June 2010 - ProfitScore IQ

The ProfitScore IQ is our monthly newsletter in which we discuss the U.S. and global economy and trends we see emerging that can affect your investment success. Packed with invaluable insight and actionable information about the U.S. and global equity markets, The ProfitScore IQ lets you benefit from our research and the daily hard work that contributes to our never ending journey to be better stewards of your investment assets.

  • Is Our Nation's Largest Creditor Telling The Truth?

    In This Issue:

    Our Monthly Performance Update
    China: The Economic Elephant in the Room?
    Chinese Fool's Gold
    Smoke and Mirrors
    Superbubbling Over?
    Trade Earnings of the Impossible Kind?
    A Drop in the Bucket
    Interesting Reading
    Portfolio Performance Analysis
    Why Pigeons Walk Instead of Fly in Boise Idaho

    Was the flash crash a market related fluke, or could it be telling us something about our future?  When most investor's think back to the most recent bear market, many remember Bear Stearns, Lehman Brothers, and the gut grinding months of September, October, and November.  The event was so traumatic that it is easy to forget how it all got started. 

    The first shot across our bow was in August of 2007.  As it turned out, most of the larger quantitative based market neutral long/short hedge funds had become correlated with their positions and didn't know it.  Each thought they had developed some super secret alpha generating model, but actually these funds had developed similar models that were making the same trades.  Everyone's super secret computer model had found the same edge in the data. 

    In August of 2007, the perfect storm hit causing these funds to unwind their trades at the same time causing huge losses for their clients.  When there is no one to take the other side of your trade, it is painful.  The losses were so large that it caused many hedge funds to close their doors.  Even Goldman Sachs had to close down some of their billion dollar funds, so it must have been completely unexpected.  Genius failed again.

    What happened in August of 2007 and the flash crash in May of 2010 seems eerily similar.  Do you recall what happened next?