It was a whirlwind week. After attending two big conferences, I landed in Vancouver Friday where I presented at the International Metal Writers Conference. Markets continued to close at record highs, even as political uncertainty remained and the threat of terrorism loomed large over Western nations. Last Monday, gold flashed a bullish signal we haven’t seen in over a year.
There’s much to talk about! Below are five things you need to know from the week now behind us.
1. Quants Now Control Wall Street
A special report by the Wall Street Journal last week confirmed what I’ve been saying for a while: Wall Street is now run by the quantitative analysts, or quants. Numbered are the days when traders and fund managers picked stocks on gut instinct. Today, a decision is made only after whole oceans of data have been processed using sophisticated algorithms.
And yet quants’ role has even further room to expand. As the WSJ reports, quant hedge funds now represent 27 percent of all U.S. stock trades by investors, up from 14 percent in 2013.
To get some idea of the type of analysis quants conduct, take a look at the matrix below. Of course, their methods are far more sophisticated, their data crunched in a matter of nanoseconds, but it’s helpful to see how they might codify many points of data.
We aspire to conduct the same sort of analysis, from technical to tactical, to make better, more strategic investment decisions.
2. Paul Singer Says It’s Time to Build Up Some Dry Powder
Last week at a Chief Executives Organization (CEO) event, I had the privilege of hearing billionaire hedge fund manager Paul Singer speak. His firm, Elliott Management, has one of the most impressive long-term track records, generating a compound annual growth rate (CAGR) of 13.5 percent since its inception in 1977, with only two down years.
Elliott Management currently manages close to $33 billion – not including the $5 billion it raised this month in as little as 24 hours. Yes, billion with a b. Singer, suggesting a potential investment opportunity in distressed stocks could soon open up, recently called on investors to commit a fresh infusion of cash. The resultant $5 billion in dry powder, the most ever raised in the firm’s history, is expected to be deployed at some later date.
Singer continues to be a huge advocate for gold. At the event, he mentioned that he still holds the yellow metal, noting its attractive diversification benefits. This is in line with what I frequently say: You’re unlikely to get rich investing in gold, but as a diversifier it helps to reduce some of the volatility in your portfolio. I like to recommend a 10 percent weighting in gold – 5 percent in bars and coins, the other 5 percent in gold stocks – with annual rebalances.
Gold posted a “golden cross” last week, which is what happens when the 50-day moving average climbs above the 200-day moving average, often seen as a bullish move.