Well,so much for the 'experts'-It is no rocket science,no kiddin'!
Hi mrknow
You seen this cover story in Bus.Week,quite revealing I say.Looks like they could have bought DELL and avoided losing money and humiliation.
Excerpts.
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FAILED WIZARDS OF WALL STREET
Can you devise surefire ways to beat the markets? The rocket scientists thought they could. Boy, were they ever wrong!
Smart people aren't supposed to get into this kind of a mess. With two Nobel prize winners among its partners, Long-Term Capital Management L.P. was considered too clever to get caught in a market downdraft. The Greenwich (Conn.) hedge fund nearly tripled the money of its wealthy investors between its inception in March, 1994, and the end of 1997. Its sophisticated arbitrage strategy was avowedly ''market-neutral''--designed to make money whether prices were rising or falling. Indeed, until last spring its net asset value never fell more than 3% in a single month.
Then came the guns of August. Long-Term Capital's rocket science exploded on the launchpad. Its portfolio's value fell 44%, giving it a year-to-date decline of 52%. That's a loss of almost $2 billion. ''August has been very painful for all of us,'' Chief Executive John W. Meriwether, a legendary bond trader, said in a letter to investors. (Long-Term's executives declined to speak on the record.)
Long-Term Capital and its Nobel laureates in economics, Robert H. Merton and Myron S. Scholes, weren't the only ones who got creamed. Locating the losses is hard because Wall Street and the hedge-fund world don't disclose them. According to Andrew W. Lo, a finance professor at Massachusetts Institute of Technology who advises several so-called quant funds, as much as 20% of hedge funds, which control some $295 billion, are quantitatively oriented.
LONG-TERM DAMAGE. The losses didn't stop there. Nearly every major investment house and bank in the U.S. and abroad has a group of highly paid rocket scientists in its proprietary trading department trying to beat the market with complex, computer-aided trading strategies. In an announcement on Sept. 2, Salomon Smith Barney Holdings (NXS) disclosed that it had realized $300 million in losses from fixed income and global arbitrage--five times its $60 million in Russia-related credit losses. Then, on Sept. 9, Merrill Lynch & Co. (MER) announced that it had lost $135 million from trading and said that the losses had hurt its own stock price.
August may go down as a watershed in the history of high-tech investing. That's because the losses suffered weren't just financial: The reputation of quantitative investing itself has been dealt long-term damage. Merton and Scholes, after all, are two of the most esteemed figures in finance--co-inventors with the late Fischer Black of the options-pricing model that underpins much of rocket science. They and their counterparts seemed to have developed a clean, rational way to earn high returns with little risk. Instead of betting which way a market is headed, they typically search for ingenious arbitrage plays--chances to cash in on temporary disparities in the prices of related assets...............
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