Shows why the majority of people who go and get their degrees and MBA's in finance and then go on to be some kind of big time stock broker that claims to make millions in the stock market end up like the guys at Long Term Capital Management or end up selling their "guaranteed way to make a fortune in stock options.
(Hat tip to Martin for the error calling it "Credit Management")
Tiny detail, it's Long Term Capital Management. The guys working there gave a bad name to the "Nobel Memorial Prize in Economics", which they won prior to operating the hedge fund. Goes to show that it makes economic sense to give such prizes posthumously.
ReplyDeletelong term none of them beat the index. buy an exchange tradedindex fund any forget about it.
ReplyDeleteI think it's important to consider the time span covered by those graphs. Basically, we're looking at the early stages of dot-com mania during the first part, with the second part including the crash towards the end. Between the beginning of '95 through the end of '97, the NASDAQ Composite had nearly doubled. By the end of 2000, the NASDAQ Composite had lost half of the value it had in March of 2000. It kept falling in 2001, but most of the losses occurred during the period covered in the second graph.
ReplyDeleteThat would explain why the best performers in the earlier period performed so poorly in the later period; they were dot-com bubble speculators. They did well early on, as all bubble-heads always do, and when the bubble crashed, so did they.
That's just a guess, though. I really don't have any idea what those mutual funds managers were investing in, but it makes sense.
History repeats itself, Just look at VA Partners investment in VRX or Pirate Capital's investment in JRCC?
ReplyDelete