CVC) - New position
13. Corn Products International (CPO) - Increased stake by 168%
14. Williams Sonoma (WSM) - Sold literally only 3 shares
15. Yahoo (YHOO) - New position
16. TerreStar Corp (TSTR) - Boosted stake by 2.7%
17. Peabody Energy (BTU) - New position
18. RTI International Metals (RTI) - No change in position
19. Northwest Airlines (NWA) - Added only 46 shares
20. Hughes Communication (HUGH) - No change in position

Harbinger's top 3 holdings have undoubtedly increased the volatility in their portfolio. Those three stocks have been on a downward spiral to hell. Freeport McMoran (FCX), Harbinger's top holding, traded around $110-120 at the time of this SEC filing. Since then, FCX has sold off hard and currently trades around $53. Additionally, their position in Cleveland Cliffs (CLF), which they increased by 127% last quarter, has played out in similar fashion. (They basically bought additional CLF at the top). CLF traded around $120 at the time they disclosed their positions. Now, CLF trades around $48. How about some more? Let's move on to AK Steel (AKS), which traded around $70 at the time of this filing. Now, it trades around $23. Undoubtedly, you get the picture. Harbinger's metals and natural resource plays have really been a thorn in their side. And, if there is one 13F filing I am most looking forward to come November, Harbinger's would be it. Because, in that next filing, we will get to see their updated portfolio to see if they were "buying the dip" in these names, or whether they were puking them up with the rest of the market. Harbinger has massive positions in these names, as they are their top 3 largest portfolio holdings.

So, how much pain did those positions (among others) cause Harbinger? Well, a lot, as I recently noted in my performance update on Harbinger. Earlier in the year, they were up as much as 42%. And, nowadays, they find themselves up only 2% for the year. How's that for a swing? This is why I say that their next filing will be very interesting, because many of their top holdings have seen wild volatility. And, if you're interested in other hedge funds, then head over to my last hedge fund year-to-date performance update.

Other notable portfolio news includes new positions in Sprint Nextel (S), Cablevision (CVC), Peabody Energy (BTU), and Yahoo (YHOO). These are positions that Harbinger did not hold in the prior quarter and thus are new holdings. And, they were sinking a lot of money into these positions, as they brought all of these holdings all the way up to top 20 holdings in their portfolio.

One last thing I want to mention is their position in Corn Products International (CPO). Over the past quarter, they boosted their position in this company by 168%, bringing it up to their 13th largest holding. So, on one hand, you can highlight that they were buying with conviction and that maybe it's a name we should be paying attention to. On the other hand, they added to CLF with conviction and look where that got them. Point being, they were heavily adding to this name.

Also, since this 13F filing, we have seen additional activity by Harbinger. In a recent 13G filed with the SEC, Harbinger has disclosed a 6% ownership stake in Ashland (ASH). They now own 3,789,266 shares. Curiously enough, in the 13F detailed above, Harbinger held 5,871,426 shares of ASH. So, they've decreased their position substantially recently. A 13G filing signifies a passive investment in a company. But, as we are all too familiar with Harbinger's activist exploits in the coal/steel arena, there's always the option they could shift this position from a passive investment, to an activist one (which would require a 13D filing). But, for now, they've maintained it as a passive investment while decreasing their stake.

That sums up the details of Harbinger's filing. Overall, it's been the worst year for hedge funds in a long time, and Harbinger is a perfect example of such volatility.

You can view Harbinger's entire 13F filing over at the SEC.

Let the Bloodbath Begin: Hedge Fund Redemptions

September 30th was the final day (end of the quarter) that investors in most hedge funds could request to redeem their money in December. If you've been following my posts on this matter, you know we're in for a rough ride. There have already been reports of massive redemption requests by investors. As of right now, redemption estimates are in the hundreds of billions. Nouriel Roubini, respected Professor of Economics at NYU, recently predicted this and said the run on hedge funds could last up to 2 years.

Why are investors running to redeem their money you might ask? Well, maybe it's because Hedge Funds have had a rough year just like everyone else. While there are some standout performers, the majority of funds have been on the losing side of things. Overall, the performance of hedge funds and fund of funds this year has been the most widely dispersed in six years. And, such dispersion is bound to cause redemptions. These redemptions cause hedge funds to sell out of their positions and raise cash. Increased selling in the markets can create increased volatility, in a time when we are coming close to testing historical levels of volatility. Citigroup analysts already estimate that hedge funds have around $600 billion in cash reserves in anticipation of redemptions.

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FT Alphaville captures the possible severity of the situation,

"The bottom line, according to industry outfit hedge fund research, is that up to 2000 hedge funds can be expected to be liquidated in the coming months. Given the complexity of the market - the way hedge funds and their holdings so interlace the financial system, this is a potential massive shock. It almost makes the failure of Lehman pale into insignificance. The Lehman collapse will be worked out over years. Hedge fund redemptions and liquidations will take days or weeks."

Simply put, hedge funds are deleveraging. Not to mention, you've got the added threat of hedge funds straight up liquidating and closing up shop. We've already seen evidence of this with the closing of Dwight Anderson's Ospraie Fund. And, rumors started swirling as to who was next. Then, on top of all that, numerous funds are close to shutting down simply because all their assets are tied up in the prime brokerage operations of the now defunct Lehman Brothers. Hedge funds who used Lehman's prime brokerage services have seen their accounts frozen as Lehman filed for bankruptcy protection a few weeks back. Here are some excerpts from Bloomberg illustrating how many funds are affected by this:

"

• London-based MKM Longboat Capital Advisors LLP said last week it will close its $1.5 billion Multi-Strategy fund in part because of assets stuck at Lehman
• Lehman Brothers Holdings Inc.'s bankruptcy probably means the end of hedge-fund manager Oak Group Inc. after 22 years in business.
• Diamondback Capital Management LLC, a Stamford, Connecticut-based hedge fund, told investors that it had assets of $777 million stranded in Lehman
• Managers with a smaller percentage of assets in Lehman limbo include Harbinger Capital Partners, Amber Capital LP and Bay Harbour Management LLC, which are each based in New York, and RAB Capital Plc and GLG Partners Inc., both in London
• Darden Capital Management, an investment club run by students of the University of Virginia's business school, has about $6 million in four funds that are stranded.

"

As you can see, investors aren't the only ones threatening hedge funds' livelihood. Counterparty risk is very much a problem as well. The collapse of numerous Wall Street institutions has sent a shock wave through the entire investment community.

As I recently wrote, this has been the worst year for hedge funds in a long time. Heck, Boone Pickens' funds are down $1 billion. The market volatility has affected everyone, and it could get even worse.


For more on redemptions, liquidations, and the deleveraging of hedge funds, check out some of my recent articles:
Worst Year for Hedge Funds in a Long Time
VIX: Historical Volatility Comparison
Crisis and Deleveraging of Hedge Funds
Boone Pickens Funds Down Big
Run on Hedge Funds is Next Step



Sources:
FT Alphaville
Bloomberg

Improve Market Folly: Vote in Our Polls!

Hey everyone, I've just tossed a few quick polls up to get an idea what readers like/dislike. Feel free to fill in the "other" category, post up comments, or email me. I'd love any and all feedback!

Hedge Fund Tracking: Atticus Capital's 13F Filing (Managed by Timothy Barakett)

(Note: Before reading this update, make sure you check out the preface to the series I'm doing on Hedge Fund 13F's here).

It's time to continue the Hedge Fund tracking series. If you've missed them, I've already covered Jeffrey Gendell's Tontine Partners, Bret Barakett's Tremblant Capital, Peter Thiel's Clarium Capital, Stephen Mandel's Lone Pine Capital, Lee Ainslie's Maverick Capital, John Griffin's Blue Ridge Capital, Boone Pickens' BP Capital, Louis Bacon's Moore Capital Management, Paul Tudor Jones' Tudor Investment Corp, and Bruce Kovner's Caxton Associates. And, if you want to hear some insightful thoughts from many of the hedge fund managers listed above, head over to my post on Hedge Fund manager interviews. This week, I'm taking a slightly different approach to the hedge fund tracking series. I'm doing so because the 13F SEC filings are filed on a quarterly basis, so these materials are time sensitive and the next ones are due out in November. I stated in my series preface that you need to treat these as a lagging indicator, because that's what they are. The holdings discussed below reflect portfolio holdings as of June 30th, 2008. So, since these forms are so tedious to sort through, I've condensed the rest of the hedge funds I track to summarize their major moves and top holdings.

Atticus Capital is a $13 billion hedge fund ran by Timothy Barakett. In 2005, Atticus' funds were up a combined 45%. And, they finished well over 30% for 2006. Barakett founded the firm at age 26 in 1995 and focuses on taking large, concentrated positions in companies. One of Atticus' most famous investments was Phelps Dodge, a miner which was bought out by Freeport McMoran (FCX). At one point, Atticus owned more than 9% of Phelps. And, they continue to hold their position in what is now the combined FCX. Barakett received his BA in Economics from Harvard and his MBA from Harvard as well. Its very evident that Barakett employs macro based investment theses. Once he has decided on what the trend is, he will find the best company within that trend and he will place a big bet. And, when needed, he will step in and take an activist role, ensuring the company is performing to his liking.

You may have heard about Atticus over the past few weeks because they have not been performing well at all this year. In my last hedge fund year-to-date performance update, we noted that Atticus was -25% for the year. And, consequently, Atticus was a victim of liquidation rumors, which have since been denied. We previously analyzed Atticus' portfolio holdings back in June and noticed that they had significant natural resource and mining positions at the time. I'll get into the details below, but you can take a guess as to where a lot of their losses are coming from this year. Overall, it's been one of the worst years for hedge funds in a long time.

So, now that we've got a background on Barakett and Atticus Capital, let's take a quick look at his portfolio highlights. Keep in mind that this is merely a brief summary of Atticus' top holdings. Due to the time sensitive nature of the 13F material, I wanted to get this information posted before the next set of filings come out in November.

Top 20 Holdings by % of portfolio
1. Union Pacific (UNP) - Increased position by 61%
2. Conoco Philips (COP) - Stake rasied by only 0.3%
3. Mastercard (MA) - Decreased position by 13%
4. Burlington Northern (BNI) - Decreased stake by 6%
5. Freeport McMoran (FCX) - Decreased position by nearly 52%
6. NYSE Euronext (NYX) - Sold off 9.3% of their position
7. Occidental Petroleum (OXY) - Decreased stake by 7%
8. Crown Castle (CCI) - Decreased by only 0.4%
9. Peabody Energy (BTU) - New position
10. Baidu (BIDU) - Increased stake by 65%
11. Norfolk Southern (NSC) - Increased position by 36%
12. Canadian Natural Resources (CNQ) - Decreased stake by 16.6%
13. Visa (V) - New position
14. Boeing (BA) - Boosted stake by 440% (no, not a typo)
15. Praxair (PX) - New position
16. Focus Media (FMCN) - New position
17. Unibanco (UBB) - Sold off 36% of position
18. Amerco (UHAL) - Decreased stake by 32%
19. Conseco (CNO) - Sold off 8.8% of position
20. Vale (RIO) - New position

So, if you didn't already notice, Atticus definitely favors positions in the rails. And, you can't blame them. Those investments have paid off significantly over the course of the year. Atticus has large positions in most of the majors: Burlington (BNI), Norfolk (NSC), and Union Pacific (UNP). Atticus also holds a position in CSX Corp (CSX), but it just isn't a top 20 holding. Atticus boosted their stake in UNP by 61%, propelling it all the way up to the fund's top holding. Numerous other hedge funds have very large positions in the rails as I've noted before. Not to mention, Warren Buffett has some pretty large stakes in some of the rails as well.

Next, I noticed that Atticus was selling off a chunk of their Mastercard (MA). This position could potentially be another one that has been causing them some pain lately. Although they sold 13% last quarter when the share price was trading around $270-300, MA has since plumetted, and is currently hovering around $185. And, considering it was/is their 3rd largest holding, it has to be causing them some pain.

Freeport McMoran (FCX) comes in at the fund's 5th largest holding and could equally be responsible for the fund's poor performance this year. As I noted earlier, they gained these FCX shares through their purchase of Phelps Dodge (who was acquired by FCX). And, up until now, they had pretty much held onto the shares of the new company. But, this past quarter, we saw Barakett unload nearly half his position. At the time of this sale, FCX was trading anywhere from $100-120. But, recently, FCX has traded way down to $63. This name has seen brutal selling over the past few months and you have to think that either Atticus was getting mauled by the sell-off, or they were partly responsible for it. We'll see what the verdict is come November when the next 13F filings are released.

Atticus also added some new holdings this past quarter, and they were adding with conviction. They initiated a position in Peabody (BTU) and brought it up to the fund's 9th largest holding. Additionally, they initiated Visa (V) as their 13th largest holding, Praxair (PX) as their 15th, and Focus Media (FMCN) as their 16th largest. Also, although they already owned Boeing (BA), they boosted their stake by a whopping 440%, bringing it way up to the fund's 14th biggest position.

Overall, it's easy to see where some of Atticus' pain may be coming from this year. Barakett runs a smaller, highly concentrated portfolio. And, when it wins, it wins big. But, as you're seeing now, it can also lose big as well. To see all of Atticus Capital's holdings, you can view their entire 13F filing with the SEC.

Stanley Shopkorn (ex-Moore Capital Management) Opens Hilltop Park Fund LP

Today, Hilltop Park Fund LP will begin trading. This new hedge fund was started by Stanley Shopkorn, former head of equities trading at Louis Bacon’s Moore Capital Management LLC. Hilltop opens up in a sour environment, where protecting and growing capital will undoubtedly be a tedious affair. But, I'm sure with Mr. Shopkorn's experience and knowledge that they will try their best to not start off on the wrong foot.

Hilltop is of particular interest to me because Shopkorn comes from Louis Bacon's Moore Capital Management, a prominent global macro hedge fund. And, since Shopkorn used to head the equities trading department at Moore, you can bet he will be using equities at his new fund. So, look forward to November, where we will get a glimpse of the "global macro" thought process when it comes to equities they are investing in. We'll then compare them to Moore's equity holdings to see where Shopkorn is differing with his strategy. If you want to see Moore Capital Management's most recently portfolio holdings, you can find them here.


Source: HedgeCo

Warren Buffett Buys Stake in Chinese Battery Co

Well, as the markets suffered a loss of nearly 7% yesterday, you might have missed this piece of information that seemingly slipped under the radar. Warren Buffett has acquired a 9.89% stake in BYD Company, a Chinese battery manufacturer. This battery company plans to sell electric cars by 2010 in the US. Buffett bought the stake through his Berkshire Hathaway holding MidAmerican Energy Holdings (Berkshire owns 87% of MidAmerican) and the stake cost around $230 million.

Purchasing a stake in a battery maker makes a great deal of sense here, given the squeeze in the automotive industry. Numerous manufacturers have already produced hybrids or electric cars and one can assume that the trend will continue, as consumers worry about miles per gallon and rising fuel costs. The automotive landscape is changing and Buffett looks to capitalize on the upcoming trend/shift in the industry. BYD makes lithium-ion batteries that will be found in electric vehicles. So, while this may be the worst year for hedge funds in a long time, Buffett is sticking to business as usual.



Source: NYT

Wall Street Plunge Illustrated

Great picture illustrating how I'm sure a lot of people felt on Monday September 29th, 2008, the day the market fell 777 points.

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Marketfolly.com Back Online

Okay, it finally looks like www.marketfolly.com is back online. I want to apologize to readers regarding our downtime, but I had no control over the matter, as it was hosting related. They are still working on the problems and the site might flicker in and out in the next few hours, but they assured me everything would be back to normal very soon.

I have re-scheduled all posts from today to post tomorrow, to ensure that no content was lost in the mix. Thanks for your patience and sorry again. Frustrating stuff!

VIX : Historical Volatility Comparison

Many people were quick to note the Volatility Index surging as the market plummeted. So, where do current VIX levels compare to other crises? Maoxian has a great chart up illustrating just that.

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Now, the ultimate question becomes: where does the current crises fall on the list in terms of severity? Worse than the '87 crash?

Source: Maoxian

Wall Street Bailout Versus Wall Street Market Loss

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Today, the U.S. market lost nearly 7%. The market cap wiped out today was more than the proposed bailout plan that failed to pass.



Source: EconomiPic Data

2009 Earnings Estimates Are Too High

I wanted to pull an excerpt off of Chad Brand's blog because he illustrates a simple point here: 2009 Earnings estimates are too high.

He writes,

"Below is the breakdown of earnings from 2006 through current 2009 estimates: Notice what while S&P 500 earnings will be down this year, for the second straight year, eight of the ten sectors are expected to have earnings gains for the third consecutive year in 2008, as well as further gains in 2009. This data shows exactly how much impact the financial sector's woes are having on the market. The consumer discretionary sector is an obvious casualty of such fallout, but everything else is fairly strong. Personally, I think 2009 earnings estimates remain too high, though they have come down some already. Although I think the odds are remote, it is easy to see that, when one assumes the financials will rebound sharply, such a high S&P earnings number is possible in 2009 because the other sectors remain on firm footing."

As you can see from his graphic, earnings estimates indeed seem way too high for 2009, considering the fact that the crisis has elevated in recent months. There is really a trickle down effect at work here. Financials will stink it up, we all know this. But, what so many people have seemingly written off (no pun intended), is the spillover effect into other sectors. Not to mention, you've got 2 separate crises at the same time. On one hand, you've got the credit crunch, and on the other hand you've got a decelerating consumer environment and a horrible housing market. While some aspects of each are intertwined, the spillover effect is still underestimated when you consider all the problems facing the economy as a whole. So, while we may just be starting to work through the majority of the credit crisis problems, we've got a whole nother set of issues to tackle with the housing market and debt-ridden, struggling consumer. Estimates will come down.

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Source: Chad Brand's Peridot Capitalist