Hedge Funds 2024.
I had written this Blog about indicators, in particular the results you get if you trade using the MACD, but when I stopped for a coffee I saw a Bloomberg headline that just made my blood boil. Here it is:
WHAAAAT??? I had to delve deeper. Here’s some more of this report:
You have GOT to be joking I thought. You are taking more than 50% of any profits?? Who in their right mind would pay these fees.
I reread the article to make sure that I had it right. 50% fees? They helpfully gave me a little diagram:
No, I had it right. And these results are for the last 55 years so it is not a once-off. On the spot, I decided to dump the MACD column I had written and vent on this topic instead!
What’s a Hedge Fund?
Just so that we know what we are talking about, here is the definition of a hedge fund:
A hedge fund is a pooled investment vehicle that uses diverse strategies, including leverage and derivatives, to generate high returns for wealthy investors and institutions.
High returns, eh?
OK, I thought, maybe it is worth it. After all, if they make 100% and you get 50% maybe that’s not such a bad deal.
Let’s find out the actual results. I really hope you are sitting down.
Hedge Fund Results
In 2024 the market went up 24%.
How many of the expert money managers beat the market?
ONLY 2.
Yes, 2! Only 10% of the top money managers managed to beat the market, and even then they only beat it by 2%.
That’s right, people are paying these ‘experts’ to not even match the market.
But it gets worse!
Hedge Funds – Top 20 Money Managers
And then, to add insult to injury, they only give clients half of what they made!!
The average client made 6.5% last year!
It is hard to see how that can be justified, and it is a mystery why people are happy with that return and keep giving these experts their money to invest.
What To Do?
If you invest by yourself relying on financial advisers that tell you what stocks to buy your are bound for failure – we’ll look at that next week. But if you give it to the experts they will get substandard returns and then only give you half of them!
I think the whole situation is a disgrace, but people have free will and if they choose to throw their money away who am I to say they shouldn’t? It is their choice!
To the markets . .
This week has gone some way to redeeming my opinion of the 2025 market which, last week, was absolutely awful.
But now, while we are not back at the recent highs, we appear to have stopped the down trend and it looks more as though a bear trap has been forming. Let’s hope so.
SPY Charts
They’re a lot better than last week, thank goodness! Then we were eyeing the red candle below the red line and worrying that SPY was going to keep dropping. It is now trading above the 585 level but has so far declined to go over the 600 level. It reached it intra-day then retreated.
It is looking very much as though it is going to have been a bear trap – let’s hope so, anyway.
On the long term chart, it has bounced off the lower bound of its trading range, which is good news.
SPYG Charts
SPYG dropped right out of the Darvas box I drew in last week (I’ve left it in although it is not valid anymore), which wasn’t good news, but it has redeemed itself a little and is now slap bang in the middle. Technically it looks like we are in a period of consolidation, let’s hope it is prior to moving higher.
On the long term chart, we can see that SPYG is still in its trading channel.
QQQ Charts
QQQ is also looking much more positive, having bounced off support at just over 500 (which was the high of early November). The last candle is a large doji, which many people say is a trend reversal – but, in my experience, while you can get dojis at the top of a trend, you can also get them anywhere in the chart. In the last couple of weeks there have been dojis right in the middle of a trend which did not signal a change in direction (8 Jan, 30 Dec)
On the long term chart we see that it has bounced off the lower bound of the trading channel – a good sign that it is still intact.
VIX Chart (Volatility)
The VIX seems to be settling down after its recent conniption. Comfortably below 20.
ITMeter
The week ahead . .
The big news, of course, is the Inauguration which, along with it being MLK day, means that the market is closed.
Netflix, United Airlines, Johnson & Johnson, American Express, and Verizon, are expected to release their quarterly earnings this week which will give us an idea of performance over a number of sectors.
On Friday, economic data, including consumer sentiment, initial jobless claims, and existing home sales, will be released
The futures. .
The futures are down slightly, but as it is 35 hours to market open, I don’t think that this is significant.
Fingers crossed for a good week!
Heather
Q & A
Any questions you would like me to answer then please ask them here.
If you want to talk to other traders then please use ITM Chat.
10 Responses
Dear Heather,
Thank you for your weekly blogs as always. Speaking of hedge fund, it is mostly rich people’s money so they want to keep it within their friends and families investments and tradings so it can be discrete and confidential. Live well do good works.
George Henry
Greetings Heather,
ITMB for QQQ:
How well will ITMB SPY rules work for ITMB QQQ?
If ITMB QQQ rules have already been discussed elsewhere, please forgive my oversight and request pointing me there.
Good stuff, all you do.
Cheers,
John
Heather, Sorry for using abbreviations. The DPO stands for Detrended Price Oscillator. Try Barchart.com under the Learn tab for a great explanation. I’ve seen other services use the detrended price oscillator as a timing signal. It will give more signals than the 10 day/ 200 day signal, but since it may be difficult ( or a long time) to wait for a 10/200 day crossing to get in, the DPO will get investors out of their position with a small loss of profits, and then back in when the market recovers. It may not be appropriate for the investment model you have given us, but it may be helpful.
Thank you Bill – let me check it out
h
Dear Heather, I follow and appreciate your weekly comments. Since the last IN signal of 7 November 2023 you have no doubt closed out your option contracts and bought new ones simply because they were expiring. Each new set of option contracts would have been bought at levels far above the 10 day/ 200 day SMA classic entry point. Is your exit point on a decline still the crossing of the 10 day below the 200 day? It would seem that you would likely incur a significant loss. I have considered using a 20 period DPO below zero as my exit point and subsequent crossover to the upside as my entry. Any thoughts? Thanks for your insight.
HI Bill – not sure what you mean – DPO?
h
Wow! It always amazes me how much ignorance there is regarding “helpers” in the investing world. You would think investors (using this term loosely) would catch on but they don’t seem to. It would also be interesting to see how these firms spin their performance numbers to their clients or do they just quietly move on to the new year. Thanks for the report Heather and Happy New Year.
HI Thor – happy New Year to you too!
That is what fascinates me too – how do they keep going with such dismal results?
I read the financial press, I read the finance gurus – and they spout such nonsense it makes me angry – hence writing the books.
But as they say – you can lead a horse to water, but you can’t make it drink!
x
h
HI, What was the last time an OUT signnal happened?
Luan
Tha last OUT signal was on 27 Oct 2023. It was shortlived. On 7th November we got the IN signal and there has been no OUT signal since.
h