in accounting for hedge funds. so for example, i think of a substantive area of inquiry is do the custody banks have their own software to investigate the hedge funds? to analyze their investments? and to do the accounting workforce? so do the service providers have their own software, their internal projects, their internal infrastructure if you will, to analyze, to investigate, to report on hedge funds? because i'm sure as we're all aware of the fact that hedge funds, there was some major disclosure issues in supporting reporting securitis or other instruments that are difficult to hire? or do they hire out to an outside ventor, if you will. i would like that further inquiry [tkpho-plt/] whether or not the service provider has their own software or their own in-house infrastructure for software to analyze hedge funds? or are they simply buying a package and using that for someone else? the other area of inquiry is in terms of the custodial bank doing the accounting for hedge funds directly? if one of the candidat

according to hedge fund researchers, 470 hedge funds are shuttered this far in 2015.ney management is an easy business. ceo, what is it so you and you see funds like global ascent run by blackrock, which is very deep pockets, and furthermore the macro fund run by fortress investment shutting down? guest: i think it's as you don't have any outstanding macro trends to play with you had up until the crash. it says to me a slow growth world. the whole world is more accident prone to and you have a -- many accidents in holdings. leveraging alone is not a way to add value. erik: as the ceo of a mutual fund company, does it put at all a smile on your face to see the so-called superstar hedge funds shutting down because they can't deliver positive returns? martin: not really. we don't have hedge funds. we don't think we can mix the culture with hedge fund managers. that's just a personal view that we took. i think it's difficult to make money in the macro space now with the interest rate cycle and the interest rate outlook we saw leveraging reduced and hedge funds. it's just

hedge funds often invest in debt-ridden economies, buying up bonds at low prices, and looking to flip them for quick profits. and puerto rico is their latest target. the strategy has earned them a reputation among critics as so-called "vulture funds." >> a group of hedge funds that own puerto rican debt hired claudio loser to find ways for puerto rico to solve its debt crisis. among the former imf economist's recommendations - even more cuts to education. >> but it shows the expenditure and school enrollment, how it has declined, school enrollment and how education expenditure has increased enormously. we have been very careful to say that we believe that this is a decision that has to be taken by the authorities of the island. education is too important to be played with and be cut in a irrational or discretional fashion. >> but your co-author briefed reporters that puerto rico is massively overspending on education. >> i mean, that was the message, that came out from the report. >> this is true. people-- i mean, this is for the government to decide. >> that they're massively overspe

many hedge funds still buy and sell stocks the same way, like they are commodities. we saw almost recently with the cloud stocks, bring up 2014, they were hit with huge amounts of new stock, so the good went down with the bad, so the next time you see everything go down at once, or sectors just collapse, before you try to cook sense, ask yourself if you might simply be seeing the result of hedge funds gone wild. the bottom line, the markets do not make sense on a daily basis. instead of dreaming up of reasons, think about whether the move was caused by the fundamentals of the wall street money management business and out of control hedge funds meaning big redemption and take heart and start recognizing that their irrationality could be your opportunity for big profits. andrew in florida. >> caller: i want to mention another big fan of yours, my mom deserves a hallelujah for being cancer free now. >> yes. >> as a young investor with a high risk tolerance would you advise me about putting my first bits of money for long-term investment? >> i am going hedge fund, and th

there were relatively few hedge funds and very, very few that were run by african-americans. so in some ways, there was a need that was just waiting to be met here by somebody like kirk wright. >> narrator: the two doctors use their contacts to tap professionals like themselves -- people with ample wealth and little time or expertise to manage it. >> so when people like mr. wright are able to come to them and use terms -- you know, margin costs and short sells and options trading -- and throw out the big words, the person's heard that word before, they might not completely understand it, but they think, "well, he's using the right terms." >> narrator: but even savvy investors get hooked, as well. in 2001, los angeles-based real-estate developer roger o'neal agrees to meet with wright. >> he seemed like a very knowledgeable, articulate guy, and he told me a little bit about his background, that he was from harvard. by the end of year 2002, i had pretty much liquidated most of my portfolio with my investment group and transferred it over to international management associates.

top hedge funds are cutting back on stocks. what does that tell us about where the market is heading? investortesting appetite for unicorns. a market value of $4 billion. alix: unveiling for new models. will they have them unveiled a luxury market in the u.s.? scarlet: first, a snapshot of market activity. i know you were super excited because of the headline crossing now. alix: falling for the first time below $40, we were kind of waiting for this to happen. bouncing off the four dollars level to get the inventory number and boom. down. scarlet: i struggle with inventory numbers because there was a smaller than estimated build in crude inventories. bigger than estimated in gasoline. it is difficult to make out what to make of it. it is sort of difficult to figure out what is going on, technical levels in the $40. i know you will work on it. thank you. moment,rading at the energy had been the best performing group within the s&p even with oil coming down now, it seems as though major averages are holding up well. the are certai

with asness: we started new hedge fund hedge that is very unpopular in the hedge fund world. enough. the opposite is showing up. they charge too much. over time what they are supposed to do is hedge of the market risk, vita richard that is independent of the market, and they are supposed to do it at a reasonable price. erik: those look like when correlated returns. [laughter] cliff asness: the fluff size: i criticize them. and i have criticized them for those two things. the flip side is when they are not on hedged. they are not 100% long. i do not like that part because the observation is right. you should get that from? goal for near zero. if you want to be not alone, he will give it to you for five basis points. you do not need hedge funds to take to a 20 out of a 40% long. but on the flipside they're not 100% long. criticize me for not being hedged, short-term and the bull market they're not fully invested. erik: we will go back to 1900 little bit later -- cliff asness: i wrote a blog iece about the length. over time i do think the criticism that they do this partially he

hedge funds in the stock market in june did terribly.se who were staying on the sidelines have not been able to benefit or participate in the rebound. it's been tough the matter which way you look at it. >> thank you for that. headlinesies making china's national chemical corporation looking for help. the operative was rejected by it. it is to be serving as the basis for the negotiation. berkshire hathaway reduced its stakes in goldman sachs. they wanted to liberate cash complete the acquisition of something else. expected to be completed next year. urban outfitters tumbling after buying a restaurant. the deal comes amid concern about a retail. starwood tumbled by the most in two months after receiving an off her marriott the create the world's biggest hotel company area su keenan reports of new york. >> a multibillion-dollar merger deal between married on her with it all appears to be sending the message that bigger is better. it also signals further deals ahead. the $12.2 billion deal to create the world's largest lodging company. 1.1

[indiscernible] >> you think of anthony as the public face for the hedge fund industry. he is affecting the way people think about hedge funds. >> a plug. that is it for today. until next sunday, have a prosperous week. [captioning performed by the national captioning institute, which is responsible for its . (applause) well god bless you. always our joy to come into your homes and if you're ever in our area, please stop by and be a part of one of our services. i promise you we'll make you feel right at home. but thanks so much for tuning in and thank you again for coming out today. i like to start with something funny. i heard about this lady. she was on an airplane reading her bible. the man next to her said, "you don't believe all that stuff in there, do you?" she said, "of course i do! it's the bible." he said, "well, what about that guy that got swallowed by the whale?" she said, "you mean jonah? yes, i believe that too." he said, "well,

>> the catchphrase was that it was created for hedge funds by hedge funds.ever, when you start from the top with the executives, you mckenzie, looking at the overall philosophy of what they do, it ties into what hedge fund managers do. they find an edge in the market to give them added value on top of what stocks are doing in general to charge a fee for. they look at the market, find information, they try to get an edge so that they can evaluate an investment and make money. then they can move onto the next thing. golly it is doing the same thing with drugs. they say which revenues are not being maximized. with a folded into what we do, make money, and moveon. you had a lot of hedge fund guys say, i understand. this makes sense. scarlet: does that mean the ownership is very long? >> it largely is. we know that there are some folks that are very short on stock, but if you look at the type of managers -- you have 22 shareholders that have at least a 1% stake in the company, that is a lot. i higher percentage of 1% companies in the s&p. we have a big portion, s

andnage a hedge fund myself a mutual fund. team is the equity team and that is my passion but we also incubate other companies. scarlet: i look forward to seeing you again soon. we have much more coming up in the next 20 minutes. with $234ompany billion in sales last year does not misfire, but their push to make shopping more precise may have backfired. we explore as black friday approaches. nato's next steps? the former ambassador to nato, nicholas burns, gives us his take on this tense situation. just hadtock market its best week of the year but his office records set in may. we will look at whether equity valuations were -- equity valuations are on target or over evaluated. ♪ afternoon and welcome back to bloomberg markets. lumber business flash, a look at some of the biggest business stories in the news right now. a top u.s. and later as set to propose new rules that would put high-speed trading under fresh scrutiny. they want a new registration standard that would affect as many as 100 firms. biggest up to oversee automat

why do the hedging at all, michael?s gone by, you used to say, we will get it wrong on fuel, but you used that as a reason for not hedging. now you do hedge. and your rivals don't. michael: they can't. we've always taken the view that no matter what we do, we get it wrong on fuel. but if we had, at least we have cost certainty. this year, we got it wrong. this time last year, we were hedging at $92 a barrel. we clearly got it wrong. yet we can still make 1.2 billion in net profits. next year, we are hedged at $62 a barrel. if we were in the stock market, we might be doing it a little lower. savingsillion in fuel in a year were you are making 1.2 billion in profits. you can pass on low fares to customers. base inre's the next germany? how is lufthansa going to react? andael: we opened colon berlin. i can't tell you where is next. i think munich will be one of the later ones. how is lufthansa going to react? i think by stepping up with lower prices in our markets. those prices will still be higher than ours. any time in h

today, since our guest host works with a of super successful hedge fund managers, but also hedge fundon balance, losing 3 or fivehe past years. what would you rather own for the next five years -- hf rx , the average return of all hedge funds, or the s&p 500? milton: if you are bearish on the s&p 500, you will want to own hedge funds. you have to understand. in a down market, they don't make money. built on there premise that you can reduce risk and increase returns, which does not work that way. all the great hedge fund managers i work with that have had great performance for 30 years, they did by taking big bets, not by hedging and being a friend to take a bet. by having a big short bet and a long bet rather than a couple decisions here and there. they will outperform in the market goes down and underperform when the market goes up an. stephanie: doesn't the lousy performance this year prove the point that all they have been in the last five years is momentum players? the market went in one direction and they are long. milton: there are managers that are exceptional. there are a han

fund manager and doesn't tell him where he got the information and the hedge fund manager just knows that it's accurate and my golfing buddy says it's absolutely you can trust me and that hedge fund manager makes a huge bet and makes a billion dollars off of that bet, that is entirely legal. no other country allows that form of insider trading, defines insider trading so broadly. now, what i try to show in this book is that wherever you look in terms of the rules of capitalism, the basic building blocks, even bankruptcy, i mean, bankruptcy should be something that -- are you still with me? yes. bankruptcy is something that ought to be, you know, people say, well, it's just bankruptcy. that's the law. it's the rule. it's the markets. it's not just the law. bankruptcy is designed in a very peculiar and particular way. if you are a major, major business, if you are a presidential candidate, for example, no, i don't want to get partisan -- [laughter] but if you want to declare bankruptcy and protect your assets, you can. you can use bankruptcy. on the other hand, if you are a homeowner w

and that's what the hedge funds do.oop in in times of distress, grab the bonds at discounted rates, but then they want to get paid the full 100%. right? so, because if they do that, or even now with prepa, the bondholders have offered puerto rico a deal. they said, "ok, we won't insist on 100%. we'll take 85%. we'll take 85 cents on the dollar." so if one big hedge fund holds out and says, "no, that's not enough money," they can paralyze the entire situation. that's why you need bankruptcy protection, to prevent the vulture funds from holding the entire process of settlements up. and so, how do progressives and all people of goodwill who are concerned about puerto rico's future maneuver during the next few weeks and months? how do we figure out what needs to be done? and more importantly, what could be done, given the political gridlock in washington and the deep party divisions in puerto rico? first, there is a need to disseminate a clear narrative on the roots of the crisis in colonialism, not in puerto ricans being i

still ahead, a rough time for value-focused hedge funds.rom david einhorn to says down.n, they're which investments are not paying off. ♪ betty: we have new numbers on the performance of hedge funds. barry rosenstein saw his two rebound in october after four months of losses. jana partners fund up 2.7%. this is according to an investor letter. both funds are still down for the year, 5.9% and 4.1% respectively. saying with hedge funds, it is a bad year for value investors, and you know that when seth klarman is losing money. his hedge fund declined about 3.8 percent in september, according to a person with knowledge. was heard by losses in energy and health care stocks. joining us now in austin is sabrina willmer, who wrote the story about seth klarman's losses per they took the heaviest hits on health care and energy, right? sabrina: that is direct. mostly, the biggest holding of the u.s. equity holding was should near energy -- was shaneer energy. a lot of hedge funds piled into it, and that lost 30% during the third quarter. losses.ves so

betty: they are judged quarter by quarter nec hedge fund managers hit. if you are running a mutual fund, you are seeing slows coming in. a big index fund guy, we had him on earlier and we are seeing record inflows in our fun. >> the reality is they will do better than actively managed funds. if you want equities, the place to go is the index fund. in to indexring funds. $450 billion are coming into the index fund. $120 billion year today, going out of actively managed funds. betty: if you were going to be cynical, you could say the guys are throwing their money out because they have not been arming. >> is possible. managers are saying this and alligators are saying now is the right time and you want to own hedge funds and we can the markets not going anywhere are not going up for the next two years. someonewhen you want not to take short positions as well. betty: in this regime change, we now see a tightening cycle. isn't this a time where you may want to see more active runs? alec: limiting drawdown when markets are volatile, and i also think now is a g

andy: hedging just delays the impact. no company is going to be hedging 3, 5 years into the future.onathan: is next year the critical year? andy: we may well be hedged for the first half of 2016. as you start getting into the second half, that is where we will start seeing the impact in the numbers. the market will start anticipating those impacts earlier. we will see the impact in the stock market before we see it in the reported numbers. they are being prudent. they are hedging. they are managing risk. are only managing it for 6-12 months. jonathan: final question, when the fed minutes come out later this evening, do you read them? andy: i have to admit that i have some very good friends of mine who read them and send me the highlighted bits that they feel are important. so i have some very good friends who do the hard work for me and give me the bits that i need. jonathan: now we know what andy lynch is into. up next on this program, we take you from the fx market to commodities. glencore crushed. it falls for a record 10th straight day. ♪ jonathan: good morning and welcome back

hedged versus17% 30 5% last year. southwest has kept its hedges in line with last year.atastrophic insurance. flipside, u.s. producers, only seven out of 23 are hedged at maybe 50%. that is very different from last year. they wind up thinking that oil prices could go higher. if you hedge, you will go lower and they are going to risk their cash flow because they think prices will go higher. scarlet: they have a front row seat to all of this. as we go to break, we want to tell you that french president francois hollande and angela merkel are speaking right now and had a meeting in paris today. these are live pictures. the twoe leaders of largest economies in the eurozone are talking about the next steps after those terrorist attacks in paris. the french president says he will meet with vladimir putin in paris tomorrow. we will be right back in a few moments. ♪ alix: welcome back. scarlet: the biggest day in u.s. retail is rapidly approaching. we are talking about black friday. as consumers get there while it's ready, the stores are putting months of planning into action. s

first of all, let's start with a notable hedge fund manager.has a very, very large position in apple and boosted his exposure to apple during the course of the third quarter to an interesting ad to his apple position there. he has also taken a new stake in gps giant gar minute so a new stake for him there. now notably he dissolved and got rid of his stake in karenal giant hertz as well as macy's and citizens financial here in the u. s. he also cut his stake in sunedison by 25%. so a cut in that here. this also comes on the heels of fellow hedge fund titan. he did liquidate his stake in the company. then there's john paulson taking new stakes in the drug giant perrigo and cit and boosting stake in teva pharmaceuticals and starwood hostings as well. a lot of these names prehaped involved in deals. he also decreased stakes in petroleum and computer sciences. and then there's leon cooperman taking a small new stake in retailer jcpenney as well as boosting his stake in facebook. so when we talk about this it's interesting here because dave einhorn,

in hedge fund investment.y coming out of funds and being put into funds like yours? i wish we were. >> i just sold it right there for you. [laughter] >> the flow to separately managed accounts and allocators come primarily from the dealers side to the investment advisory side. not so much from the hedge fund university advisors. >> clearly it makes sense to be in the s&p during the bull market run, they are always going to perform hedge funds. those are supposed to protect us on the downside. whether they do or not, obviously the long short is going to underperform like this. >> show us funds in the last quarter. right now i'm coming in from someone who just referred the themselves as the next macro master and he's crushing it. he may be but i think that when you tell you -- call yourself a master it's kind of the kiss of death. at hl ds, thisg is aberdeen here and we can see his holdings. ,hese are some of the changes right? they have done them in the last quarter? a reduction in energy holdings is probably v

they will always outperform hedge funds. hedge funds are supposed to be connectors on the downside.rs on the downside. long short will underperform. stephanie: why don't you show was what that show was what funds will look like? the next macro master crushing it. i tend to think when you call yourself a master -- here --is is averaging aberdeen here. changesooking at the that martin has done over the last quarter. a reduction in energy holdings. a bit of a reduction in financials. a big increase in i.t. holdings. similar to what we see if i look at druckenmiller or duchesne. i wonder what you are doing differently than blackrock. you don't see any changes in their energy holdings. a massive reduction in their financials. here it is. here is the blackrock accra team fund -- macro team fund being wound down. they are not doing something right. >> the themes we like in emerging markets are consumer led. we like countries like india and mexico. india should benefit from the lower energy prices. met: strong holdings and pepsico and yum! brands. c, theindia, we like htf nonstate owned ban

on paper valeant appears to be one of the most popular hedge fund stocks. 11th most widely epd held on the top 50 list that it compiled last quarter, and to have respected new move twal fund names ru an tops the list, and they've expressed support for the company following by pershing square, t. rowe price, which has been invested for some nine years in the company. >> the risk managers worrying about the absolute value of the stock and what it's going to do for their portfolio more than anything, but every whisper of negative news just seems to clobber this name lately. >> we can probably make the leap, if it is that, and the reason the stock was down so sharply yesterday, and we are all wondering why it was perhaps due to this sale -- >> is it up-to-date, do we think, because of that reason? >> negative news report. another big investor selling out because you think those are fair assumptions to make, kate? >> i think they're fair assumptions. i can't say for a fact that it's the goldman sale that happened yesterday. the fact that the company announced it

consider ways to hedge your portfolio.irst thing you want to think about when you look at hedges is how long i do want to be protected? what do i want to protect against? we have the federates decision. we have the toll day decision. maybe you're looking at star wars. so that takes us at least into january. the next thing you want to take a look at, how much protection do i need? well, we know that the s&p 500 when it fell recently fell down to around 1900. that translates to 190. down about 10%. if we look at this time frame, we want to hedge that much. and the final thing is how much am i willing to spend? obviously, there has to be a limit. you're not willing to spend 10%, obviously, if you think that's all of the risk. so in this case, i'm going to look at spending 2% of the portfolio level or less. how do we do it? look to the january 2009 put spread. that is going to cost me $4. i'll sell the 189 against it for a dollar. the important thing is that decay in that $1 option is going to offset a lot of the decay in the

the poster child for this trade, it was the epicenter in hedge fund land. why do these funds find themselves in certain types of stocks and select names? >> a lot of stories are about roll ups or restructuring. has that was the case of sunedison, they have a bunch of affiliated companies they own pieces of. hedge fund managers have to go to a place where they feel like it's a misunderstood idea with potentially a catalyst. >> that kind of hedge fund sponsorship is good for these stocks' performance, right? >> it's not as if we're saying these overrated arrogant hedge fund managers can't earn their money. it's a matter of a down side of when you have heavy bets in certain areas where you think you have an edge and maybe the edge doesn't pan out. we have names that have done relg tifl well still in this environment to have heavy hedge fund ownership. time warner cable, mohawk industries, al err began, expedia is another one. all the liberty media affiliated companies always been really loved which hedge fund managers. >> there anything about this time around

most hedges are closest to at the money right now.,an take the s&p 500 diet, sell a lower strike aboutt it and it costs $25. it has a 4.5% payout ratio, so for the market does it, you are going to get paid 4.5 times the outlay you paid for that. julie: and if it doesn't, you are out $25? kevin that's a cheap insurance policy because the market can move 1.5%, especially when it's dependent on the fed. julie: let's talk about the fed. we seem to have this digestion process which we have had how many times over the past several years to the idea that the fed is going to raise rates. foris it still so hard investors to accept rates are going to go higher? : it's been hard to accept because we are on a risk on environment. correlationssector run at 95% and now we are starting to see it diverge. no one knows how that's going to play out. people are trying to figure out how they can invest in a slow growth world. julie: kevin kelly, thank you very much. bloomberg markets will be right back. ♪ i just had a horrible nightmare. my company's ent

so if we are looking at this time frame, we want to hedge about that much. the final thing is, how much am i willing to spend? well there has to be a limit. you are not willing to spend 10% if you think that is all of the risk. so in this case, i will look at spending 2% of my portfolio level or a little bit less. how do we do it? we look to the january 2009, 189 put spread. >> that will cost $4. because i'll spend $5 and sell the 189s against it for a dollar. but the decay will offset the decay in the short-term, especially in the 209 strike put that i get. that gets me protection down to the 189 level that we previously identified. one final point, spy will iesha dividend between now and expiration that will amount to a little over a dollar so the cost is less than 2%. >> even less. carter, we know you don't like the charts right now? >> we haven't been in a bull market for the better parent of the year. if the russell 2000 is not changed, that is not bullish. at russell 3000 which is 90% of the investment capital in the united states is down 3.5% from the

we take you inside the super secret hedge fund today. kate kelly nabbing a rare interview with a top stock picker there. >>> we do begin with the fed and the markets and the realization that the free money mania of the past six years could be about to end. most importantly, investors seem ready. stocks taking off after those fed minutes appear to lay more ground work for a december rate hike. >> the reason that we at double line are cautious though, when you look at broad indicators today, we're worse off than in 2012. at the end of 2012 gdp -- want only gdf was off by 1%. now it's around 3-esh. moderateties are at all-time lows in some indicates. china is slowing. it just doesn't strike me that things are so hot that you have to accelerate. >> are they so bad you have to be at zero? >> i guess the fed -- price stability. with regard to the price stability, we're nowhere near the 2% inflation target. with unemployment by conventional measures, 5% it looks like we're there. however, what i thought was jarring is when you parse through the

macro hedge funds. reporter: it has been a very difficult year.ing a move to close it fun. and these funds are down this year according to data come bloomberg,ompiled by and it is generally a very difficult environment. think about these funds. they make very large bets on currencies, rates, commodities, and for stocks and bonds. look at how many surprises we have had this year in those areas, and in january, and then the cap on the fright, and then devaluation inn august, and then what commodities have done and oil, and at a certain point, i saw people tweeting a hash tag with casino, because at some point, research can only get you so far. betty: and there are a value investors who say it is very hard to differentiate the good from the bad in this environment. so what does it take for blackrock in this environment? devin: these three large funds we talked about, they were all down pretty much throughout the year. clientstions between and the fund manager, and you will have redemption notices, and that will get the fund manager's attention. then,

if you're a professional investor in a hedge fund this partners calling you, asking money. pain. individuals can sit on stocks slong they want. when i cancel patients many get ansi, they'll netflix, they went to gains they want it now. i say some of the best stocks require some incubation. you know how patient i was owning intel. for 18 months i watched it do nothing, paint dry, nothing at all in late 1980s but i believed. i held on to it because at that time i had a few partners and none of them needed to know how much they were worth. a common stream asked how i was doing. later in my career when partners hounded me daily, i would have never held on to intel that long. lots of takes a long time. lots of turn arounds take 18 months to 2 years when you buy a stock, market it so you don't get tired of it sell it and give up. here is something to remember, stocks that are stuck tend to romp when they are freed from the gates. do you hear the patients? if you don't, let someone, no should have, would have, could haves. one of the most disspeckble trades second guesses. you buy some

you always say there is a hedge fund hotel. 22 hedge funds with major stakes in valeant have lost a combined $43 million in three months. oliver, explain to us what is going on with valley and -- with valley and -- with valeant in your piece. you had a stock here in a company that a lot of hedge fund managers could see themselves in. this is a company that goes out and buys drugs and rings up the prices and goes on to the next thing. they are constantly trying to find the edge. ofy are officially sort doing the same thing that hedge fund managers do, which is try to get an edge on the market. because of that, this became one of the hedge fund hotels. that is what drove the stock up so far. he does the hedge fund is brought up that far, who is going to buy this thing? they own such a large stake. it is absolutely a growth stock, and now it is going through a transition that maybe one could argue it is a value stock. i do not think a lot of value guys are going to be looking at valeant. you have to think about who is not just going to buy the stock. the question is, who will bring it up to the

hedge funds having an unusually bad period.assets last month than they had in seven years. but, you know this is a perennial criticism of hedge funds. they charge a good deal of money 2% for expenses, 20% of any upside. and they often underperform the market. in bad times they may do less badly than the broad market. in good times they do less well. it's a source of frustration to people. defenders say, look, they're known as an alternative asset class. the reason for that is they hedge an overall investment basket but they're not the end all be all of where you should put your money. >> kate, thank you very much. let's send it out to chicago and rick santelli. >> thanks, simon. i would like to welcome my first guest of the week, andy brenner. always fun to have you, andy. even when it's not november, you always like to talk turkey. let's start. unchanged on the year. to me, as a technician, unchanged on the year is significant what key markets are unchanged? ten-year note rates. the dow jones is within a half point of unchange

what is going on in hedge funds that maybe the average investor doesn't understand? >> well, a number of different things over a lifetime. so just because the fund is down a particular month or even series of months doesn't necessarily forecast the end of the fund and certainly not the end of the manager. people are very creative, they come up with new ideas, they make new investments and new bets. so lots of things change, and i think it's just a question of focusing on the longer term . deirdre: and the institutions who have been for the most part investing in hedge funds to your point for decades, they do not pull their money in and out? it is minimum seven to ten years sort of assumed. >> well, they can be shorter periods but the reality is when you're looking at a lot of institutions, they are longer term. some of them are looking at three years, ten years, some of them but you can remember in a fund you've got to get a lot of notice to pull your capital out and on the nature of the portfolio, it takes a long time to liquidate and pull your assets as well so thi

>>> we have five hedge fund favorites. stocks being gobbled up by the big money players, but are they right for your portfolio as well? >>> and shut down. brussels, europe's capital, shuttered over terror fears, schools closed, the train system not running. we'll take you live to

we locked that in through a hedge between that point of locking it in an quarter end, that hedge ran against us a bit. we locked in a much more significant gain on the balance sheet. that hedge went against us a bit between the time we said it in end.quarter half of that hit was reversed. it was very for to witness on our part. that will be an important part of her acquisition strategy going forward. it keeps the partners and founders of the firm engaged not only in the short run, but in the long-term value of the company. it is good to be aligned with shareholders now in that company, even though we are the vast majority shareholder, we are both shareholders. we are interested in tomorrow and also interested in years from now. david: the commodity landscape was much different than it is now. has the calculus changed a bit because of what's been happening with china? joe: not really. they are not as sensitive to commodities, they have a broad infrastructure capability. it is listed infrastructure. their mandates cover a variety of different strategies. they are not just impacted sole

they're called hedge funds, but they do not hedge. they are long driven strategies. stephanie: what do you think? one thing explains the dichotomy probably bigger than anything and that is that endowments can be longer term in nature. they do not have to worry about day-to-day flows come outflows, meeting those investor redemptions. and that helps. there is a big liquidity premium in the market today. they can really move to take advantage of that. the numbers that we showed -- about 50% of endowment investments go into alternatives. they tend to be a lot less liquid. , say,you're talking about private equity for example? like timberland or farmland? too. it could be that, the one common characteristic is that they are less liquid and endowments can take advantage of that. erik: there is a little bit of cherry picking going on here because we are looking at one year's worth of data. have you seen this trend play out over time and is it favoring endowments as time moves on? playsthe trend definitely out over time. if you look at the long-term numbers, they are just as

there are probably 800 hedge funds right now. no to hedge funds have the same strategy.blee public strategies, we have those friends in common. with lowe are those key constant strategies with lower returns but less volatile returns. tom: you can't get smoother than that. the only reason he can be that smooths is because he froze up in bowden for four years in maine. that was smooth. wenttudzinski: and then i to chicago. if you have ever been to chicago, you can freeze even more. francine: he should be a politician. when you look at strategy around the world, different regions, is china concerned? you also came back from japan. europe,at the u.s., china, and japan, are we focusing on the wrong thing? mr. studzinski: if we are talking about investing in terms of where we look at the world in terms of long-term investments, there is aear money, lot an interesting real estate in europe. coming the u.k. or spain out of think portfolios. there are other businesses in europe that are also interesting . because of the geopolitical tensions that you have seen in the past week, a

amazon may soon be the new hedge fund darling, s&p capital iq out with its quarterly hedge fund tracker and they highlight which stocks were bought and sold the most. amazon, paypal and among the top sold ebay, price line and microsoft. with us with more is palvo. >> thank you. >> i don't want to be too flip about this, a lot of the times those crowded trades, whether apple, as everybody and the smart money piles in that's the moment they tend to buckle. now you're saying that amazon is potential one of these crowded smart trades. >> it seems like it. it seems like it is the top buy for their hedge funds and it was interesting because consumer staples was probably the biggest sector they bought into. i think consumer staples it's, you know, very noncyclical, bay at that, dividend laden so conservative from where we were last time where they loved healthcare. >> healthcare was the darling and we know what happened to a lot of those names. did they move out of those positions as far as you guys know? >> they did. in terms of, for example, valeant, i think that was an interesting play beca

i'm not really looking to hedge here. i'm bullish on equities to the year end.i would recommend not having a gold position here. >> gold is still up 4% over the past 90 days. stacy, your focus is the options market. when you look at that, do you see traders thinking gold may go below $1,000 an ounce. >> if anything investors continue to suggest that gold will be somewhat range bound with maybe a slightly bearish bias but nothing we would say is pounding the table saying they're incredibly bearish. in terms of going below $1,000 looking to under, it's less than a 5% probability we break $1,000. if we go out a little further to january of 2017, now you have around a 20% probability. nothing we would label as bearish. the flip side is they're not setting up for a major bounce in gold and to andrew's point a lot of that has probably come off the fed where we saw gold sell off when we saw the volatility come lower and the sentiment get a little more bearish in gold options. >> i called gold a couple years ago a, quote, tired old mule. nice to have, doesn't do a whole