As you know, some of the best intelligence comes from unexpected places. Recently my client Khushro Ghandhi and I were talking about politics and the market. To say I get an education every time I speak with him would be an understatement, as you’ll soon see. One day, to make his point he said to me “E.J., believe me I know how the left thinks, I was one of them, I’m a reformed Marxist!” That got my attention. I love my conversations with Khushro because what he says is from his heart. He has learned his beliefs from personal inflection, studying, and not being afraid to question “the system.” … [Read more...]

Great piece by Jason Zweig of the WSJ on the trouble with private equity funds: Trying to get your money out. For years now, big banks and brokerage firms have been urging their wealthiest individual clients to get into private-equity funds. Buying such a prestigious fund can make you feel like a big cheese with privileged access to the high returns corporate deal making can generate. Trying to sell one, however, can make you feel like a tiny mouse in a giant glue trap. Consider J.C. Flowers II L.P., once one of the most glamorous of the buyout funds. By July 1, investors must decide whether … [Read more...]

Puerto Rico’s potential bond default could be an owner’s manual for overburdened U.S. states. Two days before a potential historical default, Puerto Rico Governor Alejandro Garcia Padilla made it clear that the commonwealth won’t pay bondholders even as Congress votes on a bill allowing the island to restructure its $70 billion in debt. “On July 1, 2016, Puerto Rico will default on more than $1 billion in general obligation bonds, the island’s senior credits protected by a constitutional lien on revenues,” Garcia Padilla wrote in a editorial posted on a CNBC website. The lapse will mark the … [Read more...]

Hedge funders and traders made big mistakes around the Brexit (more on this here) referendum because they bet on the outcome they preferred, not the reality of the vote. Computer based trading strategies did quite well however, because they tuned out the emotion of vote and focused on actual market trends. The Wall Street Journal reports: Equity hedge funds fell 2.1% on Friday alone, according to data from Chicago-based Hedge Fund Research. The losers generally appear to have been hedge funds too heavily weighted toward cyclical stocks such as airlines or financial stocks that were hard hit … [Read more...]

Hedge Fund managers are under pressure from Randi Weingarten, president of the American Federation of Teachers (AFT), for supporting charters schools and pension reform. Some pension funds have withdrawn money from hedge-fund managers criticized by the teachers union. And some hedge-fund managers stopped making donations to advocacy groups targeted by Ms. Weingarten. Hedge funds, reluctant to buckle to the pressure, say Ms. Weingarten is doing a disservice to the teachers she represents, because funds should aim solely to earn the highest possible return on their assets. The personal … [Read more...]