Friday, September 24, 2010

David Tepper Likes Equities (Hedge Fund Appaloosa Management)

David Tepper, founder of $12.4 billion hedge fund Appaloosa Management sat down for a rare interview with CNBC this morning. He says that over time he has compounded 40% for himself and compounded 30% for his investors over the course of 17 years. In his chat, he revealed that he is moving into stocks because if the economy does well, stocks will do well. Conversely, he thinks bonds and gold will not. Interestingly, he believes the Federal Reserve is acting as a put for his strategy because if the economy worsens, the Fed will help with quantitative easing (QE). You can see what stocks are in Appaloosa's portfolio in our newsletter: hedge fund wisdom.

Appaloosa Management typically allocates 70% of their capital to bonds and 30% to stocks. Given Tepper's commentary, it's evident that he's increasing his equities allocation due to the perceived opportunity. While he has made the conscious decision to move more in that direction, he appropriately cautions people that he is not "going balls to the walls." (By the way, isn't it awesome that such a prominent fund manager would use such a characterization?) Additionally, keep in mind that Appaloosa's main funds do not employ leverage either.

Embedded below are the two videos from Tepper's interview with CNBC. Email readers will need to come to the site to view them. Video 1:

Back in May, Tepper advocated shares of Bank of America (BAC) and thought they could see $27 in the next year. He also liked Spanish banking giant Banco Santander (STD). However, Tepper mentioned that financials only comprise 10% of his equities portfolio at the moment. Tepper also decided to highlight that his son had bought Apple (AAPL) and Google (GOOG) as well to showcase how young investors are not afraid of equities like some strategists believe. Here's part two of the interview:

Overall, the Appaloosa manager likes to watch overall macro pictures such as trends in jobless claims, movement in M2, etc. Lastly, Tepper also made sure to highlight one of the best pieces of advice in financial markets, to take emotion out of the picture by saying, "we're pretty unemotional when we invest." To see what Appaloosa is invested in, you can find out in our latest issue of hedge fund wisdom.

Hedge Fund Prologue Capital's Latest Macro Outlook

It's been a while since we checked in on global macro hedge fund Prologue Capital, so let's get their latest economic assessment. We track the fund as they've shown solid performance through very rough waters, up 18.86% in 2008 and up 12.41% in 2009. Prologue was up 3.69% for the year as of the end of June (net of fees). In the fund's second quarter letter, Chief Economist Tomas Jelf echoes chairman Bernanke's declaration that the US economic outlook remains "unusually uncertain."

The $1.014 billion hedge fund points to strength abroad, notably accelerating economic output in India and Singapore as well as a strong recovery in Germany and the United Kingdom (following the earlier fiscal stresses). This comes after their previous commentary where Prologue saw cause for concern.

Jelf notes that the US saw mostly strong corporate earnings in Q2 yet key economic indicators (confidence, employment, housing and consumer spending) suggest a sluggish recovery ahead. The one bright spot was the improvement in capital expenditures. Second quarter GDP estimates have been reduced to 2.5% in light of the harsher economic reality. Jelf foresees continual deleveraging in the corporate sectors and the perseverance of low rates as the Federal Reserve becomes more cautious.

He argues that the picture in Europe is not nearly as bleak, as the markets have reacted favorably to numerous indicators surprising to the upside. Investor confidence has also benefited from the increased transparency following the completion of the bank stress tests. Weak credit growth and fiscal difficulties still pose challenges in the future.

Given all of the above, how is Prologue positioned? They plan to generate returns via the following core strategies:

- Structurally long duration, particularly in the US via forward swaps and higher yielding countries where appropriate.

- Active participation in the underwriting process of government bonds.

- Exploiting dislocations between futures, cash, swaps and mortgages.

- Relative value strategies within core country yield curves.

- Short Europe vs. the US and the UK.

Definitely an interesting approach by the global macro firm given all the uncertainty out there. For more insightful commentary from hedge fund Prologue, they previously detailed why macro factors are positive for risk assets. In terms of other hedge fund manager commentary, Crispin Odey also recently said that equities remain attractively priced but unloved.

Dinakar Singh's TPG-Axon Capital Buys More Zhongpin (HOGS)

Dinakar Singh's hedge fund firm TPG-Axon Capital Management recently filed a 13G with the SEC regarding shares of Zhongpin (HOGS). Per the filing, TPG-Axon has disclosed a 5.18% ownership stake in HOGS with 1,800,000 shares. Due to portfolio activity on September 21st, this marks a 484% increase in their position size as Singh's firm only owned 307,845 shares back on June 30th.

A former partner at Goldman Sachs, Dinakar Singh founded TPG-Axon in 2004 in partnership with the private equity firm Texas Pacific Group, launching with $5 billion. The firm has offices in New York, Hong Kong, Tokyo and managed $13 billion as of 2008. Prior to founding his firm, Singh was co-head of the Principal Strategies group at Goldman Sachs.

Taken from Google Finance, Zhongpin is "is principally engaged in the meat and food processing and distribution business in the People’s Republic of China (the PRC). At December 31, 2009, the Company’s product line included 358 meat products, including chilled pork, frozen pork and prepared meats, and 34 vegetable and fruit products, that are sold on a wholesale basis and on a retail basis through an exclusive network of showcase stores, network stores and supermarket counters."

For more on the latest hedge fund movements, head to our constant coverage of SEC filings.

George Soros Adds to Exar Corp (EXAR) Position

George Soros' hedge fund firm Soros Fund Management just filed a Form 4 with the SEC regarding shares of Exar Corp (EXAR). Per the filing, Soros purchased 794,164 shares of EXAR on September 21st at a weighted average price of $5.71. The following day, Soros purchased an additional 997,333 shares at a weighted price of $5.66. On the 23rd of September, the hedge fund also bought 64,575 shares at a weighted average of $5.587.

In total, Soros Fund Management acquired 1,856,072 shares of EXAR and after these transactions now own 6,266,666 cumulative shares. Back on June 30th, Soros owned only 3,866,666 shares so their position size has risen 62% since then. For an in-depth look at the rest of Soros' portfolio, head to our brand new newsletter: hedge fund wisdom.

Taken from Google Finance, Exar is "a fabless semiconductor company that designs, sub-contracts manufacturing and sells differentiated silicon, software and subsystem solutions for industrial, telecom, networking and storage applications. The Company’s product portfolio includes power management and interface components, datacom products, storage optimization solutions, network security and applied service processors."

Learn more from this legendary investor in his book, The Alchemy of Finance.

What We're Reading ~ 9/24/10

A look at Falcone & Harbinger's big bet on 4G [Teri Buhl, Forbes]

Todd Sullivan's latest take on General Growth Properties (GGP) [Value Plays]

Also, Credit Suisse initiated coverage on GGP (.pdf download) [Value Plays]

The buzz of dividend paying stocks [CNNMoney]

Clutching at dividends [FT Alphaville]

Medtronic (MDT) dividend stock analysis [DividendsValue]

12 things making Barry Ritholtz nervous [BigPicture]

What the InterOil (IOC) math teaches us [FinancialInvestigator]

Walter Schloss on why we invest the way we do [Value Investing]

Hedge fund managers set up for next acts [Dealbook]

Excerpts of insight from Mohnish Pabrai [DNA]

An old profile of and interview with Morris Mark [HedgeFundNews]

Can blogs move markets? [Felix Salmon]

The latest rankings of MBA programs [The Economist]

Wisdom from a depression era trader [CrosshairsTrader]

Thursday, September 23, 2010

"Equities Remain Attractively Priced But Unloved": Crispin Odey's Latest Market Outlook

Crispin Odey of hedge fund firm Odey Asset Management is out with his latest commentary. Recently, we outlined Odey European's hedge fund outlook and this time around we're taking a look at the prominent UK manager's latest stance on the economy and markets. Crispin Odey's full current oulook:

"September has now almost repaired the damage done in August. Equities remain attractively priced but unloved. This makes share prices volatile, especially since investors remain very cautious on the outlook. I see nothing that can damage the excellent free cash flow outlook for the corporate sector. Where pessimists see governments spending cutbacks next year killing any GNP growth, I see pent-up capital spending plans and a little less paying back of debt taking up the running and more than compensating.

The performance of the fund has been disappointing. We were hurt by being short of governments bonds early on, we have been hurt by being naturally hedged back into the weakest currency, the Euro, and we have been hurt by some painful individual share price movements - Sky Deutschland, Connaught (in small way), Barclays and Ericsson.

The successful strategy this year would have been to opt for those companies serving emerging market- the growth stocks. Value stocks have had a bumpier ride. Investors have been scared by the cyclicality implied in owning high yielding shares, despite earnings yields being twice those of the growth stocks. It is an uneasy time being early, but nothing either at a macro level or at the corporate level has bid me to change my mind. Indeed managements seem to me to be entirely in the right place. Governments, like the UK coalition, are making the difficult decisions and only the politics in the USA remains uncertain. I personally welcome the Tea Party movement there - politicians need to connect with people - and the midterm elections, if they end the Democrat's majority in the House of the Representatives, can only be a blessing."

Odey touches on some of his firm's positions specifically so it's always interesting to see what they've got their eye on: Sky Deutschland, Connaught, Barclays, and Ericsson. Intriguingly, he also touches on how equities remain 'unloved.' As his commentary was penned on August 31st, this comment precedes the rally we've seen in equities as of late. But even then, he'd still most likely point to the massive exodus from equities by retail investors. Odey currently favors value stocks over growth as he feels they have high earnings yields and cheap valuation. In terms of position updates from Odey, we recently detailed that they increased their stake in Pendragon (LON: PDG).

For all our coverage of hedge funds based across the pond, scroll through our posts on UK managers.

Warren Buffett & Jay-Z on Success: Forbes Interview

Forbes sat down for an interview recently with somewhat of an unlikely combination in investor Warren Buffett and entertainer/entrepreneur Shawn Carter (better known as Jay-Z). However, the duo is not so unlikely when you consider that the topic of discussion was success. Both gentlemen have found their niche and excelled in it. For a look at Buffett's success specifically, we've posted up a multi-decade look at Buffett's career.

On the subject of succeeding, Buffett attributes his triumph to getting started early on in his life. He essentially had a 15 year head-start over anyone else as he started rifling through investment books at age 7 due to his father's involvement in the investment industry. Jay-Z credits some of his success to starting almost in an opposite fashion, not entering the business until he was 26 and hitting the ground running.

Both men attribute passion and consistency as pillars of their success as well. They have been disciplined in their approaches as Buffett sticks to investments in industries he can understand and Jay-Z sticks to his own entertainment style rather than succumbing to new trends. As a value investor, Buffett stays away from the hottest new stock or industry that trades at astronomical P/E ratios.

Another commonality between the two men is the role of downplaying emotion. Jay-Z doesn't let emotion get in his way of making decisions in terms of his music production. He doesn't like to give in to what's "hot" in the industry. Buffett takes the same approach. He stays calm, buying when others succumb to their emotion and panic. The difference between the two businessmen here is that Jay-Z seems to just ignore the emotion altogether and stick with how his mind works. The Oracle of Omaha, on the other hand, exploits other people's emotion and uses it to his advantage.

On the topic of self-improvement, Buffett urges everyone to essentially invest in themselves by developing habits of success. He suggests that of the people you admire, list the characteristics about them you like and then learn to master those qualities. In investing, Buffett likes companies with wide moats and a competitive advantage. You can advance yourself he says if you "build your own moat around yourself." This type of advice is exactly what the Oracle of Omaha has divulged in Buffett's top 25 quotes.

So loosely speaking, what is the path to success?

According to these two businessmen, the answer lies in a few qualities that collectively assemble into the magical equation:

- Passion
- Drive
- Discipline
- Ability to ignore emotion
- Consistency
- Ability to learn from mistakes
- An element of luck

Embedded below is the video of Forbes' interview with Warren Buffett and Jay-Z (email readers: you'll have to come to the site to view the video):

To try and master financial markets like he has, head to Warren Buffett's recommended reading list.

Berkshire Hathaway Sells Moody's (MCO) Again

Warren Buffett's Berkshire Hathaway has sold shares of Moody's (MCO) for the second consecutive time in a week. Per a Form 4 filed with the SEC, Berkshire Hathaway sold 560,000 shares of MCO at an average price of $25.725 on September 20th. This comes right after Buffett sold Moody's last week. After the cumulative sales, Buffett is now left with 28,873,326 shares of the company.

As we detailed last week, it's very evident that any price over $25 is a price Buffett is willing to part with some of his shares. Keep in mind though that he still has a massive position, with over 28 million shares remaining. He has been patient with his sales and many months ago has demonstrated his willingness to sell MCO at around $25-30 per share.

On the other side of the coin, we've also cataloged how David Einhorn's hedge fund Greenlight Capital has been short Moody's. You can view his original thesis here: The Curse of the Triple A.

Taken from Google Finance, Moody's is "a provider of credit ratings; credit and economic related research, data and analytical tools; risk management software, and quantitative credit risk measures, credit portfolio management solutions and training services."

To learn how to invest like the legend himself, head to Warren Buffett's favorite investing books.

Wednesday, September 22, 2010

Bruce Berkowitz Goes Activist on AIG: Examining the Company's Road to Recovery

Bruce Berkowitz's Fairholme Capital has filed a 13D on shares of American International Group (AIG). Due to activity on September 16th, Fairholme has disclosed a 24.4% ownership stake in AIG with 32,909,500 shares. This is a very slight increase over Fairholme's previous AIG position. Berkowitz's most recent purchase came on September 15th, buying 1,000 shares at $36.04.

What's interesting here is that he had previously filed a 13G indicating a passive stake. With the filing of a 13D, he has signaled activist intent. Yet within the filing itself, he did not necessarily lay out a tentative plan of action. Typically, an investor filing a 13D will try to shake up the board, consult with management regarding strategy, or take some sort of action in an attempt to generate shareholder value.

Fairholme originally started an AIG position back in March of this year. He initiated his stake with 20% of some tranches of convertible debt, other AIG bonds, as well as 13 million shares of common stock. In other ownership, David Tepper's hedge fund Appaloosa Management had previously bet on AIG's 8.175 junior subordinated debt. Tepper argued that there was a mis-pricing due to a misunderstanding of AIG's capital structure. Berkowitz's credit positions give him additional layers of protection, but his equity stake is harder to fully understand. Some analysts have likened shares of AIG to spinning the roulette wheel while others have found value and believe AIG can earn $8 billion or so in 2011.

So, what's Berkowitz's investment thesis? He has previously argued that the government's involvement has 'cleansed' the company and that AIG can move forward as a free entity in 2011. In the past, Berkowitz opined that the company has the ability to pay back taxpayers and the Treasury, emerging as a smaller organization by selling off assets such as AIA and Alico. The overriding thesis in Berkowitz's portfolio overall has been 'recovery.' In terms of his firm's other positions, we've detailed Fairholme's MBIA stake, as well as their new position in Morgan Stanley (MS).

Berkowitz's investment could possibly be best served if AIG could offload AIA for more than 1x book value somehow down the road. In recent developments, it appears as though AIA will raise up to $15 billion in a Hong Kong IPO. Additionally, the troubled firm has neared a deal to sell two of its Japanese life insurance companies to Prudential for $4-5 billion combined. Selling assets and raising capital to payback taxpayers has been the CEO's number one priority. Also, AIG is said to be evaluating options regarding its Nan Shan Life Insurance ownership stake.

As if AIG wasn't a complicated mess to start with, you can't forget the fact that the government also has a massive stake in the company (ya know, from when they saved them). Apparently, AIG and the government are in talks to speedup the repayment of US taxpayers, allowing the company to gain independence again. This plan essentially converts the government's $49 billion worth of preferred shares into common shares. Such a scenario means that the government would own over 90% of the company (up from its current almost 80% stake). These common shares would then eventually be sold off to private investors.

Breaking down what is owed to taxpayers, it's clear there's still plenty of work ahead. The Federal Reserve of New York owns $26 billion worth of preferred interests in AIA and Alico. This amount is most likely to be repaid by the sale of the units. Further AIG asset sales will be required to pay back the $20 billion in secured debt owed to the New York Fed. Also, don't forget the $29 billion from Maiden Lane II and Maiden Lane III (financed by the New York Fed). This figure will most likely be repaid via the securities those companies own. Lastly (as mentioned above), the Treasury Department owns $49 billion worth of preferred shares, likely to be converted into common and then sold.

Keep in mind that this is by no means guaranteed as there are a lot of moving parts involved and it could take years to complete. This is obviously quite a large overhang but something that needs to be done in order for the company to fully recover. AIG seeks to simplify its capital structure for the future, allowing investors more clarity in valuing the company. The government will be more willing to reduce its ownership stake as long as AIG is able to raise new capital, most likely via issuing new stock.

Unfortunately, Berkowitz's most recent full portfolio disclosure is only as recent as May 31st, 2010. Back then, AIG was Fairholme Fund's second largest position at 6.86% of the portfolio. Given that this position is so large for him, one shouldn't necessarily be surprised that he wants to take a more hands-on approach with the 13D. While AIG's roadmap to recovery is essentially mapped out, it's unclear how Berkowitz plans to pave the road with his activist stake.

For an in-depth look at Fairholme's portfolio as well as the investments of top hedge funds, check out our new publication: Hedge Fund Wisdom.

Tuesday, September 21, 2010

Hedge Fund Carlson Capital Files Amended 13D on Hot Topic (HOTT)

Dallas based hedge fund Carlson Capital just filed an amended 13D with the SEC regarding their activist position in shares of Hot Topic (HOTT). As we previously covered, Carlson owns a 3.96% stake in HOTT and that figure remains unchanged. The reasons for the amendment are as follows:

- Removal of "group" filing status: Previously, Carlson had joined up with Becker Drapkin Management, filing as a group for the purpose of this activist investment. Their collective stake in Hot Topic totaled 9.042% of the company. They are no longer adjoined as a group.

- Addition of both Stephen R. Becker and Matthew A. Drapkin to Hot Topic's board: The exhibits attached to the amended 13D filing propose adding the two gentlemen to Hot Topic's board. Neither work for Carlson and they are both proprietors of Carlson's former "group" member, Becker Drapkin Management.

- Standstill period: As of September 19th, 2010, members of either Becker Drapkin or Carlson will *not* acquire any securities of the company, will not submit any shareholder proposals, will not solicit proxies, and will not seek acquisitions regarding the company.

Given the legal nature of these document, there's plenty of fine print that you can read here. The 13D filing is accompanied by two exhibits. In the end, the main thing to take away from all of this is that Carlson has not adjusted their position, has abandoned "group" status for filing purposes, and seeks to put two individuals from Becker Drapkin on Hot Topic's board. We'll continue to watch this activist investing situation unfold. View our original coverage of Carlson's activist position here.

Taken from Google Finance, Hot Topic is "mall and Web-based specialty retailer operating the Hot Topic and Torrid concepts, as well as the e-space music concept, ShockHound. It sells a selection of music/pop culture-licensed and music/pop culture-influenced apparel, accessories, music and gift items for young men and women principally between the ages of 12 and 22."

For more in-depth coverage of hedge fund portfolios, scroll through our coverage of the latest SEC filings.

Tom Brown's Second Curve Buys CompuCredit (CCRT) Shares

Tom Brown's hedge fund firm Second Curve Capital just filed a Form 4 with the SEC regarding trades made in shares of CompuCredit Holdings (CCRT). In the filing, Second Curve discloses that they purchased 25,000 shares of CCRT at $4.64 on September 16th, 2010. After this transaction, Tom Brown's firm now owns 4,118,630 shares.

Second Curve recently filed a 13G on this stock, disclosing ownership of 11.4% of the company. This latest purchase adds to that total. Prior to founding Second Curve, Brown headed up the financial services group at Julian Robertson's Tiger Management. Other recent portfolio activity out of this hedge fund includes a new position in Tennessee Commerce Bancorp (TNCC).

Taken from Google Finance, CompuCredit is "a provider of various credit and related financial services and products to or associated with the financially underserved consumer credit market."

To see what the top managers have been buying and selling, check out our detailed hedge fund portfolios.

Monday, September 20, 2010

Interview with Seth Klarman: Opportunities for Patient Investors

A while back we detailed thoughts from Baupost Group's Seth Klarman where the legendary investor was worried about inflation and the markets. His comments came from the CFA's annual conference in Boston on May 16th-19th. While we had posted notes from the event before, today we're highlighting the full interview that Klarman had with Jason Zweig. If you're unfamiliar with Baupost Group, you can check out their portfolio as detailed in a free sample issue of hedge fund wisdom, our new newsletter. Additionally, you can read a profile of Seth Klarman here.

In the interview, Klarman touches on numerous topics ranging from his evolution as an investor, the financial crisis, and his current concerns. Additionally, Klarman recommended a few books which we compiled into a list. But we wanted to highlight what he learned as an investor from his early days at Mutual Shares, working for Max Heine and Mike Price. Of this Klarman says,

"What I learned from Mike—and I worked most closely with him—was the importance of an endless drive to get information and seek value. I remember a specific instance when he found a mining stock that was inexpensive. He literally drew a detailed map—like an organization chart—of interlocking ownership and affiliates, many of which were also publicly traded. So, identifying one stock led him to a dozen other potential investments. To tirelessly pull threads is the lesson that I learned from Mike Price.

With Max Heine, I learned a bit of a different lesson. Max was a great analyst and a brilliant investor—and he was a very kind man. I was most taken with how he treated people. Whether you were the youngest analyst at the firm, as I was, or the receptionist or the head of settlements, he always had a smile and a kind word. He treated people as though they were really important, because to him they were."

Embedded below is Klarman's full interview from the CFA conference:

You can download a .pdf copy here.

You can find out what Klarman is investing in via a free sample issue of hedge fund wisdom, a brand new quarterly publication by

Steven Cohen's SAC Capital Boosts Carter's (CRI) Stake

Steven Cohen's hedge fund firm SAC Capital filed a 13G with the SEC regarding shares of Carter's (CRI). Due to portfolio activity on September 7th, the filing states that SAC Capital now has a 5.4% ownership stake in CRI with 3,212,093 shares. This figure includes 452,200 shares represented by call options. Overall, this is a massive increase as SAC has boosted its position size in Carter's by 21,684%. Back on June 30th, they only held 14,745 shares of the company.

In terms of other recent activity from Cohen's firm, we detailed their stake in Genco Shipping (GNK) as well. Remember that due to SAC's frequent trading, you can't necessarily read too much into these filings. As such, take it with a grain of salt since they move in and out of positions much quicker than other hedge funds. We simply cover their activity because readers want to know what good ole Stevie Cohen is up to.

Make sure to check out our coverage of Goldman Sachs' VIP list where we identify what stocks matter most to hedge funds.

Taken from Google Finance, Carter's is "a branded marketer of apparel for babies and young children in the United States. The Company owns two brand names in the children’s apparel industry, Carter’s and OshKosh."

Pat McCormack's Tiger Consumer Adds to Medifast (MED)

Patrick McCormack's hedge fund Tiger Consumer Management just filed a 13G with the SEC regarding shares of Medifast Inc (MED). Per the filing, Tiger Consumer has disclosed a 5.11% ownership stake in MED with 788,790 shares due to portfolio activity on September 7th, 2010. This marks an increase in their position as they previously held 553,191 shares back on June 30th. As such, Tiger Consumer has boosted its position size by 42.6%, buying 235,599 additional shares over the past two and a half months.

In terms of other portfolio activity from McCormack's fund, we detailed back in July that they started a position in Sonic Automotive (SAH). Tiger Consumer is one of the many funds seeded by Tiger Management founder Julian Robertson and you can view the proverbial Tiger family tree here.

Taken from Google Finance, Medifast is "engaged in the production, distribution, and sale of weight management and disease management products and other consumable health and diet products."

To see the other stocks that matter most to hedge funds, head to our coverage of Goldman Sachs' VIP list.

Best Shorting Opportunity of 2010 Says Technical Strategist Robin Griffiths

Today we're presenting commentary from Cazenove Capital's technical strategist Robin Griffiths. In an interview on CNBC a few weeks ago he said that we are approaching the best shorting opportunity of 2010. Given that last week we covered the bullish case for equities, we wanted to present the other side of the coin.

Technically speaking, Griffiths feels that April 2010 marked the "top" of the year-long rally that began in March 2009. As such, he is cautious, simply stating "do not put risk on." Ever since this top, the market has been in a downtrend and he feels the only way he would switch his stance is if the market blasts through the April 2010 high. He also points out that the next four months are typically the weakest of any in a year. He doesn't think that the market will break through its early August highs either (around current levels at 1125 on the S&P 500).

He feels the market will break the July low and can see a 10-15% fall. Specifically, he is targeting 940 on the S&P 500. If you were looking to trade around his comments, it would seem that shorting and placing a stop at the April 2010 high would mirror his take. Now, do keep in mind that it has been two weeks since he made this commentary. However, his stance is still relevant given that the market is sitting at levels that still sit within his parameters. It appears as though to the two main levels to watch on the S&P 500 are 1020 for possible support (July low) and 1220 for resistance (April high).

Embedded below is the video of Robin Griffiths' commentary at CNBC. Email readers will need to come to the site to watch the clip:

So, a bearish argument based on technical levels of support and resistance. For a completely converse look, last week we presented the bullish case for equities.

George Soros ~ Quote of the Week

Market Folly's quote of the week this time around comes from the founder of the legendary Quantum Fund, George Soros:

"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong."
~ George Soros

The global macro aficionado's quotation quickly brings to mind the old adages of, "let your winners run" and "cut your loses quickly." He hints that some of the best attributes of successful traders/investors are those who can recognize their winners and losers. It doesn't matter if you're "wrong." Everyone has been wrong before. Successful traders and investors recognize when they've made a mistake, admit their error, swallow their pride, and cut their losses quickly.

George Soros' portfolio is profiled in our brand new quarterly newsletter: hedge fund wisdom by market folly. You can also check out his insight in his book, The Alchemy of Finance.