Muffie on Markets

Muffie Benson-Perella (muffie AT muffmarkets.com) was an Associate in the Investment Banking Division of a “Bulge Bracket” bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. She concentrated in Contemporary French Poetry at prep school where she was awarded the exclusive premiership of the school’s “French Club.” Today, Ms. Benson-Perella is the Founder and Managing Director of “Muffie on Markets” (http://www.muffmarkets.com), a deep dive into capital markets, finance and investment strategy. She is also the Founder and Managing Director of Muff Cap, LLC., an invitation only, private investment vehicle for prestigious and accredited investors only, employing an actively managed, long-short strategy.

Investing is hard work. It requires a certain kind of dedication. It is not for everyone and there are any number of temptations to lure one’s focus away from the important tasks at hand. That’s why invitations like this just break my heart:

From: “xxx xxxxxxx” <xxxxx@FOXbusiness.com>
Date: April 14, 2008 8:10:28 AM CDT
To: <muffie@muffmarkets.com>
Subject: Fox Business

Hi,

I work for the 5pm show on Fox Business called Happy Hour and we would love to have you as a guest on the show. The show is live from 5-6pm at the Bull and Bear in the Waldorf Astoria (49th and Lexington). I look forward to speaking to you soon.

Best,

xxxxx
Fox Business Network

212-xxx-xxxx

I really don’t even know that I have the heart to tell her that I am too busy to attend. Especially because cocktails at the Waldorf Astoria sounds like so much fun! Plus, I’ve always wanted to meet Cody Williard!

Cody runs his own hedge fund, you know. I guess it started really small, like $15,000 AUM (that’s “assets under management”) or something really small. But that’s just what I heard. I’ve never met him.

I guess he must not get along with his parents very well or something if he didn’t start with more. That must be connected to the whole songwriter and musician thing he has going on with his band and all. Still, I can’t figure why his uncle or his grandfather didn’t help him out. Uncles and grandfathers (but particularly uncles) are great sources for capital when parents are in a mood. The sibling rivalry really kicks in and smart investors will use any advantage they can to leverage this for themselves.

I will have to think before I reply to Fox Business. I mean, I think I would look fantastic on the show, and I really think my particular brand of investment wisdom would really fit with the young, “on-the-go” Fox Business viewer, but, you know, focus focus focus.

Muffie Benson-Perella (muffie AT muffmarkets.com) was an Associate in the Investment Banking Division of a “Bulge Bracket” bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. She concentrated in Contemporary French Poetry at prep school where she was awarded the exclusive premiership of the school’s “French Club.” Today, Ms. Benson-Perella is the Founder and Managing Director of “Muffie on Markets” (http://www.muffmarkets.com), a deep dive into capital markets, finance and investment strategy. She is also the Founder and Managing Director of Muff Cap, LLC., an invitation only, private investment vehicle for prestigious and accredited investors only, employing an actively managed, long-short strategy.

I used to think that being a generalist was a good idea, since it is hard to come up with investment ideas, and I wanted to have the most opportunities available to me without annoying restrictions. For my entire life I have found restrictions annoying and burdensome. But recently, I’ve realized that I have a deep expertise in financial services, particularly given my experience in the area.

So I have started to look at the prestigious investment banks. I found some interesting things. For example, Bruce Wasserstein, who runs Lazard, went to Harvard Business School and Harvard Law. Reputation and expertise being as important as it is in investment banking, it seems pretty clear to me who is worth betting on. Then I did some more analysis.

Bruce has surrounded himself with good looking executives who have more than a passing resemblance to Hollywood stars. That’s foresight in hiring.

Bruce Wasserstein and company

And so, with a market order at the open MuffCap added LAZ today @ $36.75

Muffie Benson-Perella (muffie AT muffmarkets.com) was an Associate in the Investment Banking Division of a “Bulge Bracket” bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. She concentrated in Contemporary French Poetry at prep school where she was awarded the exclusive premiership of the school’s “French Club.” Today, Ms. Benson-Perella is the Founder and Managing Director of “Muffie on Markets” (http://www.muffmarkets.com), a deep dive into capital markets, finance and investment strategy. She is also the Founder and Managing Director of Muff Cap, LLC., an invitation only, private investment vehicle for prestigious and accredited investors only, employing an actively managed, long-short strategy.

Muffie on Markets has been asked to join the Forbes family! How’s that for appreciation?

Hi Muffie!

You are invited to join the new community of the high quality business and financial bloggers from Forbes.com. Our community - the Business and Financial Blog Network, will launch shortly.

Muffie Benson-Perella (muffie AT muffmarkets.com) was an Associate in the Investment Banking Division of a “Bulge Bracket” bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. She concentrated in Contemporary French Poetry at prep school where she was awarded the exclusive premiership of the school’s “French Club.” Today, Ms. Benson-Perella is the Founder and Managing Director of “Muffie on Markets” (http://www.muffmarkets.com), a deep dive into capital markets, finance and investment strategy. She is also the Founder and Managing Director of Muff Cap, LLC., an invitation only, private investment vehicle for prestigious and accredited investors only, employing an actively managed, long-short strategy.

So I promised weeks ago that MuffCap’s first trades would go up on these pages. Things got really busy, however. Putting together a hedge fund is hard and difficult work. Be this as it may, I have launched operations.

Keeping abreast of markets requires a lot of work, and it is also a very trying process. I set up CNBC on my new flat panel in my new “study” and bought a new desktop with four flat screens to run my trades and do research. It’s a different schedule for my life, that’s for sure.

Then, of course, there is the issue of deciding on a strategy, and the initial entry. I decided on a very general and broad strategy (daddy says flexibility is key in investment) without particular investment horizons or holding periods. That all seemed so restricting and I really didn’t want to decide on anything more specific.

I spent most of last week and the week before trying to do research and come up with trade ideas.

Of course, it is hard not to hear about the “credit crunch.” Everywhere I looked it was on the front page. So I felt like it was time to get involved.

To me, the entire mortgage fiasco is overblown. No one, and I mean no one, I know has had any problems paying their mortgages, or (for those people who already own their estates outright) paying the upkeep and expenses requirement to manage the property. Of all the expert property owners I surveyed, none had problem mortgages.

Given this, I really wanted some exposure to the “panic” so that I can take advantage of the subsequent “melt-up.” The two best holdings, at least if you take the frequency of their mention in the financial press are Bear Stearns (BSC) and Lehman Brothers (LEH).

Before I could get into Bear Stearns, it blew up badly because of liquidity fears, but Lehman not only hasn’t blown up, but is a huge bargain. The reality is that Lehman has always had better presence, better brand name and better people than Bear. That is worth a lot to me. Plus, you can’t sneeze at a firm that has one of the girls as a CFO. (Of course, she’s a Harvard grad too).

Erin Callan

True, we might have to work on the hair a little, but I know Erin won’t let her Crimson sisters down. Lehman it is.

Had I tried to pick it up last week I would have paid in the range of $50 a share. This morning I picked it up for $44.63 and I’m already sitting on a 2% gain! Off to the races!

The rest of this week will be about trying to put more of MuffCap’s money “to work.”

Feel free to email me or IM me with investment ideas!
muffie AT muffmarkets.com
AIM: muffiehbs05

via: lolstreet.

Muffie Benson-Perella (muffie AT muffmarkets.com) was an Associate in the Investment Banking Division of a “Bulge Bracket” bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. She concentrated in Contemporary French Poetry at prep school where she was awarded the exclusive premiership of the school’s “French Club.” Today, Ms. Benson-Perella is the Founder and Managing Director of “Muffie on Markets” (http://www.muffmarkets.com), a deep dive into capital markets, finance and investment strategy. She is also the Founder and Managing Director of Muff Cap, LLC., an invitation only, private investment vehicle for prestigious and accredited investors only, employing an actively managed, long-short strategy.

Setting up a hedge fund can be a daunting task. Of course, the first issue is the money. Seed capital is used to pay attorney’s fees to form the underlying entities. Accountants have to be retained. Brokerage accounts opened. Dinners to be consumed with people important to business development. All that sort of thing. Only after all that has been completed and everything is in place can you work on putting together a strategy for investment. A few of the attorneys whined about this since the strategy discussion had to go into the placement memorandum, but we solved that by keeping it very vague and open. In any event, just because I like a particular strategy doesn’t mean Bess, my other portfolio manager, is going to adopt the same one.

This strategy part has been the most difficult, actually. But, after long consideration, I have elected to adopt a long-short equity strategy. Over and above that, I have elected to avoid particular holding periods, particular concentration (or diversity) requirements and particular sector, market capitalization or other restrictions on potential investments. I really don’t want any restrictions that will prevent me from capitalizing on a good opportunity.

After having some strategy discussions, I have elected to put $1.25 million of the original seed money into Bess Levin’s portfolio. She has a deeper insight into the media and entertainment worlds than I do. Going along with Jim Cramer’s “Invest in what you know,” advice, that will be her focus.

And so, things begin. This week will mark MuffCap’s initial entry. Stay tuned!

Muffie Benson-Perella (muffie AT muffmarkets.com) was an Associate in the Investment Banking Division of a “Bulge Bracket” bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. She concentrated in Contemporary French Poetry at prep school where she was awarded the exclusive premiership of the school’s “French Club.” Today, Ms. Benson-Perella is the Founder and Managing Director of “Muffie on Markets” (http://www.muffmarkets.com), a deep dive into capital markets, finance and investment strategy. She is also the Founder and Managing Director of Muff Cap, LLC., an invitation only, private investment vehicle for prestigious and accredited investors only, employing an actively managed, long-short strategy.

I have to admit that I was sort of hard on Tim Sykes before. It is just that he seems very unqualified. I spoke to my former professor at HBS though, and he pointed out that statistically you can expect some people to be amazingly lucky and it can appear to be skill, when in fact it isn’t any different than someone winning the lottery. He pointed out that survivorship bias means that you can’t tell how many people failed before one succeeded and therefore it looks more like skill than it really is.

That makes a lot more sense really, because I really don’t see how someone could make any money at all if they don’t have the background and the formal training to think about investing and markets critically.

But, still, lucky or not Tim is kind of helpful, and he’s online all the time so he’s easy to talk to. For example:

7:18:22 PM muffiehbs05: Hi!
7:18:30 PM CilantroFP: whatsup
7:18:34 PM muffiehbs05: The sky, duh.
7:18:40 PM CilantroFP: nice
7:18:47 PM CilantroFP: sweet post the other day
7:18:55 PM muffiehbs05: Yeah so I really don’t understand/like your strategy.
7:19:11 PM muffiehbs05: And it is kinda all about you when I talk to you. It is a huge turn off.
7:19:28 PM CilantroFP: i gotcha
7:19:35 PM CilantroFP: most people don’t like my strategy, that why it can work
7:19:36 PM muffiehbs05: Of course, that’s totally absurd. How can you make any money with a strategy that’s not popular?
7:19:39 PM muffiehbs05: What did your lawyer say about posting your trades?
7:19:52 PM muffiehbs05: Not that you are giving me legal advice, I’m just curious.
7:19:58 PM muffiehbs05: Makes mine really nervous but he’s a worrier.
7:20:07 PM CilantroFP: i don’t run a fund anymore
7:20:14 PM CilantroFP: my website is for entertainment purposes only
7:20:21 PM muffiehbs05: But you post your trades. And money is serious business. How can you be so casual? Entertainment?
7:20:35 PM CilantroFP: yes for entertainment and informational purposes only
7:20:39 PM CilantroFP: i have no other investors
7:20:40 PM muffiehbs05: Ah.
7:20:44 PM CilantroFP: i don’t want any
7:20:55 PM CilantroFP: and the sad part is that with all my exposure now i can actually raise $!
7:22:07 PM CilantroFP: enough about me, whats new with u
7:22:23 PM muffiehbs05: Hah.
7:22:26 PM muffiehbs05: Nothing, trying to get started.
7:22:44 PM CilantroFP: getting started blogging or fund managing?
7:22:52 PM muffiehbs05: Fund managing.
7:22:59 PM CilantroFP: i think you shoudl stick to blogging
7:23:01 PM muffiehbs05: Need to get my strategy together.
7:23:13 PM muffiehbs05: Stick to blogging? I’m sure lots of people told you that when you started out. In fact, your book SAYS SO!
7:23:22 PM muffiehbs05: Practice what you preach there, Mr. Portfolio Manager.
7:23:26 PM muffiehbs05: :)
7:23:44 PM CilantroFP: i preach you shouldn’t manage a fund unless you have contacts, strategy and infastructure
7:23:46 PM muffiehbs05: “Infastructure?” You mean “Infrastructure”? And you poo-poo education. Hah. Still, I think I was kind of hard on you though. Forgive me?
7:23:57 PM muffiehbs05: Well, I have everything in there but strategy.
7:23:58 PM CilantroFP: nah i don’t mind, this is all too much fun for me
7:24:15 PM muffiehbs05: So you’ll be my unofficial online mentor?
7:24:22 PM CilantroFP: sure
7:24:27 PM CilantroFP: as long as you post all our IMs
7:24:35 PM muffiehbs05: Deal.
7:25:41 PM CilantroFP: awesome
7:26:09 PM muffiehbs05: So how do you pick what to invest in? Ever invest in anything other than equities?
7:26:13 PM muffiehbs05: Well, and options?
7:27:29 PM CilantroFP: sorry, class will have to begin next week, right now I’m working on launching my new website!
7:27:41 PM muffiehbs05: Oh!
7:27:44 PM muffiehbs05: What is it going to do?
7:27:53 PM CilantroFP: you’ll see…….
7:28:02 PM muffiehbs05: You really don’t understand women. You have to let us have what we want after just a little hard to get.
7:28:22 PM muffiehbs05: Well give me a hint at least?
7:28:38 PM muffiehbs05: You don’t even have a disclaimer on your current site.
7:28:53 PM muffiehbs05: Didn’t your expensive advisors see that?
7:29:30 PM CilantroFP: http://timothysykes.com/index.php/terms-of-service.html
7:29:38 PM muffiehbs05: Ooo! Well, it’s not even called “disclaimer.” Doesn’t it have to say that? I mean it’s not a disclaimer if it doesn’t say “disclaimer.”
7:29:50 PM CilantroFP: yah just gotta look at the bottom of EVERY page
7:30:12 PM muffiehbs05: I guess!
7:30:37 PM CilantroFP: you don’t need to guess, just look
7:30:44 PM muffiehbs05: Looking.
7:57:41 PM muffiehbs05: Ok, I did my disclaimer. I didn’t call mine “disclaimer” either.
7:57:51 PM muffiehbs05: I really don’t need to bother my lawyer with that at this hour anyhow, right?
8:01:42 PM muffiehbs05: What does “FP” stand for?
8:11:05 PM muffiehbs05: Nothing I guess?
8:24:04 PM muffiehbs05: Ok, now you are ignoring me. That sucks.
8:24:40 PM CilantroFP: sorry just gotta get this article in by midnight
8:24:58 PM CilantroFP: FP stands for Fund Partners, as in Cilantro Fund Partners
8:25:31 PM muffiehbs05: Ah!
8:25:46 PM muffiehbs05: Did you have more than one GP?
8:29:26 PM CilantroFP: nope
8:29:35 PM muffiehbs05: Oh, why “partners” then?
8:29:41 PM muffiehbs05: Shouldn’t it be Fund Partner?
8:29:53 PM CilantroFP: was planning to build a team, but I couldn’t find anybody trustworthy
8:30:17 PM muffiehbs05: Did you find untrustworthy people?
8:31:04 PM CilantroFP: i dunno, just just nobody who met my standards
8:33:26 PM muffiehbs05: Like for education? Or…?
8:34:43 PM CilantroFP: nah who cares about education i’m talking about trading knowledge
8:34:47 PM CilantroFP: its a whole differnet ballgame
8:34:50 PM CilantroFP: education means shit
8:48:43 PM muffiehbs05: How can you say that?
8:48:50 PM CilantroFP: experience
8:55:08 PM muffiehbs05: Hmm.
8:55:38 PM CilantroFP: thats trading for ya, it’s not like other structured strategies, it’s much more inituitive
9:03:05 PM muffiehbs05: What about value investing?
9:03:54 PM CilantroFP: haha i could care less about value investing, if i had followed that strategy with my initial 12k back in 1999, i’d be around 30k right now, at best
9:04:00 PM CilantroFP: waaaaay too boring for me
9:04:34 PM CilantroFP: i play the most volatile publicly traded stocks in a somewhat conservative manner, it’s strange, but it’s worked well f or me
9:11:33 PM muffiehbs05: Don’t you pay a lot in trading fees and taxes though?
9:11:51 PM CilantroFP: fees are neglible, taxes suck
9:11:58 PM muffiehbs05: “Negligible” you mean? :)
9:12:16 PM CilantroFP: but i’d rather pay 40% of $300k than 20% of $30k
9:15:11 PM muffiehbs05: But that’s a ton of money either way.
9:15:15 PM muffiehbs05: Taxes are too high.
9:15:34 PM CilantroFP: not compared to other countries, think of them as just another business expense

I mean, he’s kind of helpful, but he seems to spend more time on his website stuff and talking about his book (though he even forgets what it says sometimes) than anything else. That’s just odd. But, he does have lots of answers to frequently asked questions on his website. For example:

Q. What do you think of interest rates, the GDP, the price of oil, etc.?

A. I could care less. You have been brainwashed into thinking that you’re feeble attempts at judging the economy will make you more money. No, I know enough to know that I am no economist and that trying to predict economic trends is a guessing game that I want no part of. There are just too many variables.

No, I know Penny Stocks and I will talk your ear off about them. One of their greatest qualities is that they move somewhat independently of the overall market and the economy. Think of the economy as Las Vegas and Penny Stocks as one table in one casino that operates in Las Vegas. I believe the odds of making money in Penny Stocks are much greater than Las Vegas, but my point is that the overall state of Las Vegas has nothing to do with your odds of making money at your one table in one casino in Las Vegas.

Sure, if you want a diversified portfolio with long-term.. blah, blah, blah, then you should definitely worry about the economy, but you’re not going to make 100x your money within a few years like I did. I focus on playing stocks where I believe the odds of success are actually in my favor and it’s not a guessing game that the entire financial community seems to enjoy playing.

I don’t think Tim’s exact strategy is right for MuffCap at all. They are, I think, called “Penny Stocks” for a reason. Still, pouring over company financials is very tedious and everyone is fighting over the same numbers. MuffCap is going to need an advantage, of course, to produce outsized returns.

Jim Cramer is one of the more popular and successful investing experts I have been drawing knowledge from lately. He coined the phrase “Invest in what you know.” That, I think, is going to be central to developing my strategy. And when Bess comes online (she’s been far too busy at DealBreaker to bother with her responsibilities here apparently) MuffCap will have the benefit of what she knows too.