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    LongSnakeHamilton Nolan
    2/22/16 6:29pm

    I’ve been watching Billions for the last few weeks- pretty shitty show thats barely held up by the quality of the actors. I’ll give it to them, the cast is fantastic, but I can’t watch it without thinking “man, FUCK ALL THESE PEOPLE"

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      FunkyColdModanoLongSnake
      2/22/16 6:36pm

      Really? I think its a great show. Very House of Cards-ish.

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      GRAY-pefruitSmileLongSnake
      2/22/16 6:43pm

      I used to love Paul Giamatti, but I now realize he only has one speed: gravitas.

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    Fuzzy DunlopHamilton Nolan
    2/22/16 6:16pm

    Hamilton posts various iterations of the same article — hedge funds, on average, lose money! — about four times a year. But every time, his articles have the same basic deficiency — they lump all hedge funds together as if they are equivalent. SAC Capital Advisors is treated as no different than your idiot cousin Louie who flunked out of community college but convinced your uncles to invest with him.

    If we really want to explore the “magic genius” myth, it would make more sense to evaluate the performance of those hedge funds that are run by supposed “geniuses”—say, the 50 largest hedge funds,by portfolio—rather than every schmuck who claims to run a hedge fund.

    To clarify, I’m not saying this to defend hedge funds, and for all I know the analysis would hold true even if only the largest hedge funds are analyzed. I’d actually be curious to see what the numbers show. But HamNo’s methodology in these articles has never struck me as particularly convincing.

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      CharitybFuzzy Dunlop
      2/22/16 7:10pm

      You’re not wrong, but hedge funds have always underperformed vs. the market. Yes, some of the are better than average but that doesn’t mean as much as it sounds — statistically, *someone* must be better than average, just as someone has to be below the mean. That in and of itself doesn’t prove that hedge fund managers have some kind of edge.

      Hedge fund managers are essentially arguing against the efficient markets hypothesis; they’re arguing that they can somehow predict which stocks are undervalued and which are overvalued and make investing decisions accordingly. The problem is that they have access to the same information that the market has in setting prices to begin with; the only (legal) difference is how effectively they gather and interpret the information that’s out there. That’s a lot of intuition, experience, and a lot of luck — the same as any active manager.

      Here’s a good study on hedge fund performance from the Vanguard group that goes into some detail about how hedge funds stack up.

      It’s not fair to say that hedge funds are uniquely bad/unusually bad at investing strategy or that every hedge fund is the same. But it is fair to question whether the fees they charge are commensurate with the advantage that a hedge fund manager can realistically promise. To take the hackneyed cliche, let’s say I charged $1,000,000 to pick Power Ball lottery numbers for people. If I happen to pick the $1.5 billion winner, then I’m a genius and in the top tier of Power Ball Guess Managers. But if someone else who is just as smart as I am picks the wrong numbers, then they’re your idiot cousin scamming people out of money. Not a perfect analogy, but it’s basically what’s going on: they’re all fairly smart investors working with the same basic tools and claiming a lot of credit / taking a lot of blame for outcomes that they can’t really control.

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      WhuhtFuzzy Dunlop
      2/22/16 7:37pm

      Well your suggestion is even worse, as there is automatically considerable survivorship bias that would result in a higher number than is reasonable. The 50 largest hedge funds are the ones that succeeded; they do not include the flailing or dead ones. An index, which includes funds coming in and out over time, makes a lot more sense, and is what was used.

      The real problem with the methodology is that it is a single time period, which may not be indicative of the dynamic over time. You need several series of data - say, quarterly rolling 10-year returns, 5-year returns, and 3-year returns - to actually draw any real conclusion. I doubt the results would be materially different - nearly all data I’ve ever seen on hedge funds shows they are a sucker’s bet - but referencing only a single time period is highly questionable.

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    mattinacannHamilton Nolan
    2/22/16 6:07pm

    what does damian lewis have to do with this

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      Beet Arthurmattinacann
      2/22/16 6:11pm

      When discussing bad news, it’s always a good idea to use eye candy to soften the blow.

      Also he currently stars as the hottest hedge fund manager that ever existed for a show on Showtime.

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      sk04mattinacann
      2/22/16 6:38pm
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    CollectivePolemicHamilton Nolan
    2/22/16 6:14pm

    I don't see bonds falling anytime soon. I can think of several trillion reasons why.INVEST IN CHINA, GANG!

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      Lavarburt1CollectivePolemic
      2/22/16 6:43pm

      Umm no, don’t buy into the Chinese bond market, if someone told you to fire them! http://www.economist.com/news/21679097-…

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      ReflectedSkyCollectivePolemic
      2/22/16 6:44pm

      That’s a joke, right? You know the Chinese market is collapsing, its wealthy are extracting every penny they can and stashing them in overseas hard assets (like New York apartments), and its manufacturing and overall growth have stalled out, correct?

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    CommonVicesHamilton Nolan
    2/23/16 11:17am

    I’m not Hamilton Nolan’s biggest fan, but I’ll have to grudgingly admit that he’s 100% right on this one.

    I’ve worked for literally dozens of hedge funds in a professional capacity over the past ten years (keepin’ it nice and vague, ya’ll), and hedge fund managers are, with shockingly few exceptions, appallingly dumb. Just bone-stick-stone stupid.

    As in, “I’ve been talking to you for half an hour, and I’m pretty certain you shouldn’t be allowed outside without a styrofoam helmet, much less given control over millions of dollars of other peoples’ money.”

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      XYPCommonVices
      2/23/16 3:01pm

      Did you watch The Big Short? I’m not a financial person, my husband is, but that movie really opened my eyes to how much peer pressure can influence how stockbrokers/investment bankers operate.

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      CommonVicesXYP
      2/23/16 3:34pm

      I haven’t watched it yet. Watching dramatizations of a culture I was a direct witness to is always fun, so it’s definitely on my list.

      As to your point, yeah, there’s a phenomenal amount of peer pressure, usually coupled with shortsightedness, arrogance, moral ambivalence and (such a cliche, it should almost go without saying) greed.

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    LePepperReturnsHamilton Nolan
    2/22/16 6:24pm

    OT: I have a bad weakness for skinny, quirky Brits with bad teeth, but phew. Damien Lewis is hard to look at.

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      MissNormaDesmondLePepperReturns
      2/22/16 6:41pm

      Really? Huh. I could not agree with you less. However, to quote my grandmother’s favorite expression, “'There’s no accounting for tastes,’ said the old lady as she kissed the cow.”

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      MPapaverLePepperReturns
      2/22/16 7:27pm

      I know, right? I recently started binge watching Homeland and I just can’t buy him as a sexy handsome strong Marine who holds a mystical sway over a super intelligent and beautiful woman. I get that they’re both damaged goods and fate blah blah but yeeeeech no. He and Carrie have no chemistry either. And then that poor baby who looks just like him? I’d run off to Islamabad, too, just saying...

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    Drakkon- Iceberg SlimHamilton Nolan
    2/22/16 6:29pm

    Hedge funds have been a tax dodge for the rich from the beginning.

    Now we have proof

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      HeavyJohnsonHamilton Nolan
      2/22/16 6:05pm

      VFINX 4 LYFE.

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        IAmNotADamnWriterHamilton Nolan
        2/22/16 6:23pm

        “Billions” has sucked too.

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          MarquisDeSuaveIAmNotADamnWriter
          2/23/16 5:04pm

          Paul Giamatti gets pee’d on and makes a guy pick up dog shit with his bare hands. If you just keep rewinding to watch those scenes over and over and over it suddenly becomes the greatest thing since Shakespeare.

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        Max CherryHamilton Nolan
        2/22/16 10:02pm

        Fuck Wall Street.

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