The New York Times points out that “Economic Pessimists Gain Cachet.”
Apparently, the permabear newsletter business is booming. Unfortunately, the same can’t always be said about their investment advice. (Bold is my emphasis.)
Further afield, Raoul Pal, a former Goldman Sachs derivatives expert and hedge fund manager, has attracted a growing following with his monthly research note that, most recently, predicted a depression in the United States similar to that of the 1930s and eventual bankruptcy for Britain.
Mr. Pal writes The Global Macro Investor from a holiday village in Valencia. a province in Spain. He said that demand was so great now that he has the luxury of doling out his high-priced annual subscriptions only to clients he considers sophisticated enough to pass muster or who come recommended by people he trusts. Others must join a waiting list, Mr. Pal said, although he declined to say how large the group is.
He said that 30 percent of his clientele — which includes pension and hedge funds, governments and proprietary traders at banks — consisted of wealthy family offices with assets of more than $200 million.
“They are easily the most bearish of my subscribers because they invest in the longer term,” he said, “and in the longer run they see more uncertainty than ever before.”
According to TrimTabs, a funds researcher, hedge funds withdrew $3.5 billion in April and industry consultants say that many funds — positioned in July for a continuum of bad market news — were caught by surprise when the market rallied. “Where is the research telling me how good Intel’s earnings were going to be?” Mr. Jabre said. “I just have not seen it.”
In fact, if investors had been following the advice of Mr. Edwards or Mr. Pal over the last month as stocks have bounced back, they would have lost money, as both men readily acknowledge. Mr. Edwards has advised investors to be heavily underinvested in all equities, and Mr. Pal is betting against the United States stock market as well as shorting the euro.
Mr. Pal’s bad run began when, after becoming bearish in 2007 and reaping the fruits in 2008, he was caught short by the powerful recovery that began in March 2009. To date in his model portfolio, he has lost 96 percent on a short bet on the Indian stock exchange, 68 percent betting against the Chinese H share stock market and 68 percent on the American mutual fund company Franklin Templeton.
HT: Abnormal Returns
