Oct

24

Blogs as Indicators of Sentiment

October 24, 2007 | Leave a Comment

Our pal Finbar is reporting today that many banks are issuing policy statements asking employees to refrain from making comments on blogs.  I don’t know if this is limited to the UK  or also prevelent here in the States as well.  From talking to many friends and colleagues at big banks here, I understand that many employees are already restricted from visiting many social media type web sites such as Facebook.  This is too bad.

Finbar makes the keen insight that “Markets live on rumour, denial and false hopes and blogs are the best way to get a feel for the true market sentiment.”  I believe the same and I know there are a number of companies out there who are attempting to capture, qualify and quantify that sentiment to advantage.  Does any body know which firms these are?  I’d like to get a better handle on how they do this and how accurate their indicators are.

As Finbar points out,  ”the markets are happy at the moment but the blogs are not; market corrections take time.”

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Sep

18

Hedge Funds + Social Media … a Seismic Shift

September 18, 2007 | Leave a Comment

I reported back after my attendance at Gnomedex in August that the social media phenomenon is already changing the way people do business. This announcement reported by Reuters today is evidence that it is, in fact, happening: 

Facebook and Accel (their primary VC firm) announced that they will launch a new fund, investing in companies that build applications on the Facebook technology. It seems that Facebook is moving beyond being simply a social networking site and morphing into a platform for developers — and they are putting their money where their mouth is.

Also, check out the September issue of Fast Company.  Robert Scoble discusses in his column why social media sites like Twitter are going to change business.

The question is whether the hedge fund industry is aware of this and ready for it?  In my opinion, established funds will be more apprehensive to embrace this new movement than thier start up counterparts — to their detriment.  Start up funds run by younger, savvy managers will know about this technology and use it to their advantage and gaining an edge.  Let’s list the ways:

– Raising capital:  This is a no brainer and anyone with any familiarity with Facebook can see the potential.  It may already be happening.  After Gnomedex, I understood the power of social media and how it can empower start up hedge fund managers to raise capital faster and more effectively by networking and getting the word out about their funds and expertise.

– Finding talent: fund managers will be able to find talented people with the necessary skills and motivation to work for them.  The days of the resume, as we know it, are numbered.

– Managing the business: hedge fund managers who embrace social media tools will be able to manage their funds better and from practically anywhere (remotely).  They will also be able to interact with administrators, prime brokers, investors more effectively.  The brighest of the bunch will be able to take this, combine it with the 4 Hour Work Week and apply it to their business.

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Sep

4

Hedge Funds + Subprime Collapse = Profits

September 4, 2007 | Leave a Comment

An interesting story from Fxtraders.eu (subscription required) … Evidently, while some hedge funds focused on mortgage backed securities have suffered losses (that have been duly noted in the press) related to the decline in the sub-prime mortgages space, many hedge funds have also been able to generate profits as a result of its decline.  Well, I must admit that I don’t mind pointing out that we told you so.  Consider what we blogged on July 19th:

So why is HFL jumping on the bandwagon with commentary on the sub-prime issue?  Well, it’s all about low hanging fruit.  As we have seen in the past with excessively oversold markets (e.g., distressed in 2002 and converts 2004 and 2005), the smart money is ready and waiting to buy at the bottom and reap years of rewards while the mainstream sits on the sidelines and licks their wounds inflicted by painful forced liquidations.  Consider this HFL’s call out to all players with experience in the sub prime sector: now is the time to start thinking about ramping up your own sub-prime vulture funds!  Whether you’re a victim of a downsized prop desk or a shuttered hedge fund, now is your chance to strike gold.

 It certainly seems that some hedgies positioned themselves well and are now benefiting from the subprime collapse …

In what has been the best short sale theme since 2002, many hedge funds have greatly benefited from the collapse in sub-prime mortgages via their short exposure to mortgage lenders and sub-prime mortgage backed securities and indices. While some have focused on shorting mortgage lenders and buying credit default swaps (CDS) on specific mortgage backed bonds, others have elected to purchase CDS on indices of these securities (the ABX series), with most focused on those securities issued in 2006 under more relaxed lending standards.

Even with some hedgies profiting from the subprime mess, you probably won’t see the mainstream press write about it much — at least not for a few more weeks.  Fortunately, investors can be smarter as we reported in July …

There will, however, be no shortage of astute investors that understand the signs of an oversold market and smell the opportunity for huge profits. 

Amen.

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Aug

31

Hedge Fund News: Friday, August 31

August 31, 2007 | Leave a Comment

There is a lot going on today with the subprime situation, etc.  So, for the sake of brevity, here are some of the more compelling headlines today …

 And for a bit of fun, our friends at Fintag have some scoop on the Wall Street sequel, Money Never Sleeps

Gekko is back – as a hedge fund manager.

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Aug

12

Gnomedex, Blogging Hedge Funds … the Future??

August 12, 2007 | 3 Comments

Chris PirilloMy mind is still reeling! On the surface it might seem kind of strange that a hedge fund guy attended one of the largest, most well known blogger conferences in the world this weekend: Gnomedex which is run by Chris Pirillo and his lovely wife Ponzi.  The reason a hedge fund guy would attend a convention of bloggers and technology geeks?  Simple, there is a seismic shift happening in our culture and I wanted to attend this gathering of minds to interact, ask questions and to learn — and believe me, there is a LOT to learn.  At times, I felt like I was drinking from a fire hose.

I didn’t completely know what to expect of Gnomedex.  Of course I am familiar with blogging and the Internet, but I wanted to learn first hand what exactly was happening in regard to social media and what the impact of those changes meant to society, markets, companies – from the very people making it all happen.  Now, just to be clear, the attendees at Gnomedex are not just technology geeks or bloggers, but they are evangelists, pundits, thinkers, writers, commentators and the list goes on.  I guess the technology is the underlying factor that binds many of these folks together, but there is more to it than that.  It is about change itself and being on the bleeding edge of that change. 

This idea of change should be one very familiar to the hedge fund community.  Ours has been and continues to be an industry shaken by change: regulatory, changes in markets, technology, information channels, industry players and what investors demand from hedge fund managers.  

The change is coming and could prove to very valuable to managers and investors alike.  For managers, I think the social media opens possibilities for raising capital for hedge funds never dreamed of before.  It also opens doors of communication to investors enabling managers to connect and interact with them in a more meaningful, powerful way.  Managers will be able to better communicate with investors — verbally, visually and meaningfully.

 As I said before, my head is still spinning from Gnomedex.  In the coming days, I will try to put more thought into formulating some ideas about how hedge fund managers might be able to embrace the social media in order to market their funds, raise capital, communicate with investors, etc.

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