Same as LTCM, the client pitch was "we invented option pricing, we got nobel prizes, we got the best pricing models in the world, you are too stupid to understand it". All they did was plot a spread around a horizontal line, then sell when the spread was above, buy when it was below, sort of a "bollinger band" strategy.
Yul Brynner was famous for always dressing in black. If I don't understand the method, I won't trade it. There's a lot I don't understand. That's ok, better to distill whatever I do down to even simplistic terms I can grasp, rather than try to gamble on something that I can't even tell if it's legitimate or just mumbojumbo..
Yeah, just academic & marketing crap. In general, as long as hedge funds will outperform S&P or bond yields, new money should continue to flow into these funds.
Precisely: and the scam is perpetrated over and over again on people who dont recognize it ..... Smart people will endorse even a relatively simple strategy if it is backed up by more than one third party audit. Honest, smart, and talented people are the ones you want to endorse with capital. Just throwing money at somebody because they have a pedigree or use some buzz words, or dress a certain way or name some connections etc. is tantamount to stupidity. I am still amazed to this day at the behaviour of some of the financial and technology companies that sought out our expertise during the internet bubble- some big names by the way. The ones that we decided were operating in ways which were not optimal for their investors or the health of the comapany and refused to act on our advice to change this behaviour were dumped: We still have the good ones and ultimately refusing to do business with bad or corrupt people and organizations has been very smart business.
Is there even ONE crew out there that isn't a Ponzi Scheme or playing for leveraged gains vs. a risk of total blowup? I know there are , but we keep hearing about these clowns, and I would assume there are many more we don't hear of.
There are also many conservative funds out there who eek out 20-30% a year every year with minimal drawdowns. THey just don't make the headlines.
We've talked about this at great length on ET: http://www.elitetrader.com/vb/searc...d=144070&sortby=lastpost&sortorder=descending