Off Topic

Are You Being a Phil Mickelson?

In preparation of The Masters, we were reading up on the superstar and three-time green jacket owner, Phil Mickelson. So what did he have to say the night before the Super Bowl of golf begins? Mickelson revealed  he was going to compete with 2 less clubs than everyone else, because he just doesn’t need them… Yahoo Sports explains.

“It’s a bizarre quirk that after remodeling, renovation and some lengthening, Mickelson says that he needs just 12 clubs to win the Masters. He says he never – literally never – has to make a long chip (low 100 yards) to the green. For Mickelson, that shot requires either a sand wedge or a gap wedge.

“I don’t ever need them,” he said. “… The past six or seven years I’ve played this tournament, I have not had a shot between 90 and 130 yards. So think about that. I have not ever had a shot between 90 and 130 yards, so I have a 40-yard gap in there. I don’t ever need [those two clubs].”

Phil Mickelson

Which brings us to the question of the post, “Are You Being a Phil Mickelson?” What do we mean by that? We’re talking about a general opinion of investors tending to overweight what is performing well, versus maintaining a long term investment horizon. Phil Mickelson knows Augusta National through and through, and thinks he doesn’t need clubs for the long chip (100 yards). We can’t help but think the long chipping clubs are the “Alternative Investment Clubs” of financial world, as they haven’t been up to par performance wise (pun intended) {past performance is not necessarily indicative of future results}.

But here’s where things get interesting…  later in the article, Mickelson admits he wants to use 16 clubs (not 12 or even the 14 allowed) on some courses, as he knows that in reality, those clubs are essential to getting through some courses. Is anyone else thinking what we’re thinking? He’s telling us he’s playing without 2 clubs because the long chip shot isn’t needed for Augusta, (because it’s not needed now) even though as a whole, those clubs are needed in order to be a successful golfer.

That doesn’t sound familiar does it? Would Phil make the same choice of clubs if the PGA tour required all players to have the same set of clubs the entire year?

Floating Gold (Whale Poop) worth more than Commodity Gold?

The age old question of “Where do you think Gold is going,” is often heard among the blogosphere, financial media, and others such as Jeff Gundlach of Doubleline who will always make predictions on. Right now, the gold market is up a somewhat impressive 7% YTD when compared with last year – but certainly nothing to obsess over, like the guy we happened to stumble upon in the U.K. who has come into some money, because he discovered Floating Gold, (which it turns out is the nickname for Whale Poop), via The Daily Mirror.

“Ken Wilman said his boxer dog Madge found the 6lb lump in Morecambe, Lancashire.

Ken only realized its potential value [he was paid 100,000 pounds for the find] after an online search revealed the substance was ambergris, an ingredient used in the manufacture of perfume.”

Floating Gold

For those who are not aware – ambergris - the fancier name for ‘whale poop’, is extremely rare and is even used in some alcohols (that will definitely make you think twice before taking your next drink). Coming off a year where Gold Futures dropped 28%, should you abandon any investments you have in gold and hit the beaches of England searching for ambergris?  Well, let’s see how much that Whale Poop is really worth.

While there is not exchange rate for Whale Poop, the guy was handed 100,000  British Pounds (about $167,000 US Dollars) for 6 pounds of ambergris. That’s $27,833 per pound of the s^&% (literally), or $1,906 per Troy Ounce.  Wow!… That’s some expensive s^&%, and actually more expensive that Gold itself, which prices out currently at about $1,300 per Troy ounce.

Forget Bitcoin… the new hot currency might be ‘Floating Gold’!  And don’t get us started on the liquid gold known as nailpolish at over $1,000 per gallon.

Weekend Reads

Just for Fun:

  • March Madness, Managed Futures Style – (Attain Capital)
  • Top Hedge Fund (Note:  It’s tongue and cheek) – (Hedge Fund)
  • Here’s A Guy Riding A Segway Onto Chicago’s Busiest Freeway – (Business Insider)

March Madness, Managed Futures Style

We don’t think it’s a coincidence that the first (real) day of March Madness, and the first day of Spring coincide with each other. In true Chicago fashion, it’s already snowed here, but that can’t dampen our spirits for our passion for college basketball.  Because we like March Madness… And because we like managed futures… And because the business of raising money from investors sure feels like a tournament at times, with the bulk of CTA’s no doubt feeling like 16 seed Weber St. going up against perennial powerhouse Arizona – it was only natural for us to create our own little CTA tournament for some fun.

We can think of 20 different ways to seed the teams (CTAs), but ultimately created the bracket based on AUM, taking the 32 largest CTA’s by AUM according to the BarclayHedge database (the majors), and then adding the 32 largest CTA’s we track in house that weren’t in the previous list (the mid-majors and small conference teams), then seeding the programs 1 through 64, with the largest four managers by AUM getting 1 seeds, the next four largest 2 seeds, and so on…

Here’s the managed futures “tournament” for a little fun while watching the real tournament… fill it out and send us your picks for the CTA you think will most likely win the managed futures title over the next 3 to 5 years.

March Madness_Attain_Complete_2We all filled it out in house here, as well as reached out to a few basketball loving managed futures folks we know, and there were some ‘favorites’ among all the picks, including Covenant, Dominion, Quest, Revolution, and Eco.

Here’s some of the expert picks for those interested in seeing who CTA’s would invest with besides themselves (we gave CTA’s one rule. That they couldn’t pick their themselves as the winner, and only some of them listened):




Weekend Reads

  • US Swaps Regulator Plans Trading Data Overhaul — (Reuters)
  • DERIVATIVES: CFTC transaction fee gaining traction – Wetjen — (IFRE)
  • What is a Hedge Fund — (Barry Ritholtz)
  • Daily Chart — Wall St. Bonuses Increasing — (The Economist)
  • Inflation Signs Lurk in Broader Labor Data Yellen Seeks: Economy — (Bloomberg)
  • Vanishing Planes Mapped Since 1948 — (Bloomberg)
  • Warnings From the Ukraine Crisis — (The Wall Street Journal)
  • The New Age of Crony Capitalism — (The Economist)

Just for Fun:

  • Between Two Ferns with Zach Galifianakis: President Barack Obama — (Youtube)
  • How to Celebrate St. Patrick’s Day in Chicago — (NBC News)


Playing the Odds with Warren Buffet

March Madness is nearly here… with the brackets ready to be set this Sunday night after the last of the conference tournaments wraps up; and as you have no doubt heard – there’s a little extra incentive to fill a bracket out this year in the form of Warren Buffet, one of the world’s richest people, offering $1 Billion (with a B) for filling out the perfect bracket (64 for 64). Talk about a bet with an asymmetric payoff and the chance for an outlier gain; this is just the kind of long gamma-type strategy managed futures yearn for…

Warren Buffet

I’m sure there are a few quant teams crunching numbers right now, and Nate Silver is launching his new Five Thirty Eight blog in concert with the tournament by releasing some brackets (what if he won…a hedge fund would pay him $5 Billion to come on board…); and those in our office will surely be filling out some sheets – but what are the odds of landing this $1 Billion.

Depending on how you equate your chances of winning, you are 500 times more likely to win the jackpot lottery, then winning Buffet’s challenge. Business Insider provides a great explanation of your probabilities.

“If all of these brackets are equally likely — if each game in the entire tournament is a 50-50 tossup, and picking the winner is basically a coin flip — we then get the odds of a correct bracket at one in 9.2 quintillion.

Of course, flipping a coin 63 times is probably not a very good strategy for deciding how to fill out your bracket. Most of the games are not 50-50 matchups.

Consider the first round (the round of 64) of the NCAA Tournament.  Of the 32 games in the first round, there are four games in which four of the best 64 teams (1st seeds)  play four of the worst 64 teams (16th seeds).

Since 1985, when the tournament first expanded to 64 teams, no 16th seed has ever beaten a 1st seed in the round of 64.

If we’re comfortable assuming that this trend continues, we can safely fill in the four 1st seed vs. 16th seed games on our brackets.

Now we have 59 games to pick, and if we flip coins for all those, we have a one in 259, or about one in 576 quadrillion, chance of winning the tournament. Still pretty terrible odds, but by making this one assumption, we have boosted our chances by a factor of 16.”

If those numbers don’t compute for you, consider that no one in the history of 10s of millions of people filling out 100s of millions of brackets has ever correctly guessed all of the games, ever (at least not anyone who has been entered in an official pool). Consider that over 13 years of ESPN offering a bracket challenge, they’ve seen only ONE perfect First Round.

All in all, this is mostly a publicity stunt. And despite all the press, it really isn’t Buffet paying out the money; he’s actually insuring QuickenLoans payout of $1 Billion, and no doubt collecting some sort of insurance payment from them ($100, $100k?) to do so… talk about an option seller.

But it sure would be fun to see someone get really lucky and win… or at least get past the first round – where you could start to employ some hedging techniques and head to Vegas to spend a few hundred thousand on bets which if you lost… would mean that much greater odds of winning the billion. Or imagine someone actually getting to the final game…. Talk about a win/win – he or she could bet $100million on the team not picked in the bracket, and if the bracket is perfect, win $1 Billion. If not, win $100 million.

P.S. Here’s where you can enter Buffet’s Bracket Challenge.

P.P.S. If you just can’t get enough of Warren Buffet, he was on Late Night with Seth Meyers last night.


The Football Fan’s Guide to Investments

With the SuperBowl taking place not too far away from Wall Street and the center of the investing world, we thought we help all those football fans who aren’t quite clear on the difference between growth stocks and blue chips, or market timing and risk parity – with this handy guide explaining different investment types in terms of the type of football offensive scheme they most resemble:

investors guide to football

Hat tip to Reformed Broker for the ‘decoding’ idea, and Wikipedia for the list of football offenses.

Happy Superbowl to everyone, make sure to keep an eye out of E-Trade’s rule-breaking ads during the game.