Gross Predicts Repression Due to Fed
Bill Gross, famed manager at PIMCO, has been increasingly vocal about the dangers he sees in more Fed monetary stimulus. Many analysts believe the Fed will continue to turn the printing press on and buy treasuries. In the last two rounds of stimulus, the Fed bought over $2.3 Trillion in treasuries, making them the largest holder of U.S. Debt. Gross believes this policy will create a “repression,” by killing any opportunities for greater credit lending, and hence economic growth in developing economies. According to statements made in the last PIMCO monthly statement, Gross believes:
While recent actions by policy makers provide assurances that short and intermediate U.S. bond yields may not change for years, any potential for price appreciation is limited. Financial repression depends on negative real yields and until inflation moves higher for a period of at least several years, central banks will hibernate at the zero bound.”
Kapitall Launches Brokerage
Congrats to our friends on the Kapitall team for their successful launch of their new brokerage platform. Kapitall brings a video game like interface to the discount brokerage world, making it less intimidating for younger and tech savvy investors. Clearing is being offered through Pershing, and at a very competitive rate of $5 per trade up front. We encourage all to check it out!
Bankers Set to take $200 Million from Facebook IPO
Facebook is close to filing papers that would announce their intent for an IPO this spring. It would be one of the largest and most anticipated IPOs of the last decade, with speculation that $10 Billion in capital could be raised. To put that in perspective, Groupon raised about $700 Million last year, and Zynga about $1 Billion. Back in 2004 Google only raised about $1.2 Billion in their IPO. So $10 Billion in new capital is a very large number. The problem with the current IPO market is that it is making founders and bankers very wealthy, but for average investors they are more fizzle than sizzle.
If Facebook were to raise $10 Billion, it would mean over $200 Million in fees paid to whichever Wall Street Bank represents them. Not a bad haul for a few months of work. In the Groupon IPO, the founders and early stage investors were able to cash out on billions in stock. When Facebook goes public, Mark Zuckerberg will surely be one of the top 5 richest men in America. But, the long-term value for shareholders is incongruent with the wealth created for the bankers and founders, making it a an IPO market that should send red flags to the average investor.
Ben is once again the most powerful CEO in America
Through its “Quantitative Easing” program of the past year, the Federal Reserve has stashed away nearly $3 Trillion in U.S. Government Bonds. What people don’t realize is that the Fed earns interest on this debt, just like any other investor….
A Whole Lotta Interest. Does $76.9 Billion in profit sound good to anyone? That is what the Federal Reserve earned last year, more than 2 times that of everyone’s favorite corporate whipping boy (hint, it rhymes with Rexon), and 10 times that of the largest evil hedge funds and private equity firms in America.
So, if we think about this correctly, the National Bank of the United States buys debt issued by the National Government of the United States, who is funded by taxpayers, who fund the debt issued by the National Government, who issues the debt to the National Bank, who is paid by taxpayers of the United States, who then remits the profits back to the National Government, who then raises more funds from the taxpayer….You can see how exhaustive this gets when you really try to think about the lunacy of it all!
Morningstar's Manager of the Year Vastly Underperforms Hedgeable
Morningstar recently announced their winners for 2011 Domestic Fund Manager of the Year. And the winner is, drumroll…
Scott Satterwhite, James Kieffer, and George Sertl of Artisan Funds
Artisan Mid Cap Value (ARTQX): 2011 Return: 6.42%
Artisan Value (ARTLX): 2011 Return: 5.49%
Artisan Small Cap Value (ARTVX): 2011 Return: -3.17%
According to Morningstar, the winner is picked by the entire team of mutual fund analysts. To make the most informed decision, Morningstar combs through portfolios, returns, stewardship, and their own institutional memory of these managers. They favor managers who have achieved strong risk-adjusted performance through the careful execution of a solid investment strategy and who act as responsible stewards of investors’ capital.
Hedgeable’s Domestic Stock strategies vastly outperformed all of Artisan’s offerings for last year. Our Large-Cap portfolio was up nearly 10% for the year, a 4-5% outperformance, and our Small-Cap Portfolio was up nearly 14% for the year, a 17% outperformance.
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