- income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
- a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.
Assuming you are part of a hedge fund, the standard fees are 2 and 20, that's a 2% management fee of the mount invested per year to cover normal expenses and another 20% incentive fee, so if the fund makes $100k for you this year, they take $20k of that in incentive fees and the 2% of your AUM.
Some funds charge even higher fees of 3+% and nearly 50% incentive fees, most have a high water mark meaning they don't collect incentive fees until a new high is made for performance, but in many cases the 2% fee of say a $1 billion dollar AUM fund still generates $20 million a year.
Performance of Hedge Funds...
The HFRX, widely used measure of Hedge fund industry returns shows the industry returning 3% over the last year vs the S&P's +18% return, hedge funds are no longer seen as the slick, trendy investment of the rich and famous and many are now turning to their long term track records (when things were better) and trying to sell long term performance. With the exception of 2008 when both fell hard, the S&P has outperformed the H.F. industry for 10 consecutive years.
Throwing around their clout...
In 2011 Einhorn did the same by revealing in October a large short against Green Mountain Coffee, sending shares down and helping Einhorn end 2011 which his fund spent most of the year in the red, with an end of year +3% gain.
Back to Yahoo..
Obviously these managers use tactics (if you saw the Cramer video none of this is a surprise) like making positions publicly know which is something they'd never do unless it was seen as beneficial, so does this spell trouble for YHOO? Quite possibly, but there are some other interesting things of note about YHOO that I wanted to point out as I talk about them a lot, but it's rare to be able to show you real data that backs up what we know about the market from using 3C and following underlying trade.
As far as Loeb's selling, we see early Thursday what I think is Market Maker accumulation to absorb supply and send prices higher to fill Loeb's order. The Market Maker was obviously given very specific instructions as the order was filled with a TWO CENT SPREAD! That's 11 million shares sold with a 2 cent spread. Do you think you could do the same with just two 100 share orders? No, that's no coincidence.
1) What is Loeb really up to? He still has a sizable position and wouldn't want to knock it down whether he wants to sell the rest of it or keep it. My gut feel based on the charts is there's going to be a bounce that will be sold in to.
2) As I always mention, it is flat ranges where we most often see institutional activity, these also tend to be the most boring parts of the trading day, but they are when you need to be most alert.
3)The reason they are flat is because orders are being executed and they are as you can see, filled at specific price points, you don't want a lot of volatility a a middle man trying to fill an order at such a specific price and in such large size.
4) The size! Remember how many times I have told you that institutional accumulation and distribution are in large size, they need demand or supply to pull it off, this is why head fake moves are so common, to create that demand or supply needed, it's nothing like us selling a 100 or 1000 share order, we are talking millions of shares, that requires time, patience and manipulation of the market like the head fake moves. I'd bet if Loeb wanted to sell the rest of his position, he's want to do it at higher prices, but maybe he wants to add to his position at lower prices, as Cramer made clear, hedge funds don't do anything "That resembles the truth".
5) Hedge Funds flock, it doesn't matter to us whether they are right or wrong on their entire trade, but if they are all moving in one direction, we want to move in that direction and make money on their flocking, whether they are selling at a loss doesn't matter to us, as long as we can benefit from the direction they are flocking in.
6) Consider my plea for patience, that's your edge over Wall Street, we can turn on a dime and clear out an entire position in minutes, they take days, weeks, months and sometimes years in putting together or selling positions. Think about how our trade size gives us advantages they don't have.
7) Even as Cramer candidly admits, stock prices have nothing to do with value, it's all about sentiment, so sentiment indicators are important to pay attention to like the recent multi-year record long positioning, the recent flocking of dumb money BACK IN TO the market, there are reasons for this, think about how dumb money can be used with headlines such as "Dow 14,000" and think about the strength of trend 1 vs the length and duration of tend 2 and how dumb money and sentiment have recently behaved.
8) Look at how price was acting as Loeb's position as liquidated, notice in most cases in the area he was filled, there was intraday demand, something needed to move that amount of shares. In other words, as I always say, "Price is deceiving".
9) Remember changes in trends or character precede changes in trends and volatility is one of the most obvious. Think about how volatility has been extremely low recently and how that's an enticing and friendly market for dumb money to re-enter the market after having been scared out of it, think about volatility increasing now and think about why dumb money might be needed right now and how they created an environment that was very appealing to dumb money.
10) Nothing is as it seems, this is why I follow underlying trade, MACD can be great, but if price is a deception, than every indicator based on price is also deceiving.
11) most amazingly to me is that 11 million shares can be sold in 2 days with a 2 cent spread. As we saw many times the last few weeks, intraday trade is important, the last one was the QQQ weekly contracts (calls) bought Thursday that expired the next day, but because of underlying intraday trade we still made +50% in less than a day.
I'm sure there are good individual lessons for each of you if you just take a look at the chart. I'm already thinking about how a volatility indicator can be a great trend tool and maybe even trading system.