Highest Yielding Savings Accounts: Options For Cash Positions

Every once in a while, we like to dive into the lesser talked about topics of personal finance and we like to examine what the average saver/spender is seeing in terms of options. After all, it can affect many of their decisions going forward. Over the past month or so, we've gotten a lot inquiries about where to put 'cash' since there is still uncertainty out there. Right now, there are a few institutions that are providing meager yields compared to what they used to be. And, obviously that is due to the fact that the Federal Reserve is at 0%. However, you do still have better options than placing your money in a money market fund where you'll earn a paltry 0.40%. We've decided to check out what is out there and present some alternative ideas to at least get something out of all that cash on the sidelines.

All Rates Effective 06/29/2009

Ally Bank: 1.75% Savings Account, 2.00% 1 year CD

By far the highest yielding savings account we've found right now is that of Ally Bank. Their savings accounts are paying out 1.75% APY and their CDs are at 2.00% APY for a 1 year CD. They are FDIC insured, are part of the GMAC parent entity, and the Ally name is an effort to rebrand the business going forward. This could be a cause of concern for some, but we'd also highlight that as long as your account is FDIC insured, you're protected (which Ally is). So, make sure you stay within the FDIC imits ($250,000) and you're good to go. Their savings account and CD yields are the highest out there at the moment (and as far as we can tell have no fees or minimums). So, if you think the Fed won't be juicing up rates over the next 12 months, you can lock in at a 2.00% CD with no monthly fees and daily compounded interest.


WT Direct: 1.76% Savings Account

Upon researching all the options, WT Direct seems to be well known among various personal finance bloggers out there. The yield on their savings account is 1.76%, slightly lower than that of Ally. However, you need to deposit $10,000 or more to get that APY. WT Direct is FDIC insured and is part of Wilmington Trust, who has been around 105 years. This might offer a little more stability for those concerned about Ally's ole GMAC relationship.



HSBC Direct: 1.55% Savings Account
ING Direct: 1.5% Savings, up to 1.63% Checking

Two of the most well-known savings accounts that personal finance savants have sworn by in the past are ING Direct and HSBC Direct (both institutions are FDIC insured.). While they may be 'big time' and mainstream options, their yields have certainly fallen by the wayside. HSBC Direct is yielding 1.55% on their savings while ING Direct is yielding up to 1.63% on their checking accounts (with $100,000 or more deposit) and 1.5% on their savings. The thing with ING is you essentially have to put a lot of money into the account to get a good rate. If you're putting less than $50,000 in, don't bother with them as you'll earn a paltry 0.24%. All of the other institutions mentioned above have no minimums to get the good rate (with WT Direct being the exception at a $10,000 requirement). Another negative regarding ING is you cannot link it to your brokerage account (hat tip to a reader for that info). I guess the HSBC and ING choices would be sacrificing yield for 'peace of mind' as they are bigger institutions? Doesn't seem worth the tradeoff to us, but maybe it is for some.

FNBO Direct: 1.5% Savings Account

Another lesser known option is FNBO Direct. After digging through the personal finance blogosphere, we've found that this bank was also recommended for cash placement. Their savings account is yielding 1.5% currently, so below that of both Ally and WT. FNBO is an affiliate of First National of Nebraska and they are also FDIC insured.


After doing some research, all of the above seem to be some of the most popular savings accounts in personal finance blogger circles. Those of you with overweight cash positions can look at either money market accounts, online savings accounts, or CDs and that's really it if you want to stay within the 'cash' classification. In the end, everything is a bit weak in terms of yield. But, we can thank the Fed for that. If you want to take on a little more risk for much bigger yields, we'd suggest checking out investment grade corporate bonds, high yield bonds, or a combination. That's obviously a topic for another discussion, but it could be worth looking into.

Any other major options we missed? Where does everyone have their cash at these days? Let us know so we can monitor rates going forward. For more info on rates and all that good stuff, bankrate is a good resource for monitoring.


(Database of FDIC Insured banks available here).

Treasuries At Resistance (TLT Chart): Will the Trend Hold?

Kevin has recently brought a great chart to our attention. He pulls up the TLT which is essentially the 20 year treasury in exchange traded fund form. While some could argue technical analysis on this vehicle is a moot point, we still think there are some interesting observations at it has held numerous trendlines in the past.

This time around, Kevin has targeted $95 as the line in the sand for TLT. And, we completely agree with that. If you look at past trends for treasuries/bonds, you'll see that they typically put in a seasonal low around May or June. We are obviously right in the midst of that. What makes this interesting is that TLT is currently bumping up against its downward trendline (the red line), possibly set to breakout to the upside. This scenario would yet again solidify the seasonal aspects bonds have exhibited in the past. This might seem like mumbo-jumbo to some people, but it's still interesting to at least highlight.

(click to enlarge)

Currently, TLT is facing double resistance: from the downward trendline and also from the previous low established back in early May (the green horizontal line). So, watch this current area as a pivot point for the next big move in treasuries/bonds. If resistance holds, you can get short. If it breaks resistance, then get long for a trade. Either way, this vehicle often represents the inverse of the equity markets. So, a breakout in treasuries (people flocking to 'safety') would obviously be bad news for equities.

We saw this phenomenon in a big way back in October/November of last year. While it is unlikely we'd see that violent of a decrease in equities (and subsequent rise in TLT share price) again, the fact that numerous people have been calling for more downside is a cause for concern. This suspicion could possibly be confirmed if treasuries breakout to the upside. At the very least, it's an interesting indicator to monitor.

For additional thoughts regarding treasuries, make sure to check out hedge fund legend Julian Robertson's steepener swap play. That bet has sparked a lot of conversation in the debate as to which direction treasury yield curves are headed. Julian argues that they are headed 'steeper', while many others argue 'flatter' in a reversion to the mean trade. And, this is obviously very relevant because if TLT breaks out to the upside as hypothesized above, that would indicate the yield on the 20 year Treasury falling. (Remember, bonds have an inverse relationship between price and yield). Those betting on inflation and yields rising (by shorting TLT) have certainly had their way since the start of 2009; yields have risen and TLT has plummeted. Now it's time to see if the trend holds or not.

What We're Reading 6/26/09

7 habits of highly suspicious funds [Rick Bookstaber]

Snapshot of the Goldman Sachs Conviction List [Zero Hedge]

Revisiting the debate over Yale's investing guru, David Swensen [BusinessWeek]

Inflation - the real threat to sustained recovery (by Alan Greenspan) [Financial Times - subscription needed to view]

Ricky Sandler's Eminence Capital Likes Tech & Science Plays: 13F Filing Q1 2009

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

(image courtesy of Value Investor Insight)

Next up, we have Eminence Capital. Eminence is a New York hedge fund ran by Ricky Sandler. As of this last quarter's filing, they held $4 billion in long US equity exposure. Sandler attended the University of Wisconsin and holds a CFA designation. Prior to Eminence, Sandler started his career as a research analyst for Mark Asset Management and then went on to start Fusion Partners at the age of 25 with Wayne Cooperman. As their investment styles started to differ, Sandler went on to start Eminence. Sandler employs a 'quality value' approach to running his portfolio, spending equal time on both the long and short sides of his portfolio. In the past, he has said they employ gross leverage and are typically around 120% long and 70% short. The last major performance update we gave on them was in March of this year where they were -0.4% for the month and up 5.23% for the year as of that time. At the end of this article we've attached a Value Investor Insight feature on Ricky Sandler from the past.

The following were Eminence's long equity, note, and options holdings as of March 31st, 2009 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.


Some New Positions (Brand new positions that they initiated in the last quarter):
Thermo Fisher Scientific (TMO)
Visa (V)
SPDR S&P 500 (SPY)


Some Increased Positions (A few positions they already owned but added shares to)
Apple (AAPL): Increased by 71%
Walmart (WMT): Increased by 71%
Lowes (LOW): Increased by 38%
Nike (NKE): Increased by 27%
Lockheed Martin (LMT): Increased by 25%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Oracle (ORCL): Reduced by 59%
International Game Technology (IGT): Reduced by 55%
Bed Bath & Beyond (BBBY): Reduced by 49%
Qualcomm (QCOM): Reduced by 26%
SAIC (SAI): Reduced by 24%
Quest Diagnostics (DGX): Reduced by 23%


Removed Positions (Positions they sold out of completely)
Microsoft (MSFT)
Applied Materials (AMAT)
Genentech (DNA)
Grupo Televisa (TV)
Agilent Technologies (A)
Gaylord Entertainment (GET)


Top 15 Holdings (by % of portfolio)

1. Oracle (ORCL): 8.23% of portfolio
2. Abbott Labs (ABT): 6.63% of portfolio
3. Cognizant Tech (CTSH): 6.2% of portfolio
4. Lockheed Martin (LMT): 5.95% of portfolio
5. Fiserv (FISV): 5.9% of portfolio
6. SPDR S&P500 (SPY): 5.25% of portfolio
7. Qualcomm (QCOM): 5% of portfolio
8. Google (GOOG): 4.6% of portfolio
9. Zebra Technologies (ZBRA): 4.5% of portfolio
10. Cisco Systems (CSCO): 4.45% of portfolio
11. Quest Diagnostics (DGX): 4.3% of portfolio
12. Ross Stores (ROST): 4.28% of portfolio
13. Laboratory Corp (LH): 4% of portfolio
14. Apple (AAPL): 3.9% of portfolio
15. Thermo Fisher Scientific (TMO): 3.7% of portfolio

A few observations about their portfolio: Their largest position (Oracle) is still their #1 holding, even after they sold 58% of the position on a quarter to quarter basis. That just gives you an idea of exactly how big of a position this was for them. We'll have to wait until next quarter to see if they were merely trimming their position size or making a greater move in the context of things. They also hold Abbott Labs as their 2nd largest position which is interesting seeing how shares of the company declined steadily from February until April (new 52 week lows). It appears to be showing some signs of stabilization now and maybe they see value in this name.

In terms of 'typical' holdings that we usually see in hedge fund portfolios, Eminence fits the bill. They hold Qualcomm (QCOM), Apple (AAPL - a position they noticeably added to), Thermo Fisher (TMO), and Visa (V). Those names are some of the most widely held amongst numerous hedge funds we track here in our portfolio tracking series.

What also struck us as interesting is Eminence's propensity to own laboratory testing companies, as they own the two main players in the space: Quest and Laboratory Corp. Combine this with their aforementioned pharma play Abbott Labs and lab supplier Thermo Fisher and we could possibly see a sector bet here.

And, as mentioned in the beginning of the piece, here is a Value Investor Insight feature on Ricky Sandler from an issue in the 2006 that gives nice background and is an interesting read:




Assets from the collective holdings reported to the SEC via 13F filing were $1.5 billion this quarter compared to $1.85 billion last quarter, so there was a slight decrease. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. We've already covered:

- Gurus such as: Soros Fund Management (George Soros), and Jim Rogers.

- 'Tiger Cub' portfolios like: Andreas Halvorsen's Viking Global, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Shumway Capital Partners (Chris Shumway), Chase Coleman's Tiger Global,

- Outperforming funds like: John Paulson's hedge fund Paulson & Co, Eric Mindich's Eton Park Capital, Raj Rajaratnam's Galleon Group,

- Value and activist funds such as: David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Whitney Tison's T2 Partners, Philip Falcone's Harbinger Capital Partners,

- Concentrated funds that play secular/macro themes such as: Timothy Barakett's Atticus Capital, Bret Barakett's Tremblant Capital Group, Boone Pickens' BP Capital Management, John Burbank's Passport Capital

- And, newer funds on the scene: David Stemerman's Conatus Capital. Check back each day as we cover new fund portfolios.

Third Avenue Investor Letter (Marty Whitman)

Below is Marty Whitman's Q2 2009 letter for Third Avenue Funds investors. RSS & Email readers may need to come to the blog to view the material. If you're having trouble printing the document (margin errors), then open it up in Scribd, download it, and print the .pdf from your desktop. Hat tip to our friends over at ValuePlays for posting it up!

Unrelated note: Thank you to readers: anonymous, anonymous, and Taboo69 for your donations. We sincerely appreciate your generosity! (Taboo69 - your email inbox is full, clean it out so we can send you an email!)
If you would like to support MarketFolly, you can donate here.

Hedge-like Strategy Mutual Funds (Again)

This really is starting to get ridiculous. Yesterday, we got word out of money manager Van Eck Global that they would be launching a Multi-Manager Alternatives Fund under the symbol VMAAX. It is an open ended fund and, wait for it, they are pursuing "hedge-like strategies." This is yet another offering for retail investors of the globe aiming to pursue strategies normally reserved for the high net worth crowd. Yet, despite their so-called hedge-like strategies, rest assured... this mutual fund will still adhere to the "same SEC regulations that apply to all similarly situated open-end mutual funds" Van Eck says.

For plenty of reading on the topic, check out our past post on QAI: a hedge fund ETF, on WisdomTree's hedge fund ETFs, or on mutual funds using hedge fund strategies. Overall, we don't see the point of these vehicles as they cannot truly replicate the investment process. Additionally, we've found that these ETFs and funds end up just investing in other ETFs in a fund-of-funds type of structure. And lastly, we'll have to truly reserve judgment until they can prove that they can even match the returns that they are targeting over time. Right now, they essentially have no track record. Money managers keep rolling these out as if they're all the rage. We really don't have anymore to say on the subject besides reporting this super-new and super-never-done-before development. That was sarcasm, by the way.

Yawn. Wake us up when all the offerings in this regard die down.

(click to enlarge)

Goldman Sachs: Manipulation Kings of the Market?

*Update: Unfortunately, the document has been removed. However, a reader has pointed us to this link which has the full text of the article if you're interested.

Interesting read by Matt Taibbi in Rolling Stone regarding the postulation that Goldman Sachs has been behind every major market manipulation to date. Don't take the fact that it's from Rolling Stone too lightly either. It confused us as well at first, but after reading the piece and going back and reading some of Taibbi's other work, it made more sense as to why our friends over at Zero Hedge posted it up initially. Here is the slide-deck of the article which RSS/Email readers will need to come to the blog to view. Let us know if you're having problems printing the document from Scribd with margin errors, as we can recommend a fix.

Philip Falcone's Harbinger Capital Partners Portfolio: 13F Filing Q1 2009

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

Harbinger Capital Partners is a $6 billion firm ran by Philip Falcone. Harbinger was started in 2000 with seed capital from Harbert Management ($25 million). We've learned that Falcone is buying out Harbert to be the owner of the firm. Falcone made a name for himself in 2007 when he started shorting subprime mortgages and returned 117%. He focuses on intensive credit research, on bankruptcies and proxy fights, and was previously involved with high yield debt trading. Lately, he's been focused on equities it seems, but Harbinger's new fund will redirect his focus back to his roots.

Harbinger has been quite busy over the past year as they have been re-tooling their portfolio and fighting off a massive decline in assets. They were ranked #1 in the top 10 asset losers, losing 60.8% of assets on a year over year basis. As we've been covering on the blog, Harbinger has been decreasing their Cliffs Natural Resources (CLF) position, selling off some of their Calpine (CPN), and is seeing bidders for their NYT stake, among many other portfolio moves.

Harbinger's Offshore fund finished -22.7% for 2008. They were up 0.95% for January 2009, 4.64% for February, and +0.74% for March, leaving them at +4.06% year to date as of then. Most recently, we noted that Harbinger has revealed a new position in Zapata (ZAP).

The following were Harbinger's long equity, note, and options holdings as of March 31st, 2009 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.


Some New Positions (Brand new positions that they initiated in the last quarter):
The only new position of size is McDermott (MDR). The following new positions are all each less than 0.13% of Harbinger's portfolio, thus representing tiny positions: MDC Partners (MDCA), Weatherford (WFT), and Direxion 3x bear (FAZ)


Some Increased Positions (A few positions they already owned but added shares to)
No notable activity in this category


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Consol Energy (CNX): Reduced by 56%
Hughes Communications (HUGH): Reduced by 56%
ICO Global (ICOG): Reduced by 52%
Cliffs Resources (CLF): Reduced by 20%


Removed Positions (Positions they sold out of completely)
Cablevision (CVC), Navistar (NAC), Electronic Arts (ERTS), US Oil Fund (USO) Puts, Ultrashort financials (SKF), Williams Sonoma (WSM), Seracare Life Sciences (SRLS), Augusta Resource (AZC), Spectrum Brands (SPC).


Top 10 Holdings (by % of portfolio)

1. Calpine (CPN): 34.24% of portfolio
2. Leap Wireless (LEAP): 16.24% of portfolio
3. Cliffs Resources (CLF): 9.2% of portfolio
4. New York Times (NYT): 8.8% of portfolio
5. Atlas Air (AAWW): 8.7% of portfolio
6. McDermott (MDR): 7.3% of portfolio
7. Consol Energy (CNX): 6.1% of portfolio
8. Solutia (SOA): 2.7% of portfolio
9. Constellation Energy (CEG): 2.4% of portfolio
10. Terrestar (TSTR): 1% of portfolio

Obviously, the main story here is how Harbinger has a whopping 34% of their portfolio in one position, Calpine (CPN). However, there are some caveats here. Firstly, the filing details positions as of 3/31/09. Since then, there have been developments where Harbinger will be selling some of their shares. We've covered the entire CPN situation in detail here.

Other notable holdings round out his top 5 positions with Leap Wireless, Cliffs Resources, New York Times, and Atlas Air. Cliffs Resources is interesting because Harbinger has been involved with them for a while now as they led a campaign against the previously proposed merger with Alpha Natural Resources. Their involvement in the situation was all over the financial news and they still hold the position today. On their New York Times position, they face numerous headwinds, including both macro/secular trends and an ownership family. We've touched on some of the problems in the newspaper industry before, but we have also noted how Harbinger also has another prominent investor in NYT, Mexican billionaire Carlos Slim. In the future, we hope to take a closer look at the NYT in particular to really break down the situation there.

Assets from the collective holdings reported to the SEC via 13F filing were $1.4 billion this quarter compared to $2.3 billion last quarter. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. We've already covered:

- Gurus such as: Soros Fund Management (George Soros) and Jim Rogers.

- 'Tiger Cub' portfolios like: Andreas Halvorsen's Viking Global, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Shumway Capital Partners (Chris Shumway), Chase Coleman's Tiger Global,

- Outperforming funds like: John Paulson's hedge fund Paulson & Co, Eric Mindich's Eton Park Capital, Raj Rajaratnam's Galleon Group,

- Value and activist funds such as: David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Whitney Tison's T2 Partners,

- Concentrated funds that play secular/macro themes such as: Timothy Barakett's Atticus Capital, Bret Barakett's Tremblant Capital Group, Boone Pickens' BP Capital Management, John Burbank's Passport Capital

- And, newer funds on the scene: David Stemerman's Conatus Capital. Check back each day as we cover new fund portfolios.

Thomas Steyer's Farallon Capital Files 13D on Global Gold (GBGD)

Thomas Steyer's hedge fund firm Farallon Capital Management has filed an amended 13D on Global Gold (GBGD) and they now show an 11.3% ownership stake in the company. The filing was made due to activity on May 26th, 2009 and they own 4,466,456 shares. This is a decrease in the amount of shares they've previously owned and they attached numerous details of sales in their filing. They were selling in excess of 119,000 shares on May 26th and 27th, as well as June 2nd. They sold at the prices of $0.11 and $0.09, with the bulk of their sales coming at $0.11. While we haven't covered Farallon's entire portfolio in our hedge fund tracking series, we will note that they have much fewer positions than in the past.

And, this is obviously due to the fact that Farallon saw a big decrease in assets under management (AUM) for 2008. In fact, they narrowly escaped being on the top 10 asset losers list. Yet, despite losing so many assets, Farallon still managed to land themselves on the #10 spot in Alpha's 2009 hedge fund rankings, where they tied Jim Simons' Renaissance Technologies.

Steyer founded the firm in 1986 and still manages it today. He graduated from Summa Cum Laude from Yale University and received his MBA from Stanford's Graduate School of Business. Prior to founding Farallon, Steyer worked as an analyst in Morgan Stanley's Mergers & Acquisitions department and then as an associate in the risk arbitrage department of Goldman Sachs. Being so well versed in the area of risk arbitrage, Steyer employs similar strategies at Farallon. Farallon invests in both public and private debt, equities, private investments, and real estate. In terms of more recent activity, we had noted in early February that Farallon had sold out of numerous positions (via 13D and 13G filings). Additionally, Farallon updated their positions in Freightcar America (RAIL) and Capitalsource (CSE). Those movements of course reflect the decrease in assets under management.

Taken from Google Finance, Global Gold is "a development stage Company. The Company is engaged in exploration for, development, and mining of gold, silver and other minerals in Armenia, Canada and Chile. In Armenia, the Company's focus is primarily on the exploration, development and production of gold at the Tukhmanuk property in the North Central Armenian Belt."

(This is yet another post that was supposed to be published many days ago, but was lost in the shuffle of our site problems. Again, we apologize).

Nassim Taleb's Black Swan: Examining Returns

The following is an article by Janet Tavakoli printed with her permission. She has more than 20 years of experience in investment banking and financial products and is the President of Tavakoli Structured Finance. She previously served at the University of Chicago's Graduate School of Business and additionally is the author of Credit Derivatives & Synthetic Structures, as well as Structured Finance & Collateralized Debt Obligations, amongst other titles.

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In my follow-up commentary (below), I referred to a WSJ article that suggested the returns for 2003 and 2004 for Empirica Kurtosis, Taleb’s previous “black swan fund” (the last admin / wind-up meeting was Jan 2005) were positive in the low single digits after two years of negative returns in 2001 and 2002. If so, investors that stayed in from 2000 would have at best around a 5% return (a middling single digit annualized return). Those who “flocked” (according to Bloomberg) in after 9/11 would have lost substantial principal.

Taleb's Stranded Swan?

Before penning my previous commentary, I contacted Nassim Nicholas Taleb to check whether there were any inaccuracies in a Wall Street Journal article about the performance of his previous black swan fund, Empirica Kurtosis Ltd. The article said the fund had a 60% return in 2000 followed by "losses in 2001 and in 2002.” In 2003 and 2004 it had low single-digit gains, a period when hedge funds posted average returns of 20% and 9% respectively. The fund’s size was around $375 million when most of the assets were returned to investors.

In my query to Taleb, I also asked for confirmation that the fund experienced a voluntary wind-up…more on that later.

Taleb did not respond. Considered with his previous coy reply regarding GQ’s mythical $20 billion, I gave up hope of clarification. I enjoy debating philosophy, but debate is no substitute for size of actual gains.

I was particularly interested in Empirica Kurtosis’s reported anemic performance in 2001, because according to Taleb, the 911 terrorist attacks of 2001 were a “black swan” event.¹

How can a black swan fund do so poorly when the black swan finally appears?

Imagine a scenario: When the black swan appears, investors panic. The fund manager wants to cash in gains when volatility soars. Nervous investors want the manager to buy more “insurance,” when it is expensive and ill-considered. But investors should not be blamed for a black swan fund’s anemic performance any more than a pilot would blame nervous passengers for a bumpy plane ride. Management takes credit (and juicy fees) for the gains, so it should take responsibility for overall performance. This scenario may not be relevant for Empirica Kurtosis, but then, what is the explanation?

What about the voluntary wind-up I mentioned earlier?

Taleb’s web site stated EMPIRICA WAS NEVER CLOSED [emphasis in original].² That may be true if one is only referring to Empirica LLC, a risk management operation. But in my opinion, it is incomplete to assert this without mentioning the voluntary wind-up of Empirica Kurtosis Limited.

Taleb never responded to my query about the wind-up. The Bermuda-based trustee was more helpful and confirmed that Empirica Kurtosis Limited was indeed wound up in 2004/2005.

Winners’ Swan Dive

Big wins and big losses always occur after any market move. Winners are eager to claim they were smart—not lucky.

The big picture should be big enough to provide perspective. A black swan fund may have a good year followed by losses and mediocre returns. Empirica Kurtosis Limited may have become an example of a black swan fund with clipped wings.

(See also: “Taleb Kills $20 Billion Mythical Swan,” June 1, 2009)

¹ Excerpted Transcript May 8, 2007 – The Colbert Report (Stephen Colbert interviews Taleb)

Taleb: Take Google, September 911, the rise of the internet, Harry Potter…They were unexpected and no one saw them coming, and after they happened, oh yah, it was so explainable by historians, scholars and academics, but before they happened, they were so unexpected.

[Later]

Colbert: So you say…911 could not be predicted.

Taleb: It is very very hard to predict these events.

[Apparently Taleb never heard of the August 2001 presidential briefing: “Bin Laden Determined To Strike in U.S. based on a July 2001 intelligence report.]

Colbert: …I’m glad to hear that, because that means the 911 Commission was a waste of time. Because we shouldn’t have investigated why it happened, right?

Taleb: You need you need [sic] to investigate to see if it is predictable or not…

Colbert: But why? Why investigate something that can’t be predicted, because there is nothing to learn from it.

Taleb: No, after the fact, Okay, you have to look at…uh…first of all you can learn something from the event, it’s not like you can’t learn at all.

Colbert: Okay

Taleb: But 911, 911, what I’m saying is that its there is so many events like 911 that could have taken place, you see, so, its just to see if there’s responsibility, is there any vigilance or no vigilance. This is why we investigated 911.

Colbert: ..Is Iraq a Black Swan? We couldn’t have ever foreseen it would go poorly, we would never have known that was not going to go well…

Taleb: No, wars, wars, yah, listen, wars since Napoleon…we learned that wars…wars are more and more unpredictable, more and more complex, the link between action and consequence becoming fuzzier, and I think that the war in Iraq was a mistake…we should have seen that it could have led to these dire consequences. [Only since Napoleon?]

Colbert: We should have but we didn’t, therefore we couldn’t.

[Later]

Colbert: It seems like you’re essentially saying the future is unpredictable.

Taleb: No, I’m saying, yes, my idea in the book is to show two things: number one that the future is rather unpredictable, it is dominated by Black Swans and these black swans are not predictable, and the second point that is quite central, is that we humans…all right?...try to concoct stories to convince ourselves that the future is more predictable than it actually is…[Like Taleb’s Napoleon story?]

Colbert: The future is essentially not predictable.

Taleb: Yes, it’s not.

Colbert: By that logic, doesn’t it mean that in the future you will be able to predict things, because you are predicting that you cannot predict things?

² The only mention of Empirica on Taleb’s web site was as follows: “Owned Empirica LLC a trading/hedging/protection operation (currently the business became the Black Swan Protection Protocol managed by the traders at Universa –I am an advisor). Note that EMPIRICA WAS NEVER CLOSED. Current Corporate Boards: a few hedge funds. A prophetic novel by Viken Berberian about Empiricus Kapital.” There was no mention of Empirica Kurtosis Limited (Emprica Kurtosis), a fund, or of its returns even though it seems it may have been part of this operation at one time. The fund’s returns are not mentioned in Taleb’s Wikipedia profile (as of this writing). The returns for Empirica Kurtosis Limited are mentioned in Mark Spitznagel’s Wikipedia profile, but in an incomplete way. Spitznagel was a partner with Taleb in this venture: “Empirica was reported to have made a 60% return in 2000 and lower (though unconfirmed) returns from 2001 to 2004.”

Thanks again to Janet for letting us post up her work. Check out her firm Tavakoli Structured Finance and her books Credit Derivatives & Synthetic Structures, as well as Structured Finance & Collateralized Debt Obligations,

Hedge Fund D.E. Shaw & Co Files 13G on Medicis Pharma (MRX)

In a 13G filed with the SEC yesterday after market close, David Shaw's hedge fund firm D.E. Shaw & Co has disclosed a 5.3% ownership stake in Medicis Pharma (MRX). The filing was made due to activity on June 10th, 2009 and they now own 3,136,350 shares.

D.E. Shaw & Co was founded in 1988 by David E. Shaw and manages around $33 billion as of December 1st 2008. They focus on intertwining technology and finance and are a hedge fund, private equity firm, and technology development shop all in one. They employ mainly quantitative strategies and do a lot of statistical arbitrage. Shaw oversees strategic maneuvers at the firm, but no longer is active in the day to day operations. He received his Ph.D. from Stanford University. Some notable former employees include Jeff Bezos (before founding Amazon.com) and Lawrence Summers, who left the firm to serve on President Obama’s economic team. In Alpha's hedge fund rankings, D.E. Shaw was ranked 6th in the world. We haven't covered their portfolio for this quarter yet, but keep an eye out as they'll be featured in our hedge fund portfolio tracking series soon. Back in January, we also noted D.E. Shaw had filed a 13D on Orient-Express Hotels (OEH), in an ongoing situation.

Taken from their website, D.E. Shaw invests “in a wide range of companies and financial instruments within both the major industrialized nations and a number of emerging markets. Its activities range from the deployment of investment strategies based on either mathematical models or human expertise to the acquisition of existing companies and the financing or development of new ones.”

Form 13G is filed with the SEC when a firm takes a 5% or greater stake in a company with passive intentions. A 13D, on the other hand, is when the investor has intentions or going activist to institute change. Taken from Google Finance, Medicis Pharma is "an independent specialty pharmaceutical company focused primarily on helping patients attain a healthy and youthful appearance and self-image through the development and marketing in the United States of products for the treatment of dermatological, aesthetic and podiatric conditions. It also markets products in Canada for the treatment of dermatological and aesthetic conditions."

S&P 500 Chart: Technical Analysis Video

After the nice dive we saw in the market yesterday, we thought it was relevant to post this up. Although a few days old, this video takes a look at the technicals on the S&P 500 in a broader sense and dives into which way we may be heading after an interesting first half of 2009. You can watch the S&P500 technical analysis video here.

And, if you've missed them, we've also posted up some solid technical analysis on gold, as well as crude oil.

Dan Loeb's Third Point Files Amended 13D on Maguire Properties (MPG)

Our apologies for just now posting this up, but our publishing system has been having issues. For some reason, this post never was published. In an amended 13D filed with the SEC, Dan Loeb's hedge fund Third Point LLC is now showing a 5.02% ownership stake in Maguire Properties (MPG). The filing was made due to activity on May 29th, 2009 and they now are showing ownership of 2,410,000 shares. This is down from their previous position as detailed March 31st, 2009 (as disclosed in their most recent 13F filing). This filing was made because Third Point has ceased to be an owner of more than 5% of the outstanding Common Stock on May 21st, 2009. (And yes, we realize up above it says 5.02%, which is obviously greater than 5%... but we're just copying straight from the SEC filing). And, an interesting fact: this filing has now been amended a total of 8 times... isn't paperwork fun?

As evidenced below, Third Point was selling MPG shares in various orders on April 13th, May 21-22, and May 26-29, in both of their funds and that is what triggered this filing.

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Third Point is a $2 billion activist and value based hedge fund. Specifically, they deem themselves to be "event driven, value oriented investors." Loeb founded the firm back in 1995 with $3.3 million in seed capital and is still running the show these days. While Third Point is technically an activist fund, Loeb often has numerous passive investments as well. Loeb himself is quite well known for his searing and critical letters to management of various companies. Third Point has seen annual returns averaging over 15% since inception (including the crazy year that was 2008), a Sharpe Ratio of 0.9, and a correlation to the S&P500 of 0.4. As per their April investor update, we saw that they were net long healthcare and utilities, while being heavily net short consumer.

Their Offshore fund was up 7.4% for the month of May and was up 5.4% for the year at that time. We covered Third Point's performance and more in our May hedge fund performance numbers post. Additionally, you can see some of Third Point's market commentary in their Q1 2009 investor letter.

While Gold had previously been Third Point's top holding, we learned in that investor letter that they sold out of their position, as it appears they were merely seeking refuge from the market turmoil and uncertainty. For a current outlook on gold, check out this excellent technical analysis video here. While Loeb may have sold out, there are still a ton of other hedge funds still in the gold trade.

Taken from Google Finance, Maguire Properties is "a self-administered and self-managed real estate investment trust (REIT). The Company is the owner and operator of Class A office properties in the Los Angeles Central Business District (LACBD) and is primarily focused on owning and operating office properties in the high-barrier-to-entry Southern California market."

Hedge Fund Jana Partners Sells More Convergys (CVG): Form 4

Somehow all of our posts are not being published and we do apologize for this inconvenience. Hopefully we have remedied this matter and we are going through to make sure all of the content is now live. This particular update focuses on all things Jana Partners. Barry Rosenstein's hedge fund has been quite busy with numerous SEC filings. We'll start with the most recent and then work our way back.

In a Form 4 filed with the SEC, hedge fund Jana Partners has disclosed sales of shares of Convergys (CVG) on June 11th and 12th, 2009. They sold at prices of $9.53, $9.52, and $9.25, with the bulk of their sale coming at $9.25. In total, they sold 233,967 shares and now own 10,362,185 shares. They had also filed a prior Form 4 which detailed other sales of CVG shares on May 28th & 29th, as well as June 1st, 2009. The number referenced above is the most current share count. Jana owns 10,362,185 shares of CVG currently after all the sales have been tallied. Such a massive amount of sales also triggered their filing of an amended 13D on June 1st as well. It appears as if Barry Rosenstein's firm is eager to reduce their position size here.

In terms of other recent activity, we also recently noted Jana's 13G filing on Immucor (BLUD). So, after all this time, Jana appears to be alive and well and buying stocks. This all comes after Barry Rosenstein's hedge fund had a rough 2008 and apparently received redemption requests for a significant amount of their capital (20-30%). They were forced to set aside illiquid positions in an attempt to meet all the requests. But, it appears as if they have survived. We'll be checking in on the rest of their portfolio in our hedge fund portfolio tracking series after skipping them last go-round due to the uncertainty swirling around the fund.

In the past, we had covered some of Jana's other SEC filings. Jana was founded in 2001 by Barry Rosenstein and typically employs activist, market neutral, and long/short equity strategies in public equity markets. Rosenstein received his BS from Lehigh University and his MBA from the Wharton School of Business at the University of Pennsylvania. Jana has returned 20.9% each year annualized from 2001 til 2007. Rosenstein sees Jana's future in a strategy that uses management adjustments to force change at companies, which in turn can send shares higher. And, hopefully that strategy changes things for the better, as 2008 was a rough year for them.

Taken from Google Finance, Convergys is "engaged in relationship management. It has three segments: Customer Management, which provides agent-assisted services, automated self-service and technology solutions; Information Management, which provides business support system and operational support system (BSS/OSS) solutions, and Human Resources (HR) Management, which provides global human resource business process outsourcing (HR BPO) solutions."

Glenrock Global Partners Update May 2009

Just wanted to quickly post up Glenrock's latest investor update. RSS & Email readers will need to come to the blog to view the slide-deck.

Philip Falcone's Harbinger Capital Partners Reveals Zapata (ZAP) Stake: 13D Filing

In a 13D filing with the SEC, Harbinger Capital Partners has revealed a new position in Zapata Corporation (ZAP) due to activity on June 17th, 2009. This is a brand new position for them and they now show a 51.3% ownership stake with 9,888,684 shares. As defined in the 13D, Harbinger has "acquired beneficial ownership as a result of receiving certain proxies to vote the Shares. Until the Closing (as defined in Item 6), the Funds will not acquire a pecuniary interest in any of the Shares."

Then, once we went down to examine Items 4 and 6 of the filing, we saw that none other than the Glazer Family was also involved in the transaction. The Glazer Family owns professional sports franchises such as the Tampa Bay Buccaneers of the NFL and Manchester United FC of the English Premier League. The filing itself is quite lengthy and those interested in every detail of the situation can read the 13D here.

Harbinger has been quite busy over the past year as they have been re-tooling their portfolio and fighting off a massive decline in assets. They were ranked #1 in the top 10 asset losers, losing 60.8% on a year over year basis. As we've been covering on the blog, Harbinger has been decreasing their Cliffs Natural Resources (CLF) position, selling off some of their Calpine (CPN), and is seeing bidders for their NYT stake, among many other portfolio moves.

Harbinger's Offshore fund finished -22.7% for 2008. They were up 0.95% for January 2009, 4.64% for February, and +0.74% for March, leaving them at +4.06% year to date as of then. And, we also got word that Falcone would be returning to his roots in terms of investing style and would be opening a new fund. For more background on Falcone and Harbinger, head here.

Stay tuned as we'll be covering Harbinger's entire portfolio in our hedge fund portfolio tracking series soon.

Taken from Google Finance,

Zapata "owns 98% of Zap.Com Corporation, a public shell company. The Company is focused on acquisition opportunities in the United States and also outside of the United States. Zap.Com does not have any existing business operations as of December 31, 2008. It is searching for assets or businesses that it can acquire, so that it can become an operating company and may also consider developing a new business. During 2008, the Company did not generate any operating revenues."

Stephen Mandel's Lone Pine Capital Files 13G on Smithfield Foods (SFD)

In a 13G filing made with the SEC due to activity on June 9th, 2009, Lone Pine Capital has disclosed a 7.7% ownership stake in Smithfield Foods (SFD). This is a brand new position for Stephen Mandel's hedge fund as they now own 11,116,850 shares. They previously did not show a position in SFD when we looked at their entire portfolio, so they have just recently entered the position over the past 2 months or so. In terms of other big bets Lone Pine has made recently, we saw that Mandel likes Strayer Education. He presented this choice at the 2009 Ira Sohn Conference where numerous hedge fund managers each presented an investment idea.

His $7 Billion fund has returned over 25% annually since its inception in 1997, but had a rough year in 2008. The term 'lone pine' comes from Mandel's days at Dartmouth College, where the school has a historical lone pine tree. He is well versed in the ways of finding undervalued companies and he typically likes to sniff out solid companies with good management that are trading below their intrinsic value. In Alpha's 2009 hedge fund rankings list, Lone Pine was ranked 21st.

Taken from Google Finance,

Smithfield foods is "a hog producer, and pork processor. The Company conducts its business through five segments: Pork, International, Hog Production (HP), Other and Corporate, each of which comprises a number of subsidiaries. The Pork segment produces a variety of fresh pork and packaged meats products in the United States and markets them nationwide and to a number of foreign markets, including China, Japan, Mexico, Russia and Canada."

Timothy Barakett's Atticus Capital Files 13G on Sotheby's (BID)

Timothy Barakett's hedge fund Atticus Capital has filed a 13G on Sotheby's (BID) disclosing a 5.4% ownership stake in the company. The filing was made due to activity on June 11th, 2009 and they now own 3,584,110 shares. This is a brand new position for Atticus, as they previously did not hold it when we examined their portfolio in its entirety.

It definitely looks as if Atticus is starting to move back into equity positions and put money to work. We recently also covered their 13G filing on Transatlantic Holdings (TRH). On the surface, these type of filings just represent portfolio holdings. But, below the surface, it could very well mean much more for Atticus. We say this because Atticus' portfolio over the last 3 quarters has been all over the place. They had a lot of assets tied up in stocks, then they moved the bulk of their portfolio to cash, and then they moved a chunk of money into mainly options positions. Then, this past quarter, we noticed that they only held 5 long positions.

Whether it was raising cash levels due to a cautious stance on the market or possibly continued worries regarding investor redemptions after their poor performance in 2008, Atticus has definitely been trying to steady their ship. Either way, its pure speculation on our part. All we know is that they moved a lot of assets out of the markets. But, 13G filings like these indicate to us that they are starting to put money to work again in the markets, which is a good sign for them. After all, last year Atticus was ranked 2nd on the top 10 asset losers list. For more background on Atticus and a look at their portfolio, head over to our Atticus article here.

Taken from Google Finance,

Sotheby's is "an auctioneer of fine art, antiques and decorative art, jewelry and collectibles. The Company’s operations are organized into three business segments: Auction, Finance and Dealer. In addition to auctioneering, the Company’s Auction segment is engaged in a number of related activities, including the brokering of private purchases and sales of fine art, jewelry and collectibles. The Company also operates as a dealer in works of art through its Dealer segment, conducts art-related financing activities through its Finance segment and is engaged, to a lesser extent, in licensing activities."

Hedge Fund Pequot Capital Sells Vast Majority of Akorn (AKRX) Position

Given the fact that we already know Art Samberg's hedge fund Pequot Capital is winding down, we hesitated to even post this. But, we figured we'd quickly write it up anyways because Pequot will still have $1 billion or so invested within their Special Opportunities fund and their Matawin fund, both of which will continue to exist under their current managers. So, while a lot of Pequot's positions will undoubtedly be liquidated, some will still remain.

In an amended 13G filing with the SEC, Pequot Capital Management has disclosed a 1.5% ownership stake in Akorn (AKRX). This was due to activity on May 31st, 2009 and they hold 1,315,285 shares. This is a massive decrease in their stake in Akorn, as they previously held over 15 million shares in their last 13F filing which disclosed holdings as of March 31st, 2009. So, they have done some substantial selling in this name over the past 3 months. As we covered recently, Pequot is shutting down because of the negative effect an ongoing investigation has had on the firm.

Taken from Google Finance,

Akorn is "engaged in manufacturing and marketing diagnostic and therapeutic pharmaceuticals in specialty areas, such as ophthalmology, rheumatology, anesthesia and antidotes, among others. In addition, the Company markets and distributes vaccines purchased from outside sources. Its customers include physicians, optometrists, hospitals, wholesalers, group purchasing organizations and other pharmaceutical companies."