Let’s say a biotech CEO learns that, in two days, her company is going to announce clinical results that will surely boost its stock price. She can’t legally buy up a bunch of the company’s shares right then — that would be the bad kind of insider trading — but she can cancel a scheduled 10b5-1 sale to avoid dumping stock just before its price soars.
When you get rich you’re going to need these tips. Than you can donate to the site!
Edit: Related to taxes, an impressive example of the power of compounding and deferred taxes:
Imagine that Berkshire had only $1, which we put in a security that doubled by year-end and was then sold. Imagine further that we used the after-tax proceeds to repeat this process in each of the next 19 years, scoring a double each time. At the end of the 20 years, the 34% capital gains tax that we would have paid on the profits from each sale would have delivered about $13,000 to the government and we would be left with about $25,250. Not bad. If, however, we made a single fantastic investment that itself doubled 20 times during the 20 years, our dollar would grow to $1,048,576. Were we then to cash out, we would pay a 34% tax of roughly $356,500 and be left with about $692,000.
Everyone, everywhere has no tolerance for draw down. More than rate of return, drawdown seems to be the ultimate optimization metric. “If I reduce the drawdown I can increase the leverage and viola!” This usually ends badly. I love this article because it shows that no matter who the manager is or what the strategy is, drawdowns are inevitable. Institutions manage money because they are supposed to be more sophisticated, only to do exactly what retail does (panic at the wrong time) and charge you a nice fee for it.
Insight into the process used by institutional asset allocator, the MIT Investment Management company. Some highlights I found interesting:
- They look for younger emerging managers and focus on their process over quantitative returns.
- Looking for evidence of those ‘buzzwords’ like discipline and patience. Example being identifying great business and waiting four years to invest.
- Turning away capital
- LT business planning
- Incentives aligned with shareholders. In one case, paying expenses instead of flat management fee
- An environment that fosters ‘buzzwords’ like discipline, patience, etc
- Generalists for the most part but invests in specialists when needed.
Worth a read! Unfortunately these guys are probably in the minority of asset allocators. If the goal is to have a successful asset management business, it likely comes back to raising assets and sales/marketing.
This is another trading tale I’ve heard over the years, Japanese day traders that make millions that started off with a huge fat finger fade trade in J-Com. Trades a momentum strategy, treats trading like a video game rather than an intellectual endeavor.
This seems to be a new guy but there’s all kinds of youtube videos and interviews if you look hard enough on the other guy mentioned BNF. Here’s a few:
“All he does is eat Ramen and pick winners.”
I know a ton of money managers. Most are very good. I would hope I am included in that. But access to capital is still difficult. Here’s a free book on the subject from a firm that claims $2B in Assets Raised. Not endorsing it and it seems pretty obvious but can’t beat the price.