Friday, February 13, 2009

Free TurboTax Online Federal

So, I know the last thing I want to think about right now is taxes, but this info had to be passed on to our readers. You can now get TurboTax Online Federal edition for free. No joke. Free preparation, Free e-filing, & free printing.

If you want to get a jump on your taxes, this is a good reason to. If you're not ready to do your taxes quite yet, I'd suggest just signing up and coming back to it when you're ready. After all, its free: Free TurboTax Online.

A few months ago, we wrote about getting Free Quicken Online too. The good freebies just keep on rolling in.


Another Dow Jones Long Term Chart

Courtesy of Jesse's.we see yet another long term Dow Jones chart. But, this one has some ominous implications. After all, it is Friday the 13th.

(click to enlarge)


Jim Rogers Interview From Russia

Jim Rogers latest thoughts from February 5th in Russia:


"Thanks very much for giving us your time, first of all and welcome to Russia. You have made some investments in China because the government is planning big stimulus plan there, what are you making of what Russia`s doing, do you see anything interesting here in Russia that you're investing in?

In October, November I did buy more Chinese stocks but I am not buying shares in any other country in the world right now, because most of the world is in serious trouble including China. Don't get me wrong, but I'm not investing anywhere and certainly not investing in Russia.

Certainly not, why?

Well, I am certainly not investing in America either, for that matter and certainly not in the UK but no, the Russians have lots of problems, deep seated problems as far as I am concerned, perhaps there`s a chance Russia will continue to disintegrate in more than one country. There are lots of potential problems in the former soviet union.

Disintegrate, you mean, into separate countries?

The soviet union broke up into 15 countries, Russia itself has the potential to continue to break up, the Ukraine may break up Kazakhstan could break up, this is still not stable and every empire has disintegrated through out history. The reverberations have gone on for long periods of time. So I am sure there's good investment in Russia if you're on the ground and you can stay with them, but not for me.

What in your opinion is Russia doing right and what is Russia doing wrong in handling this crisis?

Well, what they're doing wrong is that they are propping up their banks which I find reprehensible I find bad economics and bad morality as well, the way the system is supposed to work is suppose you take the assets from the incompetent and give them to the competent and you start over from a stronger base. Well the Russians are making the same mistakes that the British and the Americans and everybody else is making. But taking the assets from the competent and giving them to the incompetent and know thy can compete with the competent, it weakens the whole system. Putin at least seems to understand that there is a problem with the US dollar, that the world needs to adjust to that problem, he seems to understand some of the problems the world faces better than we do in America, but for the most part the Russians are making mistakes too.

You said the Pound is finished, what is your take on the ruble?

Ahhh, the ruble. That's a very good question. I am not sure, even if I had an answer I am not sure I would give it to you. No, I am not optimistic about the future of the Ruble at all. The Russian at least have natural resources to some extend but I am not optimistic about the continuing stability of Russia. The natural resources, the reserves are declining as you know, because they have been stripping the assets here in Russia for some time. Oil production peaked, production of most things peaked in Russia for the foreseeable future, so I am not buying the ruble either.

The Government announced that it would defend the ruble at 41 against the Euro / Dollar basket. Was that a mistake to announce a target?

It always as been in the past the market has learned in the last few sessions that you can always bet against the central banks and you will make money eventually. So when a central bank says “don't you worry the pound is going to stay here or the ruble is going to stay here or whatever, ultimately that has always failed if the fundamentals are not sound and will fail again, everybody knows what the target is.

What is driving the fall of the ruble? Is it regular people panicking and putting their money into dollars, that one thing we`ve heard from bankers here at this forum, or is speculation?

Its mainly the Russians, in fact whenever a currency fails through out history it has always started internally, the foreigners always get the blame because the politicians like to blame all their problems on the foreigners, because they don`t vote and their not there. Right now I think there something like 20 or 25% of deposits in banks in Russia in foreign currencies by Russian and not by foreigners. So its always starts with the local people, because local people always know best what`s going wrong and they start moving out. The speculators historically always show up later.

So there are Russian speculators that may be involved here too, or is this just the average bank depositor moving their money into dollars out of concern?

It seems pretty obvious that its intelligent people making intelligent decisions with their money, they can see there`s going to be problems with the ruble so they, intelligent Russians have been moving out of the ruble. The ruble is down 50 or 60% in the last few moths, or in the last year or so.

The Central Bank said today that they won't have to spill much blood to defend the ruble at 41, do you believe them?

I don't believe in any central bank no matter what they say. The few times central banks have been right at something, you can count them with one hand. If you get your investment advice from central banks or governments you are going to go broke fast, don't listen to those people.

Are you short the ruble?

I am not doing anything with the ruble, not right now. But knowing that the central bank drew a line in the sand it makes me stand up and take a little more notice about the ruble. So I will start thinking more about it."



For some of Rogers' recent commentary, check out his thoughts on British pound, on agriculture, on commodities, and more.


Thursday, February 12, 2009

CHP Designation: Limited Spots Left

Just wanted to remind everyone that if you're interested in the Certified Hedge Fund Professional (CHP) Designation, to sign up for more info below. The CHP is similar to that of the CFA or CAIA, but is geared specifically towards hedge funds. There are only around 40 spots left for this round of registration! There has been a ton of interest generated with our exclusive MarketFolly $50 discount, so hurry before registration is full.

If you missed our posts on this, then be sure to check out Part 1 of our interview and Part 2 as well. All MarketFolly readers are eligible for the exclusive $50 discount that we've arranged with the CHP thanks to Richard Wilson. By entering your info in the form below, it will recognize that you came from MarketFolly and the discount will be automatically applied if you go on to register. Sign up now before registration fills up!

Enter your contact info below to learn more about the program:



(Email & RSS Readers: you have to come to the blog to enter your info)


Hedge Fund Jana Partners Files 13D on Convergys (CVG)

Hedge fund Jana Partners ran by Barry Rosenstein has recently filed an amended 13D on Convergys (CVG). The filing was made due to activity on February 5th, 2009 and they are now showing a 14% ownership stake in Convergys (CVG). They currently own 17,035,512 shares. The amendment to the filing has allowed them to make a change to the board of directors. As per the filing,

(click to enlarge)


So, it looks as if Barry is trying to keep the ball rolling on this name they have an activist stake in. And, in a Form 4 filed with the SEC, Jana disclosed that they acquired another 9,987 shares on February 5th. We've also covered Jana's recent portfolio updates here. If you're unfamiliar with Jana, they are a hedge fund ran by Barry Rosenstein and was recently ranked 79th in Alpha's Hedge Fund Rankings. Jana was founded in 2001 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. You can view Jana's portfolio in its entirety here.

Taken from Google Finance,

Convergys is "a global player in relationship management. The Company provides its clients with solutions to support their customers (Customer Solutions) and employees (human resource (HR) Solutions). It has three segments: Customer Management, which provides outsourced customer care solutions, as well as professional and consulting services to in-house customer care operations; Information Management, which provides convergent rating, charging and billing solutions for the global communications industry, and Human Resources Management, which provides human resource business process outsourcing (HR BPO) solutions and learning solutions."


Hedge Fund Returns For January 2009 By Strategy

Econompic Data has a great graphic illustrating performance of the various hedge fund strategies for January 2009:

(click to enlarge)



Nassim Taleb Explains the Black Swan

If you've never heard of Nassim Taleb, he is known for his Black Swan theory and overall doom focus. This video focuses on Taleb explaining the Black Swan in detail. Even if you don't agree with it, it's an interesting video.



Obviously, much more is detailed in his book, The Black Swan: The Impact of the Highly Improbable. We've actually highlighted Taleb's other book in our most recent Recommended Reading List as well.


[hat tip to WallStNation for flagging this]


Dow Performance After Elections

A nice quick Bloomberg chart comparing the Dow Jones performance after the elections of Barack Obama and Franklin D. Roosevelt. It will be interesting to see how the market performs after March, as we have yet to see any positive sort of rally after the Obama inauguration.

(click to enlarge)


Wednesday, February 11, 2009

Seth Klarman's Baupost Group: Portfolio Changes (13G Filings)

Hedge fund Baupost Group ran by Seth Klarman has made a few more recent changes to their portfolio. In 2 amended 13G filings with the SEC due to activity on January 31st 2009, Baupost now shows:

  • A 16.68% ownership stake in Facet Biotech (FACT) with 3,985,567 shares.
  • A 0% ownership stake in Centerplate (CVP) with 0 shares. They previously held this company and have now completely sold out of their position.

These changes come after Baupost recently bought more RHIE. You can view additional portfolio updates here, as well as their portfolio in its entirety.

If you're unfamiliar with Baupost, then here's what you need to know: Over the past 25 years, Baupost has seen an annual compound return of 20% and is ranked 49th in Alpha's hedge fund rankings. Klarman has always considered himself a value investor and has been patient through the market turmoil. The past few years they have had nearly half their $14 billion in assets in cash. But, with turmoil comes opportunity. And, as such, Baupost's cash has been gradually deployed by Klarman and Baupost's 100 employees, leaving them with around a fourth of assets left in cash. Klarman's investment process is detailed in his book Margin of Safety. In it, he lays out a "how-to" on risk-averse value investing. The book is no longer actively printed and is very hard to find. His take on recent market action can be viewed in his recent interview with Harvard Business School. For more information about Klarman, check out our post on hedge fund manager interviews.

Company bios taken from Google Finance,

Facet Biotech Corporation "offers biotechnology research services for drug and pharmaceutical products development."

Centerplate, Inc. is "a provider of food and related services, including concessions, catering and merchandise services in sports facilities, convention centers and other entertainment facilities."


Hedge Fund Tontine Associates Updates Stakes Via 13G Filings

Well, you might want to get used to all the Tontine Associates updates. After all, they are closing two of their hedge funds after having a very rough year where one of their funds ended up -91.5%, as noted in our year end 2008 hedge fund performance list. So, such liquidations are the reason behind the constant portfolio shuffling and SEC filings. As we've detailed before, Tontine has recently sold out of 15 positions, as well as filed amended 13D's to many of their holdings, and then they most recently sold out of 9 more positions.

This time around, they were amending various 13G filings to companies that they still hold a position in. For the most part though, those positions are now pretty small compared to what they used to be.

Firstly, in an amended 13G filing, Tontine is showing a 7.59% ownership stake in Patapsco Bancorp (PATD) with 141,385 shares.

Secondly, they also now show a 7.55% ownership stake in PVF Capital (PVFC) with 587,233 shares.

Thirdly, they have a 1.04% ownership stake in Beazer Homes (BZH) with 408,200 shares.

They also now show a 0.47% ownership stake in Trinity Industries (TRN) with 370,751 shares.

Next, Gendell and company also filed an amended 13G on AMR Corp (AMR) disclosing a 0.15% ownership stake with 430,072 shares.

Sixth, they show a 0.03% ownership stake in Goodyear Tire & Rubber (GT) with 61,200 shares.

Additionally, they disclosed an updated 0.44% ownership stake in Ameron (AMN) with 40,000 shares.

Lastly, Tontine now shows a 0.09% ownership stake in Hexcel (HXL) with 85,255 shares.

You can also view their entire portfolio here. Do note that the next update of portfolio holdings (13F filing) is due in a week or so, and their portfolio will undoubtedly change again as they continue to liquidate positions as they close down 2 of their funds.

If you're unfamiliar with Tontine, they specialize in macro investing and take very large, concentrated positions in companies he feels will benefit from those macro themes. Additionally, he will take on an activist role when necessary, to ensure shareholder returns. The fund has posted returns in excess of 100% in both 2003 and 2005. Conversely, this year has been the year from hell for Tontine. Recently, they announced they would be closing two of their hedge funds: Tontine Capital LP and Tontine Capital Partners LP. Two of Tontine's funds will remain open: Tontine-25 and Tontine Financial.

It has definitely been an astonishing year for Gendell, whose Tontine firm is named after an annuity invented by Lorenzo de Tonti. In such an annuity, investors contribute and collect dividends. As investors each die off, their share is left to the remaining partners. Therefore, the last man alive receives all the money. Gendell's desire is clearly to be that 'last investor' remaining. Such a goal becomes slightly ironic when you consider his firm suffered monumental losses and almost 'died' this past year. Gendell explains the turmoil they faced in his October letter to investors (.pdf format).

Taken from Google Finance,

Patapsco Bancorp, Inc. "is the holding company of The Patapsco Bank (the Bank). The Bank is a commercial bank operating through five full-service offices located in Dundalk, Parkville, Carney, Glen Arm and Baltimore City, Maryland. The primary business of the Bank is to attract deposits from individual and corporate customers, and to originate residential and commercial mortgage loans, commercial loans and consumer loans, primarily in the Greater Baltimore Metropolitan area."

PVF Capital Corp. (PVF) "is the holding company that operates through its principal subsidiary, Park View Federal Savings Bank (Park View Federal or the Bank). Park View Federal is a federal stock savings bank operating through 17 offices located in Cleveland and surrounding communities."

Beazer Homes USA, Inc. (Beazer) is "a diversified homebuilder. It operates in 17 states. The Company’s homes are designed to appeal to homeowners at various price points across various demographic segments and are generally offered for sale in advance of their construction."

Trinity Industries, Inc. (Trinity) is a "multi-industry company that owns a range businesses, which provide products and services to the industrial, energy, transportation and construction sectors."

AMR Corporation (AMR) "operates primarily in the airline industry through its principal subsidiary, American Airlines, Inc. (American). American is a scheduled passenger airline."

The Goodyear Tire & Rubber Company (Goodyear) is "a manufacturer of tires and rubber products, engaging in operations in most regions of the world. The Company, together with its United States and international subsidiaries and joint ventures, develops, manufactures, markets and distributes tires for most applications."

Ameron International Corporation (Ameron) is "a multinational manufacturer of engineered products and materials for the chemical, industrial, energy, transportation and infrastructure markets."

Hexcel Corporation (Hexcel) is "an advanced composites company. Hexcel develops, manufactures and markets lightweight, high-performance composites, including carbon fibers, reinforcements, prepregs, honeycomb, matrix systems, adhesives and composite structures, for use in the commercial aerospace, space and defense and industrial applications."


Large Hedge Funds Underperform Comparable Small Hedge Funds

CXO Advisory has grabbed our attention with an interesting chart depicting the relationship between hedge fund size and future risk adjusted returns. They found such data in Melvyn Teo's paper, "Does Size Matter in the Hedge Fund Industry?" Some of Melvyn's conclusions are that,

  • There is a negative, convex relationship between hedge fund size and future risk-adjusted returns (see the chart below). For example, an increase in
    assets from $10 million to $500 million implies a decrease in annual abnormal returns of about 1.23%.
  • A portfolio comprised of the smallest 40% of hedge funds outperforms a portfolio of the largest 40% hedge funds (both rebalanced annually) by a risk-adjusted 3.65% per year.
  • While new investments flow disproportionately to small funds, they do not do so quickly enough to eliminate the hedge fund size effect.
And, here is the chart illustrating that larger hedge funds tend to underperform smaller ones:

(click to enlarge)



CXO Advisory


S&P500: 2002/03 Versus Present

Just a quick look at some similarities between the S&P500 from 2002/03 and 2008/09 from a technical analysis perspective. The fundamentals and economic factors between the two periods, on the other hand, are not so similar.

(click to enlarge)



[hat tip to Steve Puri]


Tuesday, February 10, 2009

Tudor Investment Corp Updates 8 Positions Via Amended 13G Filings

Hedge Fund Tudor Investment Corp ran by Paul Tudor Jones has just filed 8 separate amended 13G filings with the SEC due to activity on December 31st, 2008. They have previously held positions in all of these names and have adjusted them. Here are the position updates (in no particular order):

  1. They now show a 0.04% ownership stake in Terrestar (TSTR) with 42,798 shares.
  2. 1.9% ownership stake in BigString(BSGC) with 995,712 shares.
  3. 0.6% ownership stake in Fibertower (FTWR) with 876,958 shares.
  4. 1.2% stake in International Fight League (IFLI) with 955,886 shares.
  5. 9.7% ownership stake in Progenics Pharmaceuticals (PGNX) with 2,888,513 shares.
  6. 1% stake in ULURU (ULU) with 628,873 shares.
  7. 12.6% stake in Enherent Corp (ENHT) with 6,593,336 shares.
  8. 1% stake in KIT Digital (KITD) with 1,182,527 shares.

If you missed it back in late January, Tudor also filed numerous 13Ds on some other positions. If you're unfamiliar with Tudor, then here is his bio from Wikipedia,

"In 1980 he founded Tudor Investment Corporation which is today a leading asset management firm headquartered in Greenwich, Connecticut. The Tudor Group, which consists of Tudor Investment Corporation and its affiliates, is involved in active trading, investing and research in the global equity, venture capital, debt, currency and commodity markets. One of Jones' earliest and major successes was predicting Black Monday in 1987, tripling his money during the event due to large short positions. Jones uses a global macro strategy when trading in some of his funds. This strategy can be seen in the 1987 PBS film "TRADER: The Documentary". The film shows Mr. Jones as a young man predicting the 1987 crash. Jones' firm currently manages$17.7 billion (as of June 1, 2007). Their investment capabilities are broad and diverse, including global macro trading, fundamental equity investing in the U.S. and Europe, emerging markets, venture capital, commodities, event driven strategies and technical trading systems."


So, as you can see, PTJ is quite an accomplished gentleman, earning him the title of the macro trader. If you want to hear some insightful thoughts from Paul Tudor Jones himself, head over to our post on Hedge Fund manager interviews or our post on quotes from PTJ. We've also covered their 13F filing which details their entire portfolio. 2008 was a mixed year for them, depending on which funds you were invested in. Their Raptor global equities fund finished '08 -20%, their flagship Global BVI fund finished -4.9%, and their Tensor fund (quant) ended +35.4% as we noted in our year end hedge fund performance numbers.


Company bios taken from Google Finance,

TerreStar Corporation, "formerly Motient Corporation is in the integrated satellite wireless communications business through its ownership of TerreStar Networks Inc. (TerreStar Networks), its principal operating entity, and TerreStar Global Ltd. (TerreStar Global)."

BigString Corporation is "a technology company focused on providing online communications. The Company provides a technology that would allow the user of e-mail services to have control, security and privacy relating to the e-mail generated by the user."

FiberTower Corp is "a provider of facilities-based backhaul services to wireless carriers. The Company utilizes its wireless spectrum assets to provide backhaul services through a hybrid radio/fiber network architecture."

International Fight League, Inc. is "a sports entertainment company that uses its professional mixed martial arts (MMA) sports league, known as the International Fight League (IFL), as a platform to generate revenues from spectator attendance at live events, broadcast of television programming, sponsorships and licensing."

Progenics Pharmaceuticals, Inc. (Progenics) is "a biopharmaceutical company focusing on the development and commercialization of therapeutic products to treat the unmet medical needs of patients with debilitating conditions and life-threatening diseases."

ULURU Inc. is "a pharmaceutical company focused on advancing topical drug delivery and engaged in the development of wound care, plastic surgery, and topically applied therapeutics based primarily on the adaptation of existing therapeutic agents using its drug delivery platforms."

Enherent Corp. is "an information technology services firm with a primary focus of providing clients with consultative and technology staffing resources; and teams of technical consultants trained in the delivery of solutions related to systems integration, network and security, and application services."

KIT digital, Inc. (KIT Digital), "formerly ROO Group, Inc., through its subsidiaries, is engaged in the business of providing Internet software products and solutions that enable its customers to distribute video content through Internet Websites and mobile devices."


Tremblant Capital Group Adds to Chipotle (CMG) Position

Bret Barakett's Tremblant Capital Group has filed an amended 13G with the SEC due to their activity on January 28th, 2009. In it, they have disclosed a 5.71% stake in Chipotle (CMG) with 1,052,735 shares, up from their previous 558,000+ shares they showed back in their last 13F filing disclosing their entire portfolio. Chipotle shares have fallen a lot recently, and Tremblant obviously sees opportunity there. Keep in mind that this hedge fund typically doesn't take larger than 5% stakes in companies (which requires a 13G filing), so they definitely like this name, as this is the first major filing from them in quite some time.

If you're unfamiliar with Tremblant, here's what you need to know: This hedge fund is ran by Bret Barakett. If his last name sounds familiar, its because his brother, Timothy Barakett, manages fellow hedge fund Atticus Capital, whom we also track. Taken from their site, Tremblant Capital Group's objective is "to achieve superior risk adjust returns for our investors through our focused and disciplined investment process." Tremblant is a $4.1 billion hedge fund based in New York and is run by Bret Barakett, who is a former portfolio manager at Moore Capital Management (the hedge fund run by the great Louis Bacon, whom we also track). So, as you can see, despite having a great mind of his own, Barakett has worked with some of the best in the macro game. But, as we noted in September, Tremblant has had a rough year. In the past, Tremblant has also disclosed a 5.2% stake in Advanced Medical Optics (EYE) and a stake in PharmaNet (PDGI).

Taken from Google Finance,

Chipotle Mexican Grill, Inc. (Chipotle) "operates fast casual, fresh Mexican food restaurants serving burritos, tacos, bowls and salads. As of December 31, 2007, the Company had 704 restaurants in 33 states throughout the United States and in the District of Columbia."


Hedge Fund Tontine Associates Sells Out Of 9 More Positions (Jeffrey Gendell)

Tontine Associates, the hedge fund firm ran by Jeffrey Gendell has yet again filed numerous amended 13G's with the SEC. Tontine has had a very rough year and will be closing two of its hedge funds, which is the reason behind much of the portfolio shuffling. As we've detailed before, Tontine has recently sold out of 15 positions, as well as filed amended 13D's to many of their holdings. They recently filed 9 more amended 13G's and have sold completely out of the following companies (in no particular order):

  1. Ceco Environmental (CECE)
  2. Champion Enterprises (CHB)
  3. Downey Financial Corp (DWNFQ)
  4. Insteel Industries (IIIN)
  5. Ecology & Environment (EEI)
  6. Graftech International (GTI)
  7. Columbus McKinnon Corp (CMCO)
  8. Emcor (EME)
  9. Hovnanian (HOV)

They had previously held positions in these companies but no longer own shares. All of the filings were made due to activity on December 31st, 2008. You can view their entire portfolio here. Do note that the next update of portfolio holdings (13F filing) is due in a week or so, and their portfolio will undoubtedly change again as they continue to liquidate positions as they close down 2 of their funds.

If you're unfamiliar with Tontine, they specialize in macro investing and take very large, concentrated positions in companies he feels will benefit from those macro themes. Additionally, he will take on an activist role when necessary, to ensure shareholder returns. The fund has posted returns in excess of 100% in both 2003 and 2005. Conversely, this year has been the year from hell for Tontine. Recently, they announced they would be closing two of their hedge funds: Tontine Capital LP and Tontine Capital Partners LP. Two of Tontine's funds will remain open: Tontine-25 and Tontine Financial.

It has definitely been an astonishing year for Gendell, whose Tontine firm is named after an annuity invented by Lorenzo de Tonti. In such an annuity, investors contribute and collect dividends. As investors each die off, their share is left to the remaining partners. Therefore, the last man alive receives all the money. Gendell's desire is clearly to be that 'last investor' remaining. Such a goal becomes slightly ironic when you consider his firm suffered monumental losses and almost 'died' this past year. Gendell explains the turmoil they faced in his October letter to investors (.pdf format).


Paulson & Co 2008 Year End Investor Letter & Report

If you've missed it, John Paulson's hedge fund sends out their report from the year that was 2008. Hat tip to NYT for posting it.

Paulson Funds Annual Report


Jim Rogers On Currencies

Jim Rogers recently gave his thoughts on various world currencies:

  • Owns the Euro, Swiss Franc, Norwegian Krona, Danish Krona, Swedish Krona, Japanese Yen, Chinese Renminbi, Singapore Dollar, Australian Dollar
  • Expects the Japanese Yen to rise another 10-15%
  • The current dollar rally is a forced short covering - not a flight to safety


And here is the video:




Big hat tip to CommodityBullMarket for flagging this, which we somehow missed. For some of Rogers' recent commentary, check out his thoughts on British pound, on agriculture, on commodities, and more.


Monday, February 9, 2009

Bill Ackman's Pershing Square Letter to Investors (Re: Target)

The full text of Bill Ackman's letter to investors in his Pershing Square IV fund, which invests solely in Target (TGT).

"
February 8, 2009

Dear Pershing Square IV Investor:

A few further thoughts and an update on PSIV:

In my effort to get last week’s letter out promptly, I neglected to apologize. I am deeply disappointed by PSIV’s dreadful performance and I apologize profusely for the fund’s results to date. Over the last few days, we have spoken to both investors who wish to redeem and others who intend to contribute additional capital. We expect to be able to redeem any and all investors who choose to exit in March, in full and in cash. We will provide more details on the timing of distributions shortly.

I have spent the last few days thinking about what we can do beyond strong progress on Target and PSIV to somehow compensate you for PSIV losses to date. Approximately 90% of the investors in PSIV are also investors in the main Pershing Square funds. Substantially all of the overlapping investors have a larger investment in the main Pershing Square funds than in PSIV.

For those PSIV investors who are investors in the main Pershing Square funds, we will raise the high water mark, thereby waiving future incentive fees on your main Pershing Square fund capital account(s) and any additions to your capital account(s) until such time as you have recouped your PSIV losses.

By way of example, if you invested $10 million in PSIV and have lost $9 million of your capital, your high water mark on your main Pershing Square fund capital account(s) will go up by $9 million and you will not pay any incentive fees until you have recouped your entire $9 million PSIV loss. This commitment applies even in the event you remain an investor in PSIV and your PSIV investment increases in value. If you remain an investor in PSIV and your capital account declines further in value, you will receive an additional credit toward your high water mark in the main Pershing Square funds.

For the 10% of the investors that are not investors in the main Pershing Square funds, we offer you the following: We will raise the high water mark on any future investment you make in any Pershing Square fund or co-investment vehicle we subsequently offer so you will not pay any incentive fees until you have recouped your PSIV losses.

Our willingness to offer those investors not currently in the main Pershing Square funds a fee waiver is, of course, of little value if they make no future Pershing Square investment. To their credit, some of these investors, who are for the most part other hedge funds (that comprised approximately $1.3 billion of the original $2 billion of fund capital), have told me that they previously hedged a substantial portion, or in some cases 100% or more, of their exposure to Target through PSIV. Hopefully, this has helped to mitigate their PSIV losses in the event we are never able to recompense them.

Bottom line, PSIV has been one of the greatest disappointments of my career to date. That said, we continue to believe that we will ultimately be successful in our investment in Target. I am likely now the largest individual investor in Target through my interests in the various Pershing Square funds including my personal commitment of an additional $25 million of capital to PSIV. I and the rest of the Pershing Square team will work hard to achieve a successful outcome for all of us. On the pages which follow, we have attempted to answer investors’ most commonly asked questions. Please call me if you have any additional questions.

Sincerely,
William A. Ackman"


And, here's the .pdf version for those that want it.


Seth Klarman's Baupost Group Buys More RHI Entertainment (RHIE)

Well, it certainly looks like Seth Klarman's hedge fund Baupost Group has a fondness for RHI Entertainment. In late January, we disclosed that Baupost had been buying RHIE and had filed an amended 13D on it, disclosing a 30% position. Fast forward a few weeks later and we are now writing a nearly identical post.

Taken from another amended 13D and Form4 SEC filings, we now see that Baupost Group has a 33.06% stake in RHI Entertainment (RHIE) with now 4,463,534 shares. As per the Form 4, Baupost was buying shares as recently as 2/4/09, where they picked up an additional 385,202 shares at $4.28 a share. You can view their most recent portfolio updates here, as well as their portfolio in its entirety.

If you're unfamiliar with Baupost, then here's what you need to know: Over the past 25 years, Baupost has seen an annual compound return of 20% and is ranked 49th in Alpha's hedge fund rankings. Klarman has always considered himself a value investor and has been patient through the market turmoil. The past few years they have had nearly half their $14 billion in assets in cash. But, with turmoil comes opportunity. And, as such, Baupost's cash has been gradually deployed by Klarman and Baupost's 100 employees, leaving them with around a fourth of assets left in cash. Klarman's investment process is detailed in his book Margin of Safety. In it, he lays out a "how-to" on risk-averse value investing. The book is no longer actively printed and is very hard to find. His take on recent market action can be viewed in his recent interview with Harvard Business School. For more information about Klarman, check out our post on hedge fund manager interviews.

Taken from Google Finance,

RHI Entertainment, Inc. "develops, produces and distributes new made-for-television movies, mini-series and other television programming worldwide. The Company also selectively produces new episodic series programming for television."


Hedge Fund Paulson & Co Files 13Gs on Rohm & Haas (ROH) and Boston Scientific (BSX)

John Paulson's hedge fund Paulson & Co has recently filed two 13Gs with the SEC due to activity on December 31st, 2008. Firstly, they have disclosed a 9.24% ownership stake in Rohm & Haas (ROH). The filing shows them owning 18,041,111 shares. ROH was set to be acquired by Dow Chemical (DOW), but the deadline recently passed. Paulson has decided to become more proactive with this position and has sent a letter to Dow Chemical regarding his stance on the merger. Obviously, as a large ROH shareholder, Paulson wants the deal to go through.

Secondly, Paulson & Co has also filed a 13G and has disclosed a 6.6% ownership stake in Boston Scientific (BSX). The filing shows them owning 99,135,000 shares in the company. You can view Paulson's entire portfolio here. Additionally, Paulson recently filed a 13G on Mirant (MIR) as well.

Paulson & Co has had back-to-back successful years, profiting from the sub-prime mess and overall chaos at financial institutions. Some of their funds finished 2008 up 24% and 37%, as we noted in our year end 2008 Hedge Fund performance numbers summary. Lastly, we also noted that one of Paulson's co-portfolio managers would be leaving to start his own fund.

Taken from Google Finance,

Rohm & Haas is "a specialty materials company. The Company operates through seven segments: electronic technologies, display technologies, primary materials, paint and coatings materials, packaging and building materials, performance materials group and salt."

Boston Scientific is "a developer, manufacturer and marketer of medical devices that are used in a b range of interventional medical specialties, including interventional cardiology, cardiac rhythm management, peripheral interventions, electrophysiology, neurovascular intervention, oncology, endoscope, urology, gynecology and neuromodulation."


Mohnish Pabrai Letter to Investors (Pabrai Investment Funds)

Just wanted to post up Mohnish Pabrai's letter to his Pabrai Investment Fund investors sent out in January 2009 detailing his 2008 year-end summary.

*Update: The letter has been removed per the request of the underlying firm.


Keep an Eye on Transports ($TRAN)

Stewie's post recently reminded me to keep an eye on the Transports. I like to watch this average for two reasons. Firstly, transports are an important gauge of economic activity. Secondly, transports typically are a leading indicator (for instance leading out of the recession). In addition to the transports, we've also looked at unemployment rates during recessions as a leading indicator, noting that the rate always skyrockets right before the worst is over.

Currently, the Transports average $TRAN is stuck in a very solid trading range, and has been for quite some time (as illustrated below). It has very strong support around the $2900 level and one should look to buy there. There seems to be a short opportunity setting up in transports as the average reaches resistance around the $3200 level. And, keep an eye out to see if the index breaks out of this past overhead resistance (as well as the 200 day moving average, which also acts as resistance). You can obviously play this by buying/selling various transport names like trucking companies, railroad plays and such.

A breakout over this heavy layer of near-term resistance would be obviously very bullish for transports. And, if this happens, it could be a signal that the recession is drawing nearer to a close, seeing as transports act as a leading indicator to economic activity. But, we unfortunately would expect the transports to fail at this resistance, setting up a nice short of the group. Because, after all, with the consumer in the house of pain, what has really changed with the economy? We would love to be proven wrong, though.

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Also, keep your eye on the Baltic Dry Index ($BDI), which measures bulk shipping. This volatile index is also a gauge for economic activity around the globe. And, if shipping activity is weak, then the odds are that we probably aren't out of the woods yet. As you can see from the chart, the index just absolutely fell off a cliff back in August of 2008. We've seen signs of a rebound, and we will continue to monitor it. Noted trader and author of the Gartman Letter, Dennis Gartman has also advocated monitoring the BDI in his recent interview with Bloomberg where he discussed the economy and Gold (GLD), among other things.

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These leading indicators of economic activity will be a great gauge for determining when we might be in the clear.