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November 19, 2008

Performance Update for the Week of Starting 11/17/2008
by Reggie Middleton

In the vein of comparing the blog's research to name brand hedge funds, see "Another Name Brand bites the BoomBust!", I have decided to update the performance charts and announce the availability of a new institutional program that will allow a new higher tier subscriber level to gain access into my outlook in regards to the positions that I have taken. Below you will find the most recent results to all of the performance comparisons that I have made in the last couple of months.

Reggie Middleton vs James Cramer

A regular reader and subscriber did the homework of comparing my subscription research to that of James Cramer's flagship subsciption service, Action Alert Plus, see Reggie Middleton on James Cramer: Marked to Market!. This is an update to that study using today's closing prices. There should not be any surprises here, unless you see how much Cramer charges for this stuff!

Reggie vs Wall Street

As many may have surmised, my team and I have blown out the results of Wall Street's biggest and most reknowned name brand brokers. It wasn't even close enough to fit in a small graph. JP Morgan failed to beat the S&P over the period that the blog has been in existence (since 9/07). The blog's research returns are 132% above the BEST performing Wall Street Broker's analyst recommendations. For the supporting data that goes behind this study, see Blog vs. Broker, whom do you trust!.

Reggie vs Goldman Sachs

Why didn't Wall Street read my post on Lehman being a yellow lying lemon? See "Is Lehman really a lemming in disguise?" and realize that this post was made on February 20th, when Goldman Sachs had a recommended price of about $55 while this blog warned that Lehman may be done for. This very similar to when I warned about the potential demise of Bear Stearns in January, when the rest of the Street had a "buy" at about $130 per share. See Is this the Breaking of the Bear?. We all know how both of these stories ended.

If you look into my original post on performance (see "Performance!"), you can see when I recommended strong shorts on Morgan Stanley and Goldman Sachs, both highly contrarian views at the beginning of the year, and both returned way over 100% and in the case of Goldman, is still pushing profits.

Reggie on broad market and global equity indices

Cash performance of the blog's researcg as compared to all major US and global market indices. The graph below assumes the research result to be taken as a cash index, as opposed to an actual investor acting upon the research, which would have to be done in a margin account (to short), options or swaps.

Reggie Middleton vs Greenwich and Park Avenue

We have totally trounced ALL hedge fund indices, taking much less risk to get multiples of return. These are the results against the Barclay's hedge fund indices year to date.

The following chart is the comparison from the inception of the blog. Slight differences in results stem from adjustments for comparison against different products, ex. analysts recommendations versus an actual researched portfolio of all holdings.

The posts, research and opinions (date stamped) behind all of these graphs can be found in the Actionable Research post (you'll have to scroll down towards the bottom, once there).

A glimpse into my proprietary account

These are the results of my trading screen as of the close of US markets today (I've been spreading around the globe).

In conjunction with the date stamped, blog post map (the Actionable Research post), you can use the graph below to see how well my proprietary research performed in my own account on a monthly basis. This is where I may loosen up by providing a premium subscription service where I share the reasoning behind my trades and positions as it applies to the research that I release.

From a risk weighted perspective, my proprietary account has pulled even farther away from both the broad market and ALL of the BarclayHedge fund indices, far away. I have assumed much less risk to get an average of over 10x the return.

Risk adjusted returns from a visual perspective.

I'd like to remind all blog readers to use the social bookmarking links below (bookmarks, digg, technoriti, delicious, etc) to spread the word about this article and the site and general. Thank you in advance.

Addendum:

From Bloomberg:

Nov. 19 (Bloomberg) -- Hedge funds capped their worst two months in at least eight years in October, as global declines in stocks and commodity prices curbed returns and investor withdrawals cut assets, according to Eurekahedge Pte.

The Eurekahedge Hedge Fund Index, tracking more than 2,000 funds that invest globally, dropped 4.5 percent last month after falling 5 percent in September, the Singapore-based data provider said. October's drop, based on 71 percent of constituent funds reporting as of today, pushed the index down 12 percent on the year, the worst since Eurekahedge began publishing data in 2000.

Investors withdrew a net total of $62.7 billion from hedge funds last month, according to Eurekahedge, shrinking the industry by $110 billion to $1.65 trillion of assets as markets tumbled amid a global recession. Assets may fall to about $1 trillion by the middle of next year, Citigroup Inc. said in a report this week.

"The industry will probably face more redemptions for a while," said Akihiro Nishi, executive director at Tokyo-based Mitsubishi Asset Brains Co.'s investment advisory division. "The decline is a reflection that a majority of hedge funds seem to be taking risks betting more on beta," a gauge of a fund's risk that measures the volatility of its past returns in relation to the returns of the benchmark.

The October loss compares with a 19 percent decline in the MSCI World Index, which tracks more than 1,700 companies worldwide, and a 22 percent drop in the Reuters Jefferies CRB Index, a benchmark for commodities.

"The decline is a reflection that a majority of hedge funds seem to be taking risks betting more on beta,"

Exactly.

These losses are evidence of fund managers simply heaping on heavy doses of beta (gambling on the volatility of the market moving in their favor) and show absolutely no indication of stock picking or opportunity identification skills whatsoever. They are, for the most part, overpriced glorified mutual funds that have no real liquidity.

For further evidence, look at the correlation in my article above. To have such a high correlation to the broad market, you are most likely riding the coat tails of market beta. What is so alternative about high market correlation and negative returns in a down market? They should be called alternatively priced investments

There is nothing wrong with paying 2 and 20, it is just that you should know what you are getting for your money.

Reggie Middleton
Reggie Middleton, LLC
Perpetual Interests, LLCTM
http://boombustblog.com/

Who am I?

Well, I fancy myself the personification of the free thinking maverick, the ultimate non-conformist as it applies to investment and analysis. I am definitively outside the box - not your typical or stereotypical Wall Street investor. I work out of my home, not a Manhattan office. I build my own technology and perform my own research - in lieu of buying it or following the crowd. I create and follow my own macro strategies and am by definition, a contrarian to the nth degree.

Since I use my research as a tool for my own investing to actually put food on my table, I can stand behind it as doing what it is supposed too - educate, illustrate and elucidate. I do not sell advice, I am not a reporter hence do not sell stories, and I do not sell research. I am an entrepreneur who exists just outside of mainstream corporate America and Wall Street. This allows me freedom to do things that many can not. For instance, I pride myself on developing some of the highest quality research available, regardless of price. No conflicts of interest, no corporate politics, no special favors. Just the hard truth as I have found it - and believe me, my team and I do find it! I welcome any and all to peruse my blog, use my custom hacked collaborative social tools, read the articles, download the files, and make a critical comparison of the opinion referencing the situation at hand and the time stamp on the blog post to the reality both at the time of the post and the present. Hopefully, you will be as impressed with the Boom Bust as I am and our constituency.

I pay for significant information and data, and am well aware of the value of quality research. I find most currently available research lacking, in both quality and quantity. The reason why I had to create my own research staff was due to my dissatisfaction with what was currently available - to both individuals and institutions.

So here I am, creating my own research for my own investment activity. What really sets my actions apart is that I offer much of what I produce to the public without charge - free to distribute and redistribute, as long as it is left unaltered and full attribution is given to the author and owner. Why would I do such a thing when others easily charge 5 and 6 digits annually for what some may consider a lesser product? It is akin to open source analysis! My ideas and implementations are actually improved and fine tuned when bounced off of the collective intellect of the many, in lieu of that of the few - no matter how smart those few may believe themselves to be.

Very recently, I have started charging for the forensics portion of my work, which has freed up the resources to develop the site to deliver even more research for free, particularly on the global macro and opinion front. This move has allowed me to serve an more diverse constituency, which now includes the institutional consumer (ie., investment turned consumer banks, hedge funds, pensions, etc,) as well as the newbie individual investor who is just getting started - basically the two polar opposites of the investing spectrum. I am proud to announce major banks as paying clients, and brand new investors who take my book recommendations and opinions on true wealth and success to heart.

So, this is how I use my background and knowledge in new media, distributed computing, risk management, insurance, financial engineering, real estate, corporate valuation and financial analysis to pursue, analyze and capitalize on global macroeconomic opportunities. I have included a more in depth bio at the bottom of the page for those who really, really need to know more about me.

Visit his blog Boom Bust Blog.

Copyright © 2007-2010 Reggie Middleton

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