Asymmetric Investment Returns

Interview on Forbes: Using Price Trends to Maximize Profits

Mike Shell — Sat, 12 May 2012 14:49:10 -0500

I did an interview last week with Kate Stalter. She titled it: Using Price Trends to Maximize Profits

(click the title to read the article).

JP Morgan underestimates risk - takes on heavy losses

Mike Shell — Thu, 10 May 2012 23:00:31 -0500

JP Morgan becomes the latest Wall Street bank to offer empirical evidence of my belief: Conventional wisdom has risk wrong: how it's defined, measured, and managed.

Below are links to the story, but none of it is useful without understanding the issue.

JP Morgan's $2 Billion Blunder - Wall Street Journal‎

JP Morgan Reveals Significant Trading Loss; Shares Plummet -Fox Business‎

J.P. Morgan's losses reveal market chaos - MarketWatch‎

Market conditions evolve over time

Mike Shell — Wed, 09 May 2012 10:18:19 -0500

Market conditions evolve over time. Circumstances evolve over time. That is, prices don't always adjust immediately and efficiently. Instead, prices drift in one direction or another as market participants decide how to respond to new ever-evolving information. Some of them under-react, others over-react as they perceive information differently and react to it based on their perception. For example, different readers of this message will perceive its meaning in different ways; based on their own knowledge and experience and "frame of reference". In fact, people often believe they know more about things than they really do. They can become overconfident in what they believe they know. When I do an interview, for example, people sometimes believe they know what I do and say "I do that too". Yet, I've never given any specifics. They really don't know. They unknowingly experience the Illusion of Asymmetric Insight. As evidenced by the vast differences in long term performance of different market operators, some are better at perception, avoiding overconfidence, understanding the issues like Illusion of Asymmetric Insight, evolving, and adapting than others. Such an understanding and skill can only be achieved by experience. The truth is, that is something few really have.

It can be useful to look at how conditions did evolve. Not that anyone can do anything in the past, but instead to get an understanding of how things unfold. My systems adapt to these evolving conditions. Below we post some articles and comments over the past several weeks.

Investor Sentiment

Stock market risk becomes elevated with breadth indicators reaching bearish level

Managing Market Risk

Bear market cycles and Subsequent Bull Runs Q2 2012

S&P 500 Index at Inflection Points Q2 2012

Some investment managers miss out on capital gains

Standard Risk Measurement Not Enough: Eurozone Crisis Deconstructed

Spain Stock Market Cascade

World Bear Market?

Asymmetry™ Tactical ETF portfolios now available to wealth managers on Folio Institutional, Schwab Institutional, TD Ameritrade Institutional, Fidelity Institutional Wealth Services, Pershing Advisor Solutions

World Bear Market?

Mike Shell — Sun, 22 Apr 2012 22:34:30 -0500

Is the world in a bear market?

Read: World Bear Market.pdf

The First Hedge Fund Article

Mike Shell — Sun, 22 Apr 2012 22:15:45 -0500

The term “hedge fund” was first printed in a Fortune article “The Jones Nobody Keeps Up With” by Carol Loomis in 1966. The article is about the top investment manager at the time, Alfred Jones. The term “hedge fund” was coined when Alfred Jones said his fund was “hedged”. Instead of a “mutual fund”, his fund was structured as a Limited Partnership as a “private fund”. From this article, these private funds are today known as “hedge funds”.

Read the first hedge fund article about the first hedge fund manager that coined the term: The Jones Nobody Keeps Up With.

Hedge fund performance first quarter 2012

Mike Shell — Sun, 22 Apr 2012 22:05:22 -0500

Commodity Trading Advisor performance

Source: BarclayHedge.com

Contrarian Hedge Funds and Momentum Mutual Funds

Mike Shell — Sun, 22 Apr 2012 22:00:45 -0500

ABSTRACT

We study how hedge fund performance is related to the presence of mutual funds operating in the same asset class. We argue that hedge funds are able to exploit the constraints of the mutual funds related to both the high correlation between flows and value of investment and their tendency to cater to investors by invest in stocks that are 'hot'. Hedge funds exploit these features of the mutual funds, especially the domestic ones. We show that the performance of the hedge funds is significantly higher when mutual fund market coverage is higher. This effect is mostly concentrated among domestic mutual funds and is stronger the higher investment horizon of the hedge funds. A high presence of the mutual fund industry helps to explain 28% of the yearly hedge fund performance. Hedge funds are more likely to be 'alpha' in the presence of a high degree of mutual fund market coverage and their probability of survival is higher. Hedge funds employ contrarian strategies at the very moment in which mutual funds ride market expectations. The degree by which hedge funds react to changes in public information is directly related to the degree of mutual fund market coverage.

Source: Massa, Massimo, Simonov, Andrei and Yan, Shan, Contrarian Hedge Funds and Momentum Mutual Funds (March 13, 2012). Available at SSRN: http://ssrn.com/abstract=2021499 or http://dx.doi.org/10.2139/ssrn.2021499

Spain Stock Market Cascade

Mike Shell — Thu, 19 Apr 2012 18:29:59 -0500

Below is the Dow Jones Spain Stock Index over the past four years. It recently declined to the 2009 cascade low. We call the lower highs and lower lows a "downtrend". You can probably see how it could have been useful to rotate out of a trend like this at some point prior to now. And, it appears some have.

Asymmetry™ Global Tactical Rotation portfolios now available to wealth managers on Schwab Institutional, TD Ameritrade Institutional, Fidelity Institutional Wealth Services, Pershing Advisor Solutions

Mike Shell — Wed, 18 Apr 2012 09:19:04 -0500

With one of the strongest and longest running actual track records applying systems that pursue asymmetric returns, we have had a lot of interest from independent wealth managers. We have made our programs available on the institutional platforms used by wealth managers and are in the process of hiring advisers across the country that will work with wealth managers.

We are pleased to announce that our Asymmetry™ managed accounts are now available to wealth managers who are independent registered investment advisors and custody accounts with:

Schwab Institutional + Schwab Advisor Services™
Fidelity Institutional Wealth Services®
TD Ameritrade Institutional
Pershing Advisor Solutions®

The Asymmetry Investment Program™ global tactical rotation and systematic trend following models are offered at different objectives and risk levels.

Asymmetry™ R15

Asymmetry™ Global Tactical Rotation GTR 10

Asymmetry™ U.S. Sector Rotation

Asymmetry™ U.S. Equity Trend Following

Asymmetry™ International Country Tactical ETF

Asymmetry™ Global Trend Following

All agreements and compensation arrangements are negotiated entirely between the wealth management firm and Shell Capital Management, LLC.

For more details about the Asymmetry Investment Program™ managed accounts contact us.

Standard Risk Measurement Not Enough: Eurozone Crisis Deconstructed

Mike Shell — Mon, 16 Apr 2012 09:05:47 -0500

From Pensions & Investments magazine:

Value-at-Risk and other popular risk measurements are typically effective during calm markets but often times are quite ineffective during challenging periods such as market shocks. More predictive models need to be used now that market volatility is high.

... normality ignores the higher moments of asymmetry and fat tails. Since volatility is simply ... not accounting for fat tails and return asymmetry . The volatile market events of 2008 ..... distributions that account for fat-tails and asymmetry.

Read it all at: Pensions & Investments: Standard Risk Measurement Not Enough: Eurozone Crisis Deconstructed

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