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Saturday 25 July 2009

Market Trading - Do It Sideways!

Having sat next to traders in many fund teams at investment banks as a humble lone researcher it was clear traders make money and business activity (trading volume).

Despite Black Swan and Dr Doom, what we are witnessing in this particular investment climate is just another cyclical correction (the frontline media are not on-the-money, matter of fact, never have been as much as frontline practioners).

So traders continue to buy and sell securities whereas medium- to long-term investors are still licking their investment portfolio wounds and rebuilding their balance sheets. Market timing and good old fashion volatility trading without 'irrational' momentum driven stories of this and that buy-out is a return to trading fundamentals.

This sideways trending market will continue until housing, employment and related corporate solvency is fixed. So this week (ending 24-Jul-09), the DJIA broke-out above 9,000 (and stayed there despite impending CIT bankruptcy workout and poor reports from bellwethers Microsoft and Amex!). So based on at best 'mixed' 1H09 earning reports we drove to a six-month high. Not surprising some of these better earning numbers considering the lows springboard from two years into this correction.

Some fundamental doomsters are waiting for the 'confidence-breaking' accident that traces a "lower low" than March (when the S&P 500 was 676.53 on 09-Mar-09). However, traders work on current sentiment and short-term perception together with mandatory fundamental bottom-up research. I am getting back in on-the-dips, and I admit I missed the 2H09 traders rally. Tactically. I may put on an ETF-short on belief the rally will dip back.

So like the traders I advise investors to go long/short ETFs etc (for retail/HNWI money) and proprietary capital (for institutional money) and get trading the unique volatility. Goldman Sacs did it and do it - trading is core to their performance.

Caveat: reading the markets and timing it is risky so let a respected adviser or fund manager do it.
Game Set to Zero: Go Go Fund Investments (My first blog topic - weeeee!).

There is a conceivable rational for investing in capital markets RIGHT NOW.
Simply because the Investment Game has been set to near ZERO (market near all-time lows) since the Housing-led recession began in the summer of 2007.

However market volatility and investor uncertainty exists about the depth of recession; indeed even the solvency of the financial system is at stake. So in this risk averse environment for those investors that have not found safe specialist selective investments then fun funds is the way to go.

Funds are by definition diversified and therefore mainly market risk (systematic risk) is inherent while other direct individual investments posses stock specific risk (idiosyncratic risk) as well as market risk. Of course funds have a degree of specific risk, viz Madoff fraud, just as regulated Enron was a significant fraud. However a multi-manager/FoFs offering from say GAM, MAN, Gottex, Ivy etc have not resulted in any significant 'blow-up' or loss of investors' money; ie not significant enough to hit general headlines.

Traditionally the diversified approach has been the cautious first steps in risky markets, for example, emerging markets investors in the 1980's used funds as an entry point to new markets before years later having the savvy and access to invest directly into, say the TAIEX stock market of Taiwan. Anyone remember the Taipei Fund offering from NITC?

I am sure there are more specific aspects to discuss on Investing Now Via Funds; yet as a general premise and rational I kindly ask anyone to refute or discuss additional points. (Kristian - Original post: 10 am GMT, 29 June 2009, London,UK)

Monday 29 June 2009

Fund Portfolio Managment (FPM) - An Introduction

This is my first edition blog of Fund Portfolio Management (FPM). Therefore a quick introduction: I am Kristian Krishna Siva with over 13+ years' focus in fund products from quality institutional work and freelance projects.

A basic 'mission goal': As may be obvious from the acronym "FPM", we aspire to be an internet forum concerned with fund investments.

Obviously 'funds' covers a variety of investments vehicles including ETFs, Mutual Funds, Investment Trusts, Hedge Funds, Private Equity - or basically any pooled investments. Specialised collective investments such as CDOs, REITs, CPDOs, Guaranteed Structured Products, are also of scope to this mission on all things fun(ds).