As hedge funds and sell-siders tango, regular investors foot the bill: James Saft

 SAFT ON WEALTH As hedge funds and sell-siders tango, regular investors foot the bill In the financial market race for information, hedge funds, it seems, are the winners. This of course raises the salient issue of who the losers are, but you probably already know the answer to that. Hedge funds, company stock analysts and shareholders form an ecosystem in which the hedge fund is the apex predator and the sell-side analyst is just the enabler. The average shareholder is the poor sap who makes the whole exercise profitable for the other two. That’s the implication of a newly revised study by the Federal Reserve which investigates the way in which information flows in financial markets: who gets it first and who trades on it when. Read Full Article Here



TRADING AGAINST ADVICE Unlike all the other types of investors in the study, hedge funds actually trade in the opposite direction to the advice of sell-side analysts, selling in aggregate in upgrades and buying on downgrades. “I find that hedge funds are unique: they trade in the opposite direction as the sell-side reports recommend,” Swem writes. “For example, after sell-side analysts publish upgrade reports I find that hedge funds sell. 

These patterns suggest that hedge funds anticipate sell-side reports, and then reverse their trades after market prices have adjusted to the information contained in, or coinciding with, the analyst reports.” What’s more, the more heavily a company is covered by analysts the better the risk-adjusted returns hedge funds generate on these trades. When analysts issue reports, the stocks at issue have an abnormal return of 3 to 4 percent up or down, depending on whether the report contains positive or negative news. Sometimes the sell-side analyst reports themselves contain new information but often they are issued just after a piece of news about a company breaks. 


http://www.reuters.com/article/us-markets-saft-idUSKBN1772QW

Warren Buffett recently listed his Laguna Beach, California vacation home for $11 million.

The 'Oracle of Real Estate'  Friday, 3 Mar 2017 | 4:00 AM ET | 01:51

Berkshire Hathaway Chairman and CEO Warren Buffett recently listed his Laguna Beach, California vacation home for $11 million. If gets anything near what he's asking, he'll make a decent return on his investment.

He paid $150,000 for the property back in 1971, which is about $900,000 in today's dollars.

What you may be surprised to find out is that Buffet, one of the world's richest people, took out a 30-year mortgage when he bought the 6 bedroom, 7 bathroom seaside spot.

"When I bought it for $150,000, I borrowed some money from Great Western Savings and Loans. So I probably only had $30,000 of equity in it or something like that – it's the only mortgage I've had for fifty years," Buffett said.

He added, "I thought I could probably do better with the money than have it be an all equity purchase of the house."

And indeed he did.

"That $110 or $120 thousand I borrowed, I was buying Berkshire then," says Buffett.

The businessman says he was constantly buying Berkshire in the early '70s, when the stock was around $40 a share.

"I might have bought 3,000 shares of Berkshire or something like that from the proceeds of the loan — so that's [worth] $750 million [today]."

For most people, the home is the most expensive investment they will ever make, and Buffett believes it's a great investment for a family if they plan to be in the same locale for many years. What makes it so attractive, he said, is the 30-year mortgage.

"If you get a 30-year mortgage it's the best instrument in the world, because if you're wrong and rates go to 2 percent, which I don't think they will, you pay it off," he said. "It's a one-way renegotiation. I mean it is an incredibly attractive instrument for the homeowner and you've got a one-way bet."

As for Buffett's main house in Omaha, Nebraska – don't expect to see that on the market anytime soon.

"The home I live in now I bought in 1958 and I wouldn't trade it for anything," he said.

On the Money airs on CNBC Saturdays at 5:30 a.m. ET, or check listings for air times in local markets.