The Fund

A couple of months ago, I mentioned I was looking into starting an investment fund.  I’ve decided to move forward with it.  There are several reasons, but the two main ones are:

  1. FORMAT: using a blog to convey market information that produces consistent results for the average armchair investor is difficult; and,
  2. BUSINESS MODEL: while enormously enjoyable, the amount of work I put into the website is, unfortunately, not proportional to the financial reward.


As we come up on the one-year anniversary of and two-year anniversary of, I’ve taken a long, hard look at the website’s effectiveness.  What I do is sometimes fairly complicated, which explains why almost half of our members are investment professionals (investment advisors, brokers, etc.)

The balance are split between pretty serious investors who have the time and energy it takes to learn and implement my techniques, and those who don’t (seriously, who wants their surgeon taking a break during an appendectomy to trade his portfolio?)

In blogging, it’s tough to write a post that satisfies the needs of all three groups.  Some members want to know how the watch works, while others simply want to know what time it is.  Others, especially those new to the site, just want to be less confused.

Even when I pen the perfect post, there’s always the issue of getting information out quickly.  Charting already takes a lot of time.  Making the charts presentable and offering even minimal explanation obviously takes even more.  In a fast-moving market, this can affect performance.

I believe a fund would allow investors of all kinds to benefit the greatest from the research I do. When I make a trade decision, they won’t have to worry about deciphering the information or being available to act on it.  It’ll just happen.

I’ll continue to offer research for determined do-it-yourself’ers who don’t need quite as much hand-holding — perhaps offering periodic webinars to discuss things in more detail.  And, of course, I will continue to offer specialized services to those professionals who use my technical analysis to augment their own analysis.


My hope in starting was that it would grow enough through word of mouth that I could make some reasonable coin while putting in only 40-50 hours/wk and still have the flexibility to hang with the family, travel, etc.

Instead, I’m putting in about 70-80 hours/wk and making a little more than I did as a first year associate straight out of B-school.  Old Wall Street chums with the same level of expertise as I do average 10-30X and have a lot more free time.

I’ve studied some of the other successful web-based investment services, and have come to believe most are really better at marketing than they are forecasting markets.  Frankly, I’m not interested in building a marketing company that offers investment products.  I am very interested, however, in being an excellent forecaster for those investors who value (i.e. are willing to pay for) such services.

Though most on Wall St would laugh to hear me say it,  it’s not always about money.  About 70 of my friends/co-workers didn’t come home on 9/11 because they were busy chasing money.  We all gotta go…but I’d like it to be in pursuit of something meaningful and enjoyable. I really enjoy the challenge of forecasting markets, and love helping others reach their financial goals.

But, if I’m going to spend 10-12 hours/day away from my lovely family, I owe it to them to provide something tangible such as, say, a decent college education or the occasional trip to Disneyland.  And, I owe it to subscribers not to burn out.


In 2012 (from inception March 22), members who went long SPX when I called bottoms and sold short when I called tops would have earned about 100% on a highly diversified, unleveraged portfolio.  It turns out this was no small feat — more than 2X the best-performing hedge fund’s 2012 return.

According to Barron’s, only one of the hundreds of hedge funds tracked by HSBC earned over 40% in 2012; only another 7 earned even 30%. The average fund earned 7.32% and about one third actually lost money. The S&P 500 itself earned returned about 16% (including dividends.)

My plan is to generate high risk-adjusted returns for investors in a hedge fund using the same techniques I use every day on to determine tops and bottoms.  But, instead of  writing about them (and trading for my own account) I will go long and short broad equity markets (primarily the S&P 500) and, to a lesser extent, currencies and risk instruments such as VIX.

The portfolio might occasionally be all or partially long or short, or even all cash.  This would be a slight departure from the website, which generally reflects either 100% long or 100% short. This added flexibility would allow the portfolio to reflect the degree of confidence I have in a particular move.  It would also allow us to move to the sidelines in the event of high-risk situations such as an election or FOMC announcement.  I would use no leverage other than that required to hedge existing positions.

The fund would be managed by me, but all assets would be held by a third-party custodian such as BNY Mellon or State Street.  Another entity such as Citco or Apex would provide administration and a major accounting firm would provide audited tax returns.  This isn’t the cheapest way to run a hedge fund, but it’s the safest.

I intend to keep the size of the fund manageable, which to me means no more than $100 million.  The legal stuff is in the works, but the plan is for a private placement for about 100 accredited investors.  The US fund would be domiciled in Delaware, but I’m looking into a master-feeder arrangement with an offshore fund in either the Cayman Islands or BVI for non-US and tax-exempt investors.  About $5 million in capital is already earmarked.

Minimum investment would mostly likely be $100,000, though there might be a limited number of smaller slots for non-accredited investors.  Fees would be the standard 2/20 hedge fund structure and feature a high-water mark and hurdle rate to be determined.  Liquidity would most likely be quarterly.

Annual members would receive several perks – my way of saying thanks for being an important part of the journey.  First, annual members would get first crack at the 100 subscription slots.  If there are still slots available after annual members have subscribed, I intend to open it up first to other members, then those referred by members, and lastly to outside investors.

In addition, annual members who invest in the fund would be eligible for a rebate of their unused subscription fee to  So, an annual member who paid $950 one month before investing in the fund would receive $870.83 (11/12 of 950) back in quarterly installments over the course of their first year.  And, subject to the lawyers’ okay, I plan to offer annual members an additional 10% discount on their first year’s total fees.

It’s hard to say exactly when everything will come together, but I’m shooting for late March/early April.  I can’t offer any more guidance at present, but want to stress that the above perks will be offered to annual members on a first-come, first-served basis.  My goal is that every annual member who desires to participate will have the opportunity.

But, when the slots are gone, they’re gone.  So, the best way to ensure a spot is to: (1) become an annual member right away; and, (2) act quickly when the offering goes live.  Those current quarterly and semi-annual members who wish to become annual members now may have their current membership extended by one year, and would thus be eligible for the membership rebate and fee discount as described above.


As for itself, I intend to migrate the website and customized services to a more sustainable model that won’t compete with the fund.  This means that the cost of an annual subscription will be raised to $2,500 on March 4 (except for charter members, whose rates are fixed.)

I understand this represents a steep increase for some, but it is comparable to the annual fee charged to someone making a $100,000 investment in the fund, or a $150,000 investment in the average equity mutual fund.  It will cover the cost of hiring additional administrative support for the website (sign-ups, log-in issues, etc.) that will be necessary once the fund is up and running as well as much-needed enhancements in technology and communications.

Speaking of running the fund… I plan to run it from Carmel, California where my family and I reside.  An added bonus for fund investors, the Monterey Peninsula is one of the most beautiful places in the States to visit. While checking up on your investments, you can take in the ATT Pebble Beach Pro-Am golf tournament, the Monterey Jazz Festival, the world-famous Monterey Aquarium, or a drive through gorgeous Big Sur.

Carmel is about a 90-minute drive south of San Jose/San Francisco, but is also served by the Monterey Airport which offers a 7,600 foot runway and several excellent FBO’s as well as direct flights via United, American, US Air and Alaska Air.

It will help immeasurably to have a good sense of how many US vs non-US members plan to participate in the fund — if and when it is offered. So, look for an email in the next day or two asking for your opinion. In the meantime, please don’t hesitate to contact me, as many of you already have, with any questions about the fund or the website.

I’m excited about taking this next step, and will continue to do my best to earn the faith you’ve shown by being a part of

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important note:  

The above is not an offer to sell or a solicitation of any offer to buy any securities. Offers are made only by prospectus or other offering materials. To obtain further information, you must complete our investor questionnaire and meet the suitability standards required by law. The  fund discussed above is strictly in the planning phase, which means it might never be formed nor offered to subscribers. If it is, essential elements might differ significantly from those discussed above.  The information contained on this and every page of is subject to our Disclosures and Use Agreement available here.













The Fund — 1 Comment