Reuters/Ray Stubblebine
Jack Schwager Explains How To Be A Great Trader (CFA Institute)
Jack Schwager, author of The Little Book of Market Wizards: Lessons from the Greatest Traders, told CFA Institute that that to him a trader is anyone that makes decisions. "To me, decision on when to go in, out, reverse positions, that's a trader," as opposed to a long-term trader. And he has some advice on how to be a good trader. "[Jim] Rogers could never make money using technical analysis and [Martin] Schwartz could not make money using fundamental analysis. Yet, they both do terrifically well."
"The very first thing to get across to people is you've got to figure out what is the right method. It's not just fundamental versus technical. Either are you short-term, or you're long-term. Do you want to trade stocks? Do you want to trade futures? Do you want to trade currencies? On and on with the variations. …It's a discovery process, an evolutionary process. Nobody can tell you that." He also says the approach traders pick has to have an "edge" and "work" and that it has to take into account risk management.
Why Advisors Should Consider Long-Short Mutual Funds (The Wall Street Journal)
Advisors looking to help clients preserve the money they made in the stellar 2013 U.S. stock market run, and to keep them in the market while lowering risk should look at long-short equity mutual funds, writes Jack Rivkin is chief investment officer of Altegris in a new WSJ column. These funds allow advisors "emphasize risk management over market timing," he writes.
"In a long-short strategy, fund managers hold attractive investments, which they anticipate will increase in value. At the same time the managers short overvalued stocks by borrowing and immediately selling shares which they anticipate they'll be able to buy back later at a lower price. When the price of the stock drops, the manager buys and then sells the borrowed shares back to their broker. The gain is in difference between what the manager made off the initial sale of the stock and lower price it was bought back for."
Hedge Funds Are Having Their Most Miserable Start To The Year Since 2008 (Business Insider)
Hedge funds have gained 1.23% year-to-date, their worst start to the year since 2008, according to a new report from Preqin. Hedge funds were up 3.76% in Q1 2013 and 6.07% in Q1 2012. Returns in January and March of this year were in the red, at -0.25% and -0.26% respectively. February's benchmark performance of 1.76% kept hedge funds in positive territory. Event-driven and long/short strategies were the most successful, returning 4.37% and 4.32% respectively.
FINRA To Consider Making Broker Checks Mandatory (Reuters)
The Financial Industry Regulatory Authority (FINRA) is considering making background checks on brokers mandatory, according to Sarah Lynch at Reuters. FINRA's BrokerCheck service which allows investors to look at a broker's background has come under the scanner as some argue that it's not as transparent as state regulators are about employees that have had legal woes. FINRA has said that its board would meet no April 24 to consider "requiring firms to adopt written procedures that are reasonably designed to verify the accuracy and completeness of the information" provided on BrokerCheck, according to an announcement made on Wednesday.
We Are Currently In The Weakest Earnings Cycle In 55 Years (Business Insider)
The pace of earnings growth has been poor the current earnings cycle which began in Q2 2007. "This has been the weakest earnings cycle in 55 years," wrote LPL Financial's Jeff Kleintop. "Every earnings cycle over the past 55 years has generated about a 7% annualized earnings per share (EPS) growth rate, when measured from peak to peak or from trough to trough." While the current earnings cycle is still ongoing with a 2.8% annualized growth rate from the prior cycle peak through Q1 2014.
Kleintop attributes this to two key factors. First, the trough in earnings was much deeper because of the recession. Second, the momentum of the earnings recovery has been much weaker. ""The pent-up demand should boost second quarter results," he said. "We are already seeing it in rebounding shipping traffic and new orders."
LPL Financial