Friday, May 29, 2009

Popular Articles on Market Folly

Here's the most popular articles currently on Market Folly:

1. Julian Robertson's Steepener Swap Play (Shorting Treasuries)

2. Hedge Fund Blue Ridge Capital's Recommended Reading Lists

3. John Paulson (Paulson & Co) Buys a Ton of Gold

4. The Ivy Portfolio: How to Invest Like Top Endowments (Book Review)

5. Educational Video on Fibonacci Retracements: Technical Analysis

6. Barron's Hedge Fund Rankings (Top 100)

7. Arthur Samburg's Pequot Capital Shuts Down

8. Our Custom Market Folly Portfolio: Generating 17% annualized returns since mid-2002 (created with Alphaclone)

9. Kyle Bass of Hayman Capital Predicts Sovereign Defaults

10. May 2009 Hedge Fund Performance Numbers

11. Discounts on Financial Publications (WSJ, Economist, Barrons, Investors Business Daily, etc)

Thanks for reading as always. If you enjoy our work, please consider making a donation (via PayPal or credit card). It definitely takes a lot of time to run a site and we appreciate your support!

Last, but not least, make sure you're getting our daily updates for free via email or for free via RSS reader.

Seth Klarman's Interview From Annual Graham & Dodd Breakfast

We're back with yet another interview with Baupost Group's Seth Klarman, as we keep stumbling upon more of his interesting thoughts. We also just recently posted up his interview from the Endowment Management Seminar, where he brought up some other great points.

This time around, we're posting up his thoughts from the Outstanding Investor Digest. The interview took place at the Annual Graham & Dodd Breakfast and encompasses value investing topics (as naturally Klarman and Baupost Group are value players). This portion comes from the question and answer session and he begins by stating, "For years, when someone asked me what my biggest fear was as an investor in managing my portfolio, my answer was that it was buying too soon on the way down from often very overvalued levels."

And, this quote is very relevant and pertinent to the current market environment. After all, Klarman has had a ton of cash on the sidelines over the years and has been gradually deploying it into this market turmoil. He obviously is afraid of being too early and from that we should infer that he will take his time scaling into larger positions that he deems valuable.

Klarman's methodology is unmatched by many, as he has one of the most sterling investment records in all of the investing game. As such, we have appropriately included him in our custom Market Folly portfolio which is seeing 17% annualized returns since mid-2002. Stay tuned next week as we dive into Klarman and Baupost Group's latest holdings, as per their 13F filing.

Here is the interview in full:
(RSS & Email readers will have to come to the blog to view the slidedeck)

Seth Klarman Interview -

What We're Reading 5/29/09

Hedge fund masters portfolio [World Beta, the blog by Mebane Faber. Last week we reviewed Meb's book, The Ivy Portfolio]

Wheat, Corn Stocks at 30 year lows [CommodityBullMarket]

Hedge Fund Manager's Farewell [NYT]

How to use Wolfram Alpha in researching investments [Marketwatch]

The reflation trade portfolio [IndexUniverse]

Inside Fortress Investment Group [TheDeal]

Potash crucial in preventing global food crisis [Stockhouse]

Thursday, May 28, 2009

David Einhorn's Greenlight Capital Has Big Bets on Gold, URS: 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.

Next up is Greenlight Capital, a $6 billion hedge fund ran by David Einhorn that specializes in spin-offs and value investing and has seen annual returns of over 20%. Einhorn's name has been popping up in the media a lot over the past year, as he talked about his well documented short position in Lehman Brothers. And, while that position paid off handsomely for him, it barely offset losses he experienced from other positions. He was caught in the massive Volkswagen short squeeze as he detailed in one of his investor letters. Einhorn has also recently detailed the saga between his fund and Allied Capital, a company he shorted, in his book Fooling Some of the People All of the Time: A Long Short Story. It gives you an inside perspective as to how Greenlight constructs and researches their investment theses and we highly recommend it. Greenlight approaches things by identifying mispricings in the markets and going from there.

He has recently advocated getting long gold (GLD) and gold miners (GDX). And, at the same time, he has advocated shorting commercial real estate property REITs, saying that a drop in rents of 10% hurts values due to leverage and also points to the difficulty they will have trying to refinance debt coming due. We covered more of his recent thoughts and ideas from his most recent investor letter.

We posted up his major moves and you can also read the letter here (in downloadable .pdf format). Other notable activity includes Greenlight filing an amended 13D on MI Developments in April. In terms of performance, his offshore fund finished 2008 -16.5% as detailed in our 2008 year end hedge fund performance numbers list. But, more recently, we've noted that Greenlight was +9% for April, bringing them up to +13.8% for 2009 as of that time. Their performance and more are listed in our April hedge fund performance list.

The following were Greenlight'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):
Nike (NKE)
Liz Claiborne (LIZ)
Everest Re Group (RE)
KKR Financial (KFN)
IPC Holdings (IPCR)
Microsoft (MSFT)
American Eagle Outfitters (AEO)
Hess (HES)
Wyeth (WYE)
Conway (CNW)
BJ Service (BJS)
Harman Intl (HAR) & Jones Apparel (JNY) - both new purchases which we covered back in April
Discover Financial (DFS)
Pfizer (PFE)

Some Increased Positions (A few positions they already owned but added shares to)
Patterson-UTI (PTEN): Increased by 340%
McDermott (MDR): Increased by 319%
Aspen Insurance (AHL): Increased by 159%
Patriot Coal (PCX): Increased by 142%
Sinclair Broadcast Group (SBGI): Increased by 101%
Republic Airways (RJET): Increased by 94%
Dow Chemical (DOW): Increased by 31%
EMC (EMC): Increased by 29%
Sunstone Hotel (SHO): Increased by 22%
SPDR Gold Trust (GLD): Increased by 14%
Helix (HLX): Increased by 14%
Teradata (TDC): Increased by 6%
MI Developments (MIM): Increased by 5%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Commscope (CTV): Reduced by 47%
URS (URS): Reduced by 5%
Allegheny (AYE): Reduced by 4%

Removed Positions (Positions they sold out of completely)
CF Industries (CF)
Triple-S Management (GTS)
Sears Holdings (SHLD)
Ensco (ESV)
Dr Pepper Snapple (DPS)

Top 15 Holdings (by % of portfolio)

  1. SPDR Gold Trust (GLD): 13.6% of portfolio
  2. URS (URS): 7.4% of portfolio
  3. EMC (EMC): 6% of portfolio
  4. MEMC Electronics (WFR): 4.9% of portfolio
  5. Target (TGT): 4.9% of portfolio
  6. Gold Miners ETF (GDX): 4.8% of portfolio
  7. Teradata (TDC): 4.6% of portfolio
  8. Allegheny (AYE): 4.1% of portfolio
  9. Pfizer (PFE): 3.3% of portfolio
  10. Hess (HES): 2.9% of portfolio
  11. Einstein Noah Restaurant Group (BAGL): 2.6% of portfolio
  12. Wyeth (WYE): 2.5% of portfolio
  13. Aspen Insurance (AHL): 2.2% of portfolio
  14. Harman Intl (HAR): 2.1% of portfolio
  15. McDermott (MDR): 2% of portfolio

Einhorn continues to like Gold (GLD) and gold miners (GDX) in a big way. At over 13% of his portfolio, his gold position can't be taken lightly. So, we now have David Einhorn, John Paulson, Eric Mindich, Stephen Mandel and many other hedge fund managers all with sizable gold positions. As such, we thought it would be prudent to post up a current technical analysis video on gold, as the metal could possibly be consolidating.

Overall, Einhorn did a lot more buying than selling. His portfolio didn't change too drastically and many of the changes we had already covered through various investor letters and other SEC filings. While Bill Ackman typically gets all the press surrounding his Target (TGT) position, Einhorn also quietly has a sizable Target stake. However, Einhorn's position remained flat from quarter to quarter; he neither added nor sold.

Assets from the collective holdings reported to the SEC via 13F filing were $2.4 billion this quarter compared to $2 billion last quarter. So, they've deployed some capital on the long side of the portfolio between quarters. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. Check back each day as we cover new fund portfolios. We've already covered Andreas Halvorsen's Viking Global, John Paulson's hedge fund Paulson & Co, Stephen Mandel's Lone Pine Capital, Eric Mindich's Eton Park Capital, and John Griffin's Blue Ridge Capital.

Art Samberg's Hedge Fund Pequot Capital Shuts Down

Well known hedge fund Pequot Capital Management is shutting down. Prominent investor and fund manager Art Samberg wrote in a letter to investors that, "Public disclosures about the continuing investigation have cast a cloud over the firm and have become a source of personal distraction ... I have concluded that Pequot can no longer stay in business." Pequot was under SEC investigation regarding an insider trading allegation with Microsoft (MSFT). The incident has dragged on and on and has hung a dark cloud over Pequot's door. As such, investors became spooked and potential investors weren't arriving in the droves that they used to. And, as we all know, assets under management (AUM) are key to survival in hedge fund land. A tarnished image certainly does not help that.

This brings a sad end to Pequot's illustrious run where they managed $15 billion at their peak, but more recently managed around $3 billion. Samberg and Pequot have seen annualized gains of 16.8% after fees over a 22 year timespan; a record that speaks for itself and more than doubles that of the S&P 500. We had covered Pequot's portfolio in the past as part of our hedge fund portfolio tracking series, where we are currently in the midst of examining their Q1 2009 holdings. Additionally, we also presented the March commentary from Byron Wien of Pequot. However, it doesn't look like we'll be covering Pequot this time around.

Unfortunately for the investing world, Samberg has now decided to hang it up and retire. We ponder though, whether Samberg would have the desire to start new and afresh after dissolving the fund that was causing him headaches. But, after the overhang of ongoing investigations and distractions, it appears that Samberg has had enough and is ready to relax. Pequot still has $1 billion tied up within their Special Opportunities fund and their Matawin fund, which will continue to exist with their current managers.

Pequot is yet another fund on a growing list of prominent names that have been forced to close their doors. We previously covered Jeffrey Gendell's Tontine Associates blowup. Gendell had been a highly regarded and respected investor, but the crisis of 2008 became too much for 2 of his funds as illiquid positions and mounting losses overcame him. His firm still remains alive for the time being, managing the remainder of their funds.

Further back in time, we also noted that Dwight Anderson's Ospraie hedge fund blew up. Anderson is well known for his time both at Tiger Management and Tudor Investment Corp. But, just recently, we learned that Anderson will be back with 2 new Ospraie funds, which prompted us to wonder when investors will ever learn.

Overall, 2008 was definitely a bleak year in hedge fund land. A few other notable closures we've covered on the blog include Satellite Asset Management and Okumus Capital. (See the list of other 2008 closures here).

The prime distinction here between Pequot and the others is that Ospraie and Tontine closed due to large losses, while Samberg felt that Pequot would never be able to overcome their now tarnished image. In the end, such an image became equatable to large losses, as his fund has suffered the same fate as countless other funds. The hedge fund graveyard continues to expand.

This only goes to show that 2008/09 and beyond will be humbling for many fund managers out there. Many previously prominent names have been brought to their knees. After all, they're untouchable... until they're not.

Here's Samberg's letter to investors:
(RSS & Email readers will need to come to the blog to view the slidedeck)

Consumer Psychology In Recessions

Have to give a big hat tip to Value Plays for posting this up a while ago. Harvard Business School has a video out regarding consumer psychology during recessions. Watch the video below (RSS & Email readers will need to come to the blog to view it).

In the video, they discuss how both marketing and consumer behavior can be impacted by recessions and they bring up interesting points. In the past, we've highlighted that consumer spending during recessions is not quite what you'd think it would be.

Head over to Todd's site to check out his example of how Walmart has used the economic situation to refine their message while Target has suffered. Hedge fund manager Bill Ackman of course has confronted Target (read: gone activist), as he pushes for major changes in the company.

Wednesday, May 27, 2009

John Griffin's Blue Ridge Capital Likes Microsoft (MSFT): 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.

Next up, we have John Griffin's Blue Ridge Capital. Now, Griffin is similar to Andreas Halvorsen of Viking Global and Stephen Mandel at Lone Pine Capital in that they are all 'Tiger Cubs' (pupils of Julian Robertson during their time at Tiger Management). Griffin though, is more well known because he was Julian Robertson's right hand man. So, needless to say, he knows his stuff.

Blue Ridge seeks absolute returns by investing in companies who dominate their industries and shorting the companies who have fundamental problems. Do note that the 13F filing only requires funds to disclose long positions (unless they are short via puts, we can see those). In the past, we have, however, gotten one sneak peek at what Blue Ridge has been shorting. Both Griffin at Blue Ridge and Lee Ainslie over at Maverick Capital like to effectively hedge with a solid balance of both long and short positions (like a true hedge fund... not like some of the crazy funds these days that aren't truly hedged).

Recently, we featured a multi-post series of readings recommended by Blue Ridge Capital. Their reading list is expansive and comprehensive, as it is broken down into four categories. We covered their lists of:

- Behavioral Finance recommendations
- Analytical recommendations
- Economics recommendations
- Historical/Biographical recommendations

We highly suggest checking out their suggestions as these lists are a great resource from a prominent and successful hedge fund.

John Griffin ahas numerous holdings in common with his mentor and ex-Tiger Management founder Julian Robertson. (Robertson has owned MA, V, AAPL, and MSFT as well). Griffin attended the University of Virginia for undergrad and received his MBA from Stanford. For more on Griffin you can check out our post of Tiger Cub biographies.

The following were Blue Ridge'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):
Range Resources (RRC)
Vale (RIO)
S&P500 Index ETF (SPY) Calls
Vornado Realty Trust (VNO)
Petrohawk (HK)
NovaGold Resources (NG)
Apple (AAPL)
RenaissanceRe (RNR)
Harley Davidson (HOG)
Whole Foods Market (WFMI)
Axis Capital (AXS)

Some Increased Positions (A few positions they already owned but added shares to)
General Growth Properties (GGP - now GGWPQ): Increased by 310%
Visa (V): Increased by 227%
Monsanto (MON): Increased by 194%
Google (GOOG): Increased by 191%
Target (TGT): Increased by 178%
Thermo Fisher Scientific (TMO): Increased by 160%
Microsoft (MSFT): Increased by 88%
Dell (DELL): Increased by 78%
Crown Castle (CCI): Increased by 77%
Exterran Holdings (EXH): Increased by 76%
Blackrock (BLK): Increased by 67%
Mastercard (MA): Increased by 34%
Millipore (MIL): Increased by 23%
National Oilwell Varco (NOV): Increased by 9%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Agnico Eagle Mines (AEM): Reduced by 53%
Netflix (NFLX): Reduced by 47%
Yamana Gold (AUY): Reduced by 38%
Berkshire Hathaway (BRK-A): Reduced by 36%
Goldcorp (GG): Reduced by 29%
Newmont Mining (NEM): Reduced by 28%
Petroleo Brasileiro (PBR): Reduced by 26%
Broadridge Financial (BR): Reduced by 23%

Removed Positions (Positions they sold out of completely)
American Express (AXP)
XTO Energy (XTO)
SPDR Gold Trust (GLD)
Gold Miners ETF (GDX)
Grupo Televisa (TV)
Genentech (DNA)
Valero (VLO)
Marathon Oil (MRO)
Aeroportuario del Pacifico (PAC)
iShares Mexico ETF (EWW)
Compton Petroleum (CMZ)
EOG Resources (EOG)

Top 15 Holdings (by % of portfolio)

  1. Microsoft (MSFT): 8.68% of portfolio
  2. Mastercard (MA): 6% of portfolio
  3. S&P500 Index etf (SPY) Calls: 5.82% of portfolio
  4. National Oilwell Varco (NOV): 4.94% of portfolio
  5. Amazon (AMZN): 4.9% of portfolio
  6. Millipore (MIL): 4.88% of portfolio
  7. Monsanto (MON): 4.5% of portfolio
  8. Visa (V): 4.45% of portfolio
  9. Vale (RIO): 3.8% of portfolio
  10. Amgen (AMGN): 3.45% of portfolio
  11. Thermo Fisher Scientific (TMO): 3.3% of portfolio
  12. Apple (AAPL): 2.76% of portfolio
  13. Covanta (CVA): 2.59% of portfolio
  14. Target (TGT): 2.5% of portfolio
  15. Berkshire Hathaway (BRK-A): 2.47% of portfolio

There are a few major themes running through Blue Ridge's portfolio. Firstly, you'll notice the large presence of technology. John Griffin substantially boosted his holdings in Microsoft and Google, and started a new stake in Apple again (having owned the name in the past). Microsoft is by far his favorite play though, as it sits as their top holding. Also, while they are not technically technology plays, Mastercard and Visa's payment processing technology obviously has caught Griffin's eye as he now holds them as his 2nd and 8th largest holdings, respectively. These two names are featured quite prominently in numerous hedge fund portfolios, including many other Tiger Cub managers.

Secondly, we also noticed that Griffin was selling gold miner shares and sold completely out of his gold (GLD). This is interesting to note given the fact that we have seen numerous other hedge fund managers load up on gold and gold miners over the past 2 quarters. (Most notably David Einhorn, Eric Mindich, and Stephen Mandel, among others). As they say, 'there is always the other side of the trade'. And, it appears as if Blue Ridge was merely hiding out in gold until the storm passed, a tactic also used by Dan Loeb's Third Point LLC.

We also continue to notice the presence of Covanta (CVA), Monsanto (MON), and Millipore (MIL) in Blue Ridge's portfolio. These positions have been some of their core holdings for numerous quarters and it's safe to say they are longer term plays. They just boosted their stake in Monsanto this time around as well. Blue Ridge filed a 13G on Millipore (MIL) back in October of 2008 and continued to add to the position this quarter. However, they did get substantially reduce one of their other previously core positions. Last time around, Berkshire Hathaway was Blue Ridge's 3rd largest holding. In the first quarter of 2009 though, BRK-A is barely in their top-15.

Lastly, we saw one more thing that intrigued us. While they are not a huge chunk of their portfolio, Blue Ridge did indeed pick up some commercial real estate plays in Vornado (VNO) and General Growth (GGWPQ). Their VNO position is by far the larger of the two. Readers will be familiar with General Growth because another hedge fund titan, Bill Ackman, has a large position in GGP (new symbol: GGWPQ). So, they must see some value in these names.

Assets from the collective holdings reported to the SEC via 13F filing were $4.3 billion this quarter compared to $3.3 billion last quarter. So, overall, they were putting a lot more capital to work on the long side this time around. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. Check back each day as we cover new fund portfolios. We've already covered Andreas Halvorsen's Viking Global, John Paulson's hedge fund Paulson & Co, Stephen Mandel's Lone Pine Capital, and Eric Mindich's Eton Park Capital.

Fibonacci Retracements: Technical Analysis Educational Video

Some readers have been asking for some more technical analysis tips and tools so we wanted to post up another useful video for you all. MarketClub has a great Fibonacci video for those of you wanting to refine or add to your technical analysis arsenal.

This educational video details Fibonacci retracements as it pertains to charts. This is yet another great tool in the world of technical analysis that many are unfamiliar with. The video is a great primer as to what it is and how to use it, so check it out. Also, don't forget we've outlined a Technical Analysis recommended reading list before too, which is a great resource.

Seth Klarman Interview: Endowment Management Seminar With TIFF

Here is an interview Seth Klarman (of Baupost Group) did with TIFF for their Endowment Management Seminar. This transcript provides even more words of wisdom from Klarman after we covered some of his latest movements. Additionally, be on the lookout next week when we cover him in our first quarter 2009 portfolio tracking series.

Here is the interview (RSS & Email readers will have to come to the blog to view it):

Seth Klarman Interview -

Tuesday, May 26, 2009

Eric Mindich's Eton Park Capital Buys More Gold: 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.

Next up is Eric Mindich's Eton Park Capital, who was ranked 53rd in Alpha's 2008 hedge fund rankings. Mindich received an Economics degree from Harvard and then worked at Goldman Sachs' risk-arbitrage desk. After becoming the youngest partner in the history of Goldman Sachs at the age of 27, it was clear he had a bright future. In 2004, he started his hedge fund Eton Park Capital with a record $3 billion in assets and a $5 million minimum investment required of investors. Today, Mindich manages over $6 billion. Typically, Eton Park invests in long/short equity and convertible arbitrage strategies. Additionally, as much as 30% of the fund can be invested in private investments.

Their stellar performance and solid strategy are some of the main reasons we have included them in our Market Folly portfolio that we created with Alphaclone. Our custom portfolio takes the positions of Eton Park (and 2 other hedge funds) that are disclosed in the 13F filings. It then combines them into a unique hedge fund portfolio clone that is yielding 17% annualized returns since mid-2002. As you can see, the numbers speak for themselves. And, a large part of that solid performance can be attributed to Eton Park's stockpicking.

Lastly, we had also previously noted that Mindich was starting to see opportunity in the markets in an excerpt from an investor letter. The following were their 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):
Google (GOOG) Calls
Allergan (AGN) Calls
Energy ETF (XLE)
Wyeth (WYE)
Homebuilders ETF (XHB) Calls
Financials ETF (XLF) Calls
Amdocs (DOX)
Suncor (SU)
Caterpillar (CAT) Calls
Harmony Gold Mining (HMY)
Schering Plough (SGP)
Grupo Televisa (TV)
Neustar (NSR)
America Movil (AMX) Puts
Scripps Networks (SNI)
Petroleo Brasileiro (PBR) Puts
Alcoa (AA) Calls
Brazil ETF (EWZ) Puts
Viacom (VIA-B) Calls
Emerging Markets ETF (EEM) Puts
SPDR Gold Trust (GLD) Puts

Some Increased Positions (A few positions they already owned but added shares to)
Potash (POT) Puts: Increased by 1384%
SPDR Gold Trust (GLD) Calls: Increased by 266%
Comcast (CMCSK): Increased by 252%
Silver ETF (SLV): Increased by 129%
Potash (POT) Calls: Increased by 100%
Vimpelcom (VIP): Increased by 58.8%
Mobile Telesystems (MBT): Increased by 36%
SPDR Gold Trust (GLD): Increased by 31%
Ebay (EBAY): Increased by 27%
Goodyear Tire (GT): Increased by 21%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Beckman Coulter (BEC): Reduced by 34.3%
Qualcomm (QCOM): Reduced by 29.8%
Lorillard (LO): Reduced by 28%
Wells Fargo (WFC) Puts: Reduced by 27.5%
Gold Fields (GFI): Reduced by 18.9%
Comcast (CMCSA): Reduced by 16.6%
Walter Energy (WLT): Reduced by 11%
Hansen Natural (HANS): Reduced by 10%

Removed Positions (Positions they sold out of completely)
Citigroup (C)
Emerging Markets ETF (EEM) Calls
Akamai (AKAM)
Constellation Energy (CEG)
Qualcomm (QCOM) Calls
Covidien (COV)
Foundation Coal (FCL)
AK Steel (AKS)
Lorillard (LO) Calls
News Corp (NWS-A) Calls
Newmont Mining (NEM)
NRG Energy (NRG)

Top 15 Holdings (by % of portfolio)

  1. SPDR Gold Trust (GLD) Calls: 15.9% of portfolio
  2. SPDR Gold Trust (GLD) Puts: 7.2% of portfolio
  3. Potash (POT) Puts: 6.48% of portfolio
  4. Brazil ETF (EWZ) Puts: 6.05% of portfolio
  5. SPDR Gold Trust (GLD): 5.3% of portfolio
  6. Emerging Markets ETF (EEM) Puts: 4.97% of portfolio
  7. Hansen Natural (HANS): 3.69% of portfolio
  8. Verisign (VRSN): 3.63% of portfolio
  9. Viacom (VIA-B) Calls: 2.81% of portfolio
  10. Potash (POT) Calls: 2.59% of portfolio
  11. Hospira (HSP): 2.35% of portfolio
  12. Goodyear Tire (GT): 2.3% of portfolio
  13. Qualcomm (QCOM): 2.2% of portfolio
  14. Viacom (VIA-B): 2% of portfolio
  15. Petroleo Brasileiro (PBR) Puts: 1.95% of portfolio

Mindich continued to beef up his gold position by way of GLD and GLD calls. He increased his GLD calls position by 266% and his GLD common position by 31%. However, at the same time, he also added a new stake in GLD puts to offset things a little bit. He now holds 2 calls for every 1 put on the etf. You'll remember that last quarter he started a gold position in a large way. And, he obviously still likes that play going forwards, even though he has hedged it somewhat. Just last week we noted that Stephen Mandel's Lone Pine Capital also liked gold. David Einhorn of Greenlight Capital also favors the metal and we'll be updating his portfolio soon too. Since so many prominent managers have been piling into gold, we've thought it would be prudent to include a video that looks at the current technical analysis of gold.

In addition to his clear fondness for gold, Mindich also was loading up on Puts across various emerging markets names as he thinks they may be overextended near-term. He boosted put positions in the emerging markets exchange traded fund EEM, as well as in the Brazilian exchange traded fund EWZ, and in Petroleo Brasileiro (PBR). Although not specifically emerging market related, Mindich also brought on a large Put position in Potash (POT). We found this interesting as such an agricultural nutrient can tied to emerging markets growth. As these countries grow economically and in population, they obviously require more agriculture and food. There could be a connection here with his thinking, but that's pure speculation on our part.

In terms of sales, Mindich sold out of his large Wells Fargo (WFC) Put position, as that was his 2nd largest holding in his previous 13F filing. He also got rid of his 8th largest holding last time around, Citigroup (C). So, he seems to have strayed away from the financials for now, at least from what is disclosed in the 13F filing (they're not required to disclose their short positions).

Lastly, we also wanted to point out that Eton Park continues to hold their decent sized positions in Hansen Natural (HANS) and Verisign (VRSN). Those positions remain largely unchanged for the most part and are Eton Park's 7th and 8th largest holdings. Assets from the collective positions reported to the SEC via 13F filing were $6.2 billion this quarter compared to $3.39 billion last quarter. So, Eton Park has definitely put some more capital to work over the course of the first quarter of 2009. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. Check back each day as we cover new fund portfolios. We've already covered Andreas Halvorsen's Viking Global, Paulson & Co (John Paulson), and Stephen Mandel's Lone Pine Capital.

Technical Analysis: S&P500 (SPX), REIT (IYR), & Copper Charts

We wanted to take our periodic look at some broad market charts real quick to see how the market is trending in the near-term. We use technical analysis as just one of the many tools in our investment toolbox as it helps tell us the "how" and the "when" behind entering and exiting stocks, while the fundamentals tell us the "why." (If you want to learn more about technical analysis, we'd advocate checking out the resource we've compiled of recommended technical analysis reading).

As such, we're going to take a quick peek at charts of the S&P500 (SPX), Copper ($COPPER), and some REITs (IYR). We have selected these three charts because the S&P is representative of the entire market, copper is often seen as a leading economic indicator, and REITs have caused quite a stir lately with their robust rally despite weak fundamentals.


Firstly, we'll start with Copper. Kevin has interestingly pointed out that Copper has been forming a symmetrical triangle pattern. As you can see with the red trending lines, a break of the trend in either direction can trigger a large move. Since the bulk of the recent action in Copper has been upwards, we'd expect this trend to continue. However, you still have to monitor things carefully as it could very well break to the downside.

(click to enlarge)

As we mentioned earlier, we monitor Copper since it is often looked at as a leading economic indicator. If things are being built globally, they more often than not require copper. As such, it has become a 'tell' if the economy is recovering or not. As you can see above, the metal has been trending upwards for the entirety of 2009 pretty much, which could be a favorable sign. The ultimate test is now a breakout above the recent resistance.


REITs are a touchy subject because there is so much research out there illustrating what a deathpit they will be in the years to come. Yet, they have rallied right in the face of those claims due to equity offerings and dilution out the wazzoo forcing massive short covering. The crux of the REIT matter is that many of these companies have massive debt loads and maturities coming due in the next few years. Couple that with the fact that overall, they are seeing declining FFO (funds from operations, a popular metric in REIT land), and increasing vacancies in their properties. If their cashflow is slowing and they have a lot of debt coming due, how will they survive? As of now, their plan seems to be to dilute shareholders with equity offerings to shore up their balance for the near-term, with no real long-term solution as of yet. So, with that in mind, let's take a look at the chart. We'll be using IYR as our proxy since it is the overall index.

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As you can see, REITs have been ripping higher over the past few months. We've outlined the uptrend with the light green lines. Each time the rally sells off, it finds support and continues higher. However, as we've illustrated with the bold red line at around $36, IYR definitely has some overhead resistance. Not only did IYR fail at that level the last time around, it also is an area of resistance from back in late 2008. Lastly, you've also got the 200 day moving average (downtrending thin red line) acting as resistance at around $37.50 as well. Overall, REITs have rallied hard but will have to rally even harder to breakout of this tough range. The lower bold green line illustrates the support IYR has around $22.50. So, it has essentially traded in a range of $22 to $36 over the past 6 months. Look to buy at the bottom and take some profits at the top. If it breaks out above all the resistance we just mentioned, then look out as this thing could really rocket higher.

Take note though, that we aren't really counting on this happenning. After all, the 200 day moving average is in an extreme downtrend, and rightly so. IYR overall is downtrending over longer time frames and the recent rallies have merely brought it back to its trendline resistance where it has typically sold off. So, we would wager that shorting IYR around $36 would be a prudent bet, allowing yourself the flexibility to then get long if the name breaks out above all the resistance. The trading range has definitely outlined a line in the sand for you to play with.

S&P 500 (SPX)

The market is struggling to break through its 200 day moving average, which is coincidentally the same level as the high for the year, made earlier this year in January. As we've twittered before, this area makes logical sense for some selling to take place. (By the way, make sure you're following us on twitter for market updates that we don't post on the blog). We've seen a massive rally and profit taking is not only healthy, but long overdue. This area also is a logical place as a starting point for the next big move, in either direction. If the market continues to fail at resistance, it could setup a big move to the downside. However, if it blasts through yet another area of resistance, it would mean we're going even higher. Point being, this could be a pretty important level.

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As such, it's time to practice the art of flexibility. But, that's nothing new, as we've been preaching that for a while now. In this whacky market, you've got to be flexible and nimble. Use the technicals to help guide you as to where the market will be going in the near-term. While the fundamentals are obviously still dreary, you have to respect the market action or you'll get your face ripped off. Case in point: the market rallying 16% over the past 3 months despite no real signal that we've solved our problems. And, as illustrated in the chart we posted last week, the market has had some wild swings over the past 2 years.

Irrationality is often the name of the game in the markets and you have to abide by her rules. After all, the market can remain irrational longer than you can stay solvent. That saying has stood the test of time for a reason.

So, it's certainly time to wait and see what the market brings us. No matter what direction she heads, we've got a solid gameplan now due to a quick check on the technicals. We also recently posted up some technical analysis on Gold if you're interested as well, as it looks like the metal could be building some support currently. And, last but not least, don't forget to check out our recommended reading list: Technical Analysis edition if you're looking to hone your chart reading skills.

Hedge Fund Legend Michael Steinhardt Says Treasuries Are Foolish

The legendary hedge fund manager Michael Steinhardt has recently voiced his distaste for Treasuries over the long-term. In a recent Bloomberg television interview, he said, "To be a long-term investor in Treasuries at this point I think is foolish. The rates are low, and the danger is high." If you're unfamiliar with Steinhardt, he ran one of the first truly successful hedge funds, garnering a 20% return each year for almost thirty years. His Steinhardt Management Co, which he opened in 1967, earned 24% a year for multiple decades. He truly is a successful hedge fund manager with a proven long-term track record.

And, with that in mind, it's interesting to see that Steinhardt has joined numerous other well-tenured investors in his dislike of treasuries. He thinks that government bonds are not safe investments and shares Jim Rogers viewpoints on this subject. Rogers, of course, has a solid background as well, having run the successful Quantum fund with ex-partner George Soros. So, we now see that both Steinhardt and Rogers see Treasuries as poor investments for the future, as we noted in our Jim Rogers portfolio update. In the past, we here at Market Folly have even gone as far to lay out the rationale behind shorting treasuries. (That play has picked up steam as of late and we still need to do a follow-up post on that subject).

Steinhardt goes on to say that he thinks the current market rally will not last and that we are not out of the woods yet. He says, "The economy is still a scary place. My net feeling is that this rally doesn't have all that much more to go and the dangers out there remain consequential." Clearly he sees this as a bear market rally and thinks we have large fundamental problems still unsolved.

Nowadays, Steinhardt is the chairman of WisdomTree Investments, a firm that creates exchange traded funds (ETFs). Steinhardt also has an autobiography out entitled No Bull. It is a fascinating read detailing the life of one of the first true hedge fund managers out there, as his firm survived the collapse of the 1960's. This book also recently appeared on hedge fund Blue Ridge Capital's suggested reading list, in their biographical/historical category. We'll continue to track Steinhardt's words of wisdom whenever he makes a sporadic appearance.