Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.
Hedge Fund Ads
This week, the SEC made the poor decision to lift the ban on hedge fund advertising. Its been 80 years since the ban took effect. While there still are restrictions in place limiting who is eligible, (you must be accredited which means have a net worth of $1 million or more, not counting your home, or have an annual income over $200,000 in the past two years) understand that these funds have underperformed the S&P 500 in recent years. In other words, anyone with money in a hedge fund was better off in an index fund!
Even worse, startups will be able to advertise too. I don’t see how regular folks “investing” in a company with a high chance of failure is a good idea. Or see an average joe cash out his 401k because a hedge fund could invest his money “better”. But hey, Congress seems to think its okay, since they approved all these changes as part of the Jumpstart Our Business Startups Act.
Here’s a few things to consider. If it really is a great hedge fund or startup idea, there will be money pounding down their door. They won’t need to advertise, they certainly won’t need your money, they’ll be turning investors away. Instead, you’ll see the third and fourth tier (and worse) funds and startups looking for money. If you’re still not convince, I suggest reading Hedge Funds Are for Suckers.
The Q2 earnings season kicked off this week. I suspect we’ll see more volatility than usually for a couple of reasons. First, earnings season is rarely smooth. There’s always surprises, big misses, and questionable releases all based on how real earnings compared to what a few analysts thought the company would do. In other words, it’s very subjective.
Second, Bernacke back pedaled on the tapor talk this week. Next week, he’ll second guess himself and say it’ll be sooner than later. Actually, his rhetoric alone is moving markets, which he wants. If Bernacke believes the market is too inflated, he’ll say the Fed tapor will start soon. If it’s too deflated, he’ll say its been pushed back to 2014. I expect a lot of flip-flopping in the next few months. Right now, the Fed is in control of the markets.
- The Best Investment Advice You’ll Never Get – a worthy read that’s been making the rounds again.
- Lessons Learned From Well-Behaved Investors – watch out for these behavior biases.
- A Portfolio That’s as Simple as One, Two, Three – simple is a great starting point and sometimes its all you need.
- Five Facts About the New Glass-Steagall – still early days in financial reform but here is the abridged version of the new Glass Steagall Act proposal.