Kris Carlson's Weblog

Alternative Investments

As you may already know, I have made my living as a trader of leveraged instruments in the past.  I've always traded my own money, mostly because I didn't have to file regulatory documents or be licensed in some way.  However, what I discovered, quite painfully, is that 10% isn't always 10%.  That is, 10% of 10,000 is smaller than 10% of 100,000.  Follow me?

While surfing, I came across a website with CTA Information.  Check it out http://www.cta-info.com/  It's got interesting information about an area of Investing that has been cloaked in secrecy for years.  Only recently, in the past 5 years, has Managed Futures been brought out of the shadows so the ordinary investor can learn about these Alternative Investment vehicles.  Managed Futures, in particular those practicing trend following strategies, have a tendency to be negatively correlated to stock indexes during down periods, and positively correlated to stock indexes during up periods.

I first heard about these types of accounts when I was reading an article by a member of the Oxford Club, A.C. Green.  He wrote about Managed Futures accounts and told the story of the Turtles.  This short article changed my life.  The story of the Turtles is compelling and inspiring.  Since I first read that article, there has been a lot written about The Turtles.  Prior to 2001, when I first read about the Turtles, they too were cloaked in secrecy.  Since then Curtis Faith (an original turtle) and Michael Covel (an author an turtle historian) have written a great deal about The Turtles, Managed Futures and Trend Following. 

The corrosive thread that binds all these super hot traders of commodities, is CTA designation.  Most of the big dollar commodity traders are CTA's and they manager other peoples money.  This is where 10% is relative.

Fiat Empire

Now this is interesting. Do you know what the Federal Reserve really is? Do you know why we went off the Gold Standard for money? Remember the Silver Certificate? Watch the video below and then go to the website, Fiat Empire, for more info.

Pimco Total Return

I guess we now know why Bill Gross is the best.  Check out Pimco Total Return (PTTAX  PIMCO:Tot Rtn;A (FUND)) at BigCharts.com.  The chart doesn't accurately reflect the growth of invested capital as found in a report at Morningstar.com.  So what is Billy Bob up to here?  When I sell the shares I get NAV or Net Asset Value.  Dividends are cool, but the NAV is just as important as capital appreciation.  So what up Bill?  Why has NAV gone down so much?  For me it might not be much but for you it's $0.04 per day times (90,000,000,000 divided by NAV(=10.45 as of 11/03/2005))(=8,612,440,191)?  And what's 12,000,000 anyway, we can round a little her, it's only fractions of pennies for the shareholder.  Let's see, what does that come to: $344 million a day; and that's from just a $0.04 change in NAV for one day.  Would that be, your Christmas bonus there Bill?  Where did it go?

Here's my question:  If this is just one fund, abeit the largest, how much money is gained and lost and skimmed from the markets each day?  The average investor does not know the size of these markets, let alone fathom the depths.  There are HUGE amounts of money removed from investors every day.  Yet to the average investor, it only seems like pennies.  And they only complain a little when they are minus 10%.  And even when the loses amount to 30% or even 40% they believe the Wall Street pundits when they say "over the long term we can expect around 10% return on investment." 

My whole point here is that HUGE sums of money can be hidden from the average investor.  Also, there are ways to get it back.  You will not get your slice by reading the Wall Street Journal, or listening to someone who will take 2% of your entire portfolio each year regardless of performance.  Want to know more?  Check out my reading list.