The 2+2 Hedge Fund

[B00T]

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I noticed that you made 300+ posts the line. How crafty, considering you have 332 posts. I bet if you were at 297 you would have made the line 250, right?

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After I read that part of his post, I stopped reading and was going to flame at that very same thing, but you beat me to it.

[jakethebake]

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What better investors than the set of all 2+2ers with over 300 posts?

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I was confused because he made this a response to me, rather than the original poster.

[DesertCat]

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good fund managers beat the market.

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Rarely, if they run a mutal fund. The problem is that the structure of mutual funds makes it difficult to beat the market. Besides the sky high fees, you have to allow cash on hand for redemptions, investors can force you to sell your best ideas because they got scared, etc. And most mutal fund managers are morons.

More and more mutual funds are becoming closet index funds. Buy the S&P 500 so you won't trail the index too badly, then try to find a couple good ideas to help you catch up. Mediocore performance will keep your fund going when a bad year can kill it.

Investment partnerships (hedge funds) offer a better structure for beating the market. But their performance records are either private, or suspect, so efficient market theorists have trouble using them for studies.

Warren Buffett and the other disciples of Ben Graham have pretty much debunked the efficient market theory. Buffett wrote an essay on it called "The Superinvestors of Graham & Doddsville". Their conclusion is the market is frequently efficient, but it never is totally so. An intelligent investor can always find mispriced securities.

[snowbank]

I noticed that you made 300+ posts the line. How crafty, considering you have 332 posts. I bet if you were at 297 you would have made the line 250, right?


After I read that part of his post, I stopped reading and was going to flame at that very same thing, but you beat me to it.

Beat me too! I was going to tell him I would do it if it was only open to 2+2ers with 333 posts or more.

[Bigdaddydvo]

Remember that line in Rounders when Mikey walks into the Judge's poker game and says something to the effect of "Seated here are some of the finest legal minds in the city...yet there isn't a card player here." Playing cards was to those judges what managing a hedge fund would be for DS. I don't mean to take anything away from the terrific minds that run this site, but I'd say with a high degree of confidence that the consensus among 2+2 ers is that David, Mason, Ed, et al. are best served to opining on Poker and related gambling topics, and not figuring out which corporate bonds to short before the Fed makes its decision to hike the prime rate.

[snowbank]

Remember that line in Rounders when Mikey walks into the Judge's poker game and says something to the effect of "Seated here are some of the finest legal minds in the city...yet there isn't a card player here." Playing cards was to those judges what managing a hedge fund would be for DS. I don't mean to take anything away from the terrific minds that run this site, but I'd say with a high degree of confidence that the consensus among 2+2 ers is that David, Mason, Ed, et al. are best served to opining on Poker and related gambling topics, and not figuring out which corporate bonds to short before the Fed makes its decision to hike the prime rate.

Very true. It's like the Fridge when they entered him into the competitive eating competition finals. He's huge and can eat a ton, but when going against the lil japanese kid and everyone else who does that all the time, he got last place. Kiboyashi or whatever his name is ate like 53, and he ate 4. Just because you are good at something, you shouldn't assume you are better than someone who does it for a living.

[TrumpchumP]

The reason your intuition finds it interesting is that it's true. If you took the entire universe of anything that operates like the stock market or the poker table (when some buys, others have to be selling)and you looked at the profits and losses of that entire universe (factoring out the inflow or outflow of total capital in the system) it is always going to be ZERO.
If you were to have an equal stake in everyone at a 9 person table, at the end of the day you would end up losing the rake.
If you end up owning all stocks in the market, or all funds that are available (and not allowing IPO's - the inflow of capital) you would have a net loss of trading costs or expense ratios.
That is why you don't buy everything. It is why a spyder/sp500 is a great way to get a better than average return. The SP500 is market cap weighted, and stocks at the top only get there becasue they are doing well. You are effectively getting a return that is equal to the dividends paid + the ecomonic growth of those companies + the +/- swing in what the average investor is willing to pay for those stocks. If the P/E multiple is rising you'll make more, if it is falling you'll make less. PE's expanded consistently through the 90's and everyone benefited, none more than those holding indices.
It is HARD to beat an index, but there are plenty of people who are smart enough to do it. The question is, is it worth the risk you are taking.

[mackthefork]

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You give them money, and they try to make money off the money you give them.

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Or more likely, you give them money and they try to get to Mexico. [img]/images/graemlins/grin.gif[/img]

Regards Mack

[David Sklansky]

"Playing cards was to those judges what managing a hedge fund would be for DS. I don't mean to take anything away from the terrific minds that run this site, but I'd say with a high degree of confidence that the consensus among 2+2 ers is that David, Mason, Ed, et al. are best served to opining on Poker and related gambling topics, and not figuring out which corporate bonds to short before the Fed makes its decision to hike the prime rate."

Totally wrong. The best poker players in the "non insinctive" category got good at poker because they were good at the more general subject of analyzing things. They might be lazy or academically uneducated but they would have no trouble surpasssing the typical Wall Street mediocrity who gets paid for being merely average.

[Cheeseweasel]

has a hedge fund that has averaged over 20% for over thirty years. Why reinvent the wheel?