Managed Futures Education Center

Managed Futures Ability to Generate “Crisis Alpha” Is Examined

Futures Magazine recently published a strong research piece on managed futures performance during crisis. The report, written by MIT lecturer and investment researcher Kathryn Kaminski, points to how managed futures provides what she terms “Crisis Alpha,” the ability of an investment to perform positively during times of stock market crisis. This is a significant topic, [...]

WSJ / Dow Jones Tackle Third Rail of Margin to Equity

Margin to equity ratios have always been a critical method to evaluate and manage risk in managed futures, but the topic never had the “sex appeal” to make the headlines. It evokes that “scary” word, “leverage,” that ignites memory of the generally non-transparent mortgage derivative mess or countless hedge fund scandals.

Wall Street Journal asset management reporter Marshall Eckblad tackled a difficult topic: report in short form a complicated managed futures topic in an entertaining and informative format – while touching the third rail of hot topics in managed futures, margin and leverage usage.

Northwestern University Announces the Establishment of Managed Futures Course

In a video press conference held in Chicago, Northwestern University announced a university course dedicated to the study of managed futures. Matt Hlinak, Academic Coordinator for Professional Development Programs at Northwestern University, said, “This is an exciting addition to our program, really part of a new movement, a largely ignored asset class, managed futures.”

“It’s interesting to note our point in history,” course instructor Mark Melin observed. “There is a need in society for an investment product not necessarily tied to the performance of the stock market or economy at large. When I started writing this book in 2008, I would ask financial professionals if they had any interest in managed futures, and the answer was widely ‘no.’ Fast forward two and a half years — now, a current Morningstar study shows managed futures as the asset class with the highest growth potential over the next five years.”

Morningstar Documents Growing Trend

In their “2010 Alternative Investment Survey of U.S. Institutions and Financial Advisers,” equity-based research firm Morningstar noted an important trend sweeping the investment landscape: the growing use of alternatives among both institutional investors and even retail-based financial advisers, but more interesting the predicted rise of managed futures as the “go to” alternative. Not only does [...]

Opalesque Reveals Fascinating Managed Futures Study

Alternative investment publisher Opalesque recently reported on a fascinating study showing how certain managed futures strategies can in fact be correlated to the performance of the stock market.  ”It is often said that managed futures… are market neutral; they are investments that are not correlated to the rest of the market,” the article started. The [...]

NFA Adds New Risk Disclosure Requirement

There has always been an interesting debate in the investing arena regarding incentive fees. One camp is against incentive fees, saying it provides the trading manager incentive to take undue risks with the investor’s capital to achieve short term gains.  This group generally says the fees in managed futures are too high and the investor is taking [...]

New Managed Futures Research Tells the Story

There are a lot of reasons to like this well-researched article, including the author’s recognition for the value of investor protections and transparency. This is particularly odd coming from a fund manager. Typically, in the equity world it is the hedge fund manager who is fighting transparency and investor protection. It should be noted that in managed futures, industry participants generally favor intelligent investor protections.

The downfall of a great society might be summed up in one word: sacrifice. Or, why equity neutral investing with managed futures can no longer be ignored or misunderstood.

The New York Times recently ran a pretty amazing article, a sign of the times that points to what could be an uncertain economic future.  The article focused on a wealthy New York county whose governmental leaders cut taxes but did not reduce spending. When faced with a significantly growing budget deficit, politicians often take [...]

Industry Updates: All I want in an investment; Attain Questions Modern Portfolio Theory; Tracking Google Search Keywords

I want an investment that is transparent, well regulated, liquid and has strong performance… I was having lunch with Mark Shore the other day (chopped salad at Ceres… it had been a long time and I love the vibe of the old time guys who hang around after 1:00).  Among other experiences, Mark wrote a [...]

MF Global Managed Futures Leader Raises Issues

“We don’t have a singular voice in Washington fighting this cause,” Adam Rochlin firmly noted, giving serious thought to the managed futures industry. “This is a side of the business that is slightly quirky with many CTAs being small independent firms. But what is amazing to me is that there is $280 billion worth of [...]

Former Reagan Budget Director Discloses Economic Truth, But Is Anyone Other Than the Chinese Listening?

If tough decisions are not made a debt crisis is on the way, say many close to the interest rate markets. Republicans must accept the fact the government needs to increase revenue and the rich might not need tax cuts at this moment in history. Democrats must accept the fact that less government services and more self reliance isn’t a bad thing. Yes, joint sacrifice can be a political bitch, and Stockman knows it.

“Stockman let loose a warning shot pointing to significant potential debt problems. He touched on what could become a future major debt crisis — a crisis that was firmly marked by the non-transparent mortgage derivative mess and which could trigger a resulting banking crisis, items that are generally left off the table in some quarters for public discussion but should be included in today’s debate.”

George Painter Issue Casts Unfair Shadow on Industry Investor Protections as a Whole

A blistering yet technically accurate Washington Post article points to significant issues with one of the administrative law judges at the Commodity Futures Trading Commission (CFTC), one of two regulatory bodies that police the futures and options industry. Essentially retiring administrative law judge George Painter is claiming fellow judge Bruce Levine is bias in his [...]

Video Interview With Todd Wood Hits Hot Managed Futures Topics

This wide-ranging interview touches on many of the raw disclosures in the book and tackles some of the most interesting issues in our industry today.  The interview is conducted by Todd Wood, who wrote the excellent white paper “Beating Warren Buffett.”  At close to 22 minutes, its a long interview but it was fun and [...]

It Takes Someone From the Commodity Industry to Tell The Naked Truth

If you haven’t seen it, this insightful video, said to be created by a former commodity industry participant, is amazing. The honest, blunt critique of the current economic disclosure coming from the New York / DC Axis of Evil is making the e-mail rounds throughout the industry earlier this month, and it is an absolute [...]

Economic Uncertainty Highlights Unusual Discussion

“Business is highly uncertain in a way I have never seen before,” the former Fed Chairman said, appearing on NBC’s Meet the Press. Action to tackle our fiscal problems will be required, the Chairman observed, “The only question is, is it before or after a bond market crisis?”

People will look back on history and ask: “Why didn’t we do something when we had choices?” McLean clearly observed for history to record. “Our problems are not calculus, they are not algebra, it is simple arithmetic – we are spending three dollars for every two dollars we take in,” she noted with righteous alarm that comes from realizing that a fundamental message that will impact the future was being generally ignored.

And here, when we start to talk about a bond market crisis, is where it gets interesting – as conversations of the potential for a future debt crisis move firmly into the public realm.

Are “Safe” Alternatives Right For Your Client?

Managed futures “are wonderful,” Wedel says. Most investors (and their advisors) are too spooked by volatility fears to invest directly in commodities, but Wedel points out that his clients’ money is with experienced and disciplined managers who diversify across many categories and that the investments give his clients global exposure. “It allows a typical retail investor to invest in oil, gold, currencies and so on without having the tremendous knowledge it takes to do so,” he says.

NY Times Article Highlights lack of understanding on Wall Street

“In C.F.T.C. Is Set to Get Tougher on Fraud, the generally well written New York Times Dealbook article, started with a note that is really more telling about Wall Street’s lack of understanding regarding managed futures and the commodities industry than it is a comment about the C.F.T.C.”

“The issue is the Wall Street establishment didn’t give it proper notice – and a sleeping U.S. Congress was prone to nod off at the very mention of anything to do with the “commodity” industry — all while the very underpinnings of the U.S. economy were crumbling. Just because those deep in financial services and political policy overlooked this monumental bark – that does not mean the “bark” was not loud. The bark was in fact very loud, consistent and to some in New York and Washington, annoying – the problem is the soft spoken female commodity regulator’s bark could not be properly heard in the right Wall Street chambers or in a certain district generally controlled by Wall Street’s interests. There is a difference between a loud bark and a loud bark that is ignored.”

Former Yale University Dean Weighs in on the Book High-Performance Managed Futures and Need for Uncorrelated Investments

“Mark H. Melin’s High-Performance Managed Futures: The New Way to Diversify Your Portfolio (Wiley, 2010) goes far beyond the standard asset allocation book. It not only makes the case for managed futures but does so from the perspective of risk. It is thorough and well documented, yet at the same time eminently practical. Both high net worth individual investors and financial advisors could profit from it.”

Is Gold the Ultimate Currency? Insight from the Stifel Nicolaus Conference

“Instead of ‘in gold we trust,’ it says ‘In God We Trust.’ So we are trusting in God that this is going to be worth something. We are trusting in God that somehow the $10 trillion in debt we have in this country and the $50 or $60 trillion in unrealized liabilities we have is somehow going to be worth something?”

“I’m really scared for the next generation in our country. I have a seven and a nine year old kid, and mean when this (paper dollar bill essentially worth nothing) and with the government continuing to pile on more debt, what’s going to happen to our economy?

“It is important to think of gold relative to the currency in which the investor lives. “Gold is a (worldwide) medium of exchange. While we talk about the dollar (as being strong), over the last 40 years the USD has lost 80% of its value (relative to gold),” a startling wake up call.

Response to STIFEL NICOLAUS BOOK SIGNING EVENT

Thank you to all the financial advisers who stopped bye to get a signed copy of the book and chat at the Stifel Nicolaus annual conference, particularly those who mentioned they are readers of this web site and blog.  We had some great conversations.  I think we were all a little surprised by the response, [...]

Stifel Nicolaus Book Signing Event

“Stifel, Nicolaus financial advisers who read this blog can stop by at the conference and received complementary signed copies of the book — and I might even tell you a story or three. I’m also going to be watching the presentation by Paul Wigdor on gold.”

“So far the most interesting reaction I’ve been receiving from the book is from financial advisers — and I’ve had some great conversations. I tape recorded a recent conversation with an RIA that I thought was stunning. We’re shooting for releasing that video next week.”

CFTC Encouraged to Act in Commodity Market Manipulation

The action is being encouraged by interesting CFTC commissioner Bart Chilton, a man who appears to be following the independent CFTC tradition of butting heads with Wall Street power players, ala Brooksley Born and her courageous stand against non-transparent mortgage derivatives.

Author analysis to follow later today, including:

*Inside disclosure regarding how the CFTC can track futures and options trades and monitor potential manipulation, something unique to futures and options regulation;

*The silver market can be manipulated, here is a little known example of pushing the market around — that occurred a few weeks ago;

*This type of investigation would have been very informative during the oil market price surge;

*Is the silver market’s move manipulation or a continuation of a long term trend towards hedging economic uncertainty?

John Mauldin Offers Readers the red pill of economic reality

John Mauldin is really one of the more insightful economic writers of our time. His books such as How to Profit from the Y2K Recession, published in 1999 before any indication to the current economic mess was in mainstream view, are in retrospect stunning in forecasting the current debt-ridden malaise. His writing asks readers to [...]

Not a One Man Show: CTA’s Interesting Boat Party Comments Highlight Industry Structure

“…the CTA recently underwent the scurrility of a probing NFA audit along with some typically harsh statements regarding some of their business operations and procedural methods.”

This CTA is a “good template because many CTAs can be one man shows, particularly at the early stages of their existent — and this can be a hidden risk to investors.”

Sold! Altegris sells to Major Equity Firm: A trend?

Breaking news: Investment News is reporting that managed futures leading brokerage firm Altegris has sold to Genworth for an estimated $35 million and deferred compensation and incentives. It is interesting that a major equity firm is entering the managed futures space.  This could position Altegris to lead the charge towards equity neutral investing with a [...]

Beating Warren Buffett is a Hit

This is a backdrop for an interesting study that pits the ranks of well known CTAs against a Wall Street industry icon, and studies performance head to head — no survivorship excuses here. The NFA audited performance that dates back to 1996, and in managed futures time a CTA that dates back to 1996 might be considered ancient history — a time when assets under management were slight and this asset class child was but a twinkle in the eye of many investors. Readers will note that Buffett was quoted on volatility in chapter six of the book. But what’s even more interesting is Buffett sidekick Charlie Munger’s reaction to a question regarding hedge funds and managed futures…

What this Recent News Doesn’t Reveal: Managed Futures Surpasses All Other Hedge Fund Investment Strategies

It was significant when BarclayHedge released this news: “…managed futures has, for the first time since BarclayHedge began tracking hedge fund performance data in 1985, surpassed all other investment strategies, based on assets under management.” For those of you who aren’t familiar with this news and its meaning, here are the key talking points: We [...]

New video reveals significant …

New video reveals significant issues that Wall Street cannot ignore: Why hasn’t Wall Street listened to Nobel Prize w…http://lnkd.in/4QXTxB CONTENT DISCLOSUREThis web site and related communication substantially represent the opinions of the author and are not reflective of the opinions of any exchange, regulatory body, trading firm or brokerage firm. The opinions of the author [...]

Coming this Week

*Financial Adviser Light Bulb Goes Off!
*National Media Spotlight on High Frequency Trading
*What’s Missing from this Picture: Managed Futures AUM Surpasses all Hedge Fund Strategies
*FCI Boat Trip and Craig Kendall’s Interesting NFA Comments
*New Video Tutorial Coming
For brief details regarding each topic, click on the post link.

Industry Updates

10/08/10: Superfund To Hold Online Seminar: The Case for Gold: Why Gold, Why Superfund Gold, Why Now? I’ve always found the concept of a managed futures investment based on gold — and not a particular currency — an interesting concept.  This Monday, October 11, 2010 at 4:30 pm EST Superfund will explain the concept.  To register, click here: http://www.superfundusa.com/privateclientgold [...]

Wall Street Journal Notes Importance of Correlation, Scratches surface of important topic

The Wall Street Journal today wrote an interesting article about an important topic – asset correlation, which can be particularly important during economic periods marked by a debt-ridden government and societal backdrop with abnormal patterns of stock market volatility over the past few years.  This article (link to WSJ web site, requires membership) is a [...]

Missing Links in Flash Crash Report

The release of Friday’s much anticipated “Flash Crash” report lays a good foundation for a 20 minute trade event that is said to precipitate the one day “unexplained” spring stock market meltdown — an event that saw the Dow Jones Industrial Average shed close to 1,000 points in a matter of minutes.  But to really understand the full [...]

Mutual Funds Could Revolutionize Managed Futures Industry; Movement Being Lead by Industry Leaders

Perhaps one of the more deceptive dichotomies in managed futures is the very real fact that the amazingly powerful index performance numbers might be difficult to achieve without diversification and a significant capital investment.  As a result, those most at risk with direct accounts are investors wishing to dip their toe in the managed futures [...]

Managed Futures a “Positive Byproduct” of 2008 Financial Crisis, Says Investment News

“One of the few positive byproducts of the financial crisis has been the light shed on the managed-futures space for its lack of correlation to traditional investments such as stocks and bonds,” noted Investment News, one of the leading publications for financial advisers. What’s insightful in the brief article (link to Investment News Web Site) is [...]

Rick Santelli Needs to Define The Tea Party Movement He Created

CNBC’s respected interest rate /commodities reporter Rick Santelli is an intelligent and insightful individual, yet some would say his ideas and concepts are being hijacked by what has become an increasingly viral political movement.  The man accurately credited with creating the “Tea Party,” a phenomenon based in large part on government’s debt levels, has significant ideas and [...]

Social messages behind the “Wall Street Two” movie — and the managed futures cameo role

Wall Street Two is a significant movie, and not because it glorifies traders and a materialistic, debt-filled go-go 80’s lifestyle.  In fact this go around Oliver Stone achieved his initial objective in terms of creating a villain of the Gordan Gecko lifestyle; as opposed to the original version, which had the opposite effect of Stone’s [...]

Industry Updates

Personal notes and comments: Below is a peak at some of the content we’re working on: I had a very interesting conversation with Matt Osborne at Altegris recently.  They launched a managed futures mutual fund and their perspective on the industry, NFA regulation of managed futures mutual funds and how they are offering a solution [...]

Mutual fund study says “Volatility? What volatility?”

A study produced by the Mutual Fund “Store,” a registered RIA, says that the stock market is not that volatile… really. (Link to investment news article to get the details http://www.investmentnews.com/article/20100923/FREE/100929951) Here is just one quick perspective looking at one angle of the report: To study a 30 year look-back period of time is un-credible [...]

Wiley Announces Controversial Managed Futures Book Release Date

“Investors have a right to design ‘stock market neutral’ investment portfolios,” according to author Mark H. Melin. “Unfortunately the best method to design stock market neutral portfolios is currently being obscured, hidden from view by a traditional Wall Street that is too married to stocks and assets handcuffed to the economy. Those who have a responsibility to understand the most uncorrelated asset class nonetheless ignore and misunderstand managed futures.”

What Single Graphic or Chart Best Represents The Managed Futures Industry?

My publisher asked an interesting question. “What ONE graphic that best represents the managed futures experience?”  At first I didn’t think this would be that difficult a choice, but then upon further examination it becomes an interesting question. The first natural place to look for performance graphics is the benchmark industry report from the Chicago [...]