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.

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.

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.

There are a lot of sketchy characters in finance. Some people who ran hedge funds don’t have any sort of finance background at all, if you can believe that. Or any business education.

I’ve been trying to figure out strategies to invest for MuffCap, LLC and I thought that I would talk to some experts who had already been successful investors. Bess played a terrible joke on me. She pointed me to this guy she said had run a really successful hedge fund and that I could learn a lot from him. So I started chatting with him online. It is pretty obvious Bess was joking. I think you can pretty much tell from the chat log.

10:27:41 AM muffiehbs05: Hi.
10:27:43 AM CilantroFP: yo shit
10:27:50 AM muffiehbs05: Yo shit?
10:27:51 AM CilantroFP: hey sorry
10:27:54 AM CilantroFP: wrong im lo0l
10:28:07 AM CilantroFP: who’s this
10:28:21 AM muffiehbs05: I’m Muffie, who do you think I am, sheesh
10:28:31 AM CilantroFP: haha no idea
10:29:09 AM muffiehbs05: Well, I read your book and I’ve started a hedge fund (See the details at http://www.muffmarkets.com) and I thought I would say hello and try and, you know, see what I might learn.
10:29:38 AM CilantroFP: cool, hey there!
10:29:46 AM muffiehbs05: Hey there!
10:30:26 AM muffiehbs05: Or, I dunno, maybe there isn’t much to learn?
10:30:43 AM CilantroFP: oh your that muffie!
10:30:51 AM muffiehbs05: “That Muffie” ?
10:30:57 AM muffiehbs05: How many are there? My name is pretty unique.
10:31:09 AM CilantroFP: muffie from dealbreaker who bess keeps pointing me to whenever i bug her about reviewing my book

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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.

After I started my hedge fund, Daddsie ordered me a bunch of books on investing and finance. I moved into the UES condo that Daddsie used to lend to Nina, some girl that was always hanging around him until a month ago or so, and I got like seven packages with a dozen books all on investing.

Some of the books are really dull, and I don’t really have the heart to tell Daddsie that I already read a bunch of those kinds of dull books at Harvard, where I went to HBS.This one, “The Intelligent Investor,” had all sorts of wonderful cover blurbs. On the back “Money Magazine,” which obviously knows something about finance given the title, glows: “Fully conveys the basic principles of [Graham’s enormously successful and popular approach to investing.” Warren Buffet is right on the cover with: “By far the best book on investing ever written.”Sounds good right? Wrong.

Sure, it looks like a normal paperback, though it is kind of thick (650 pages worth of thick), but you start going through it and find out that the pages are exactly like a big finance text book. Booor-ing. Ugh. I figured there must be a bit of a shorter explanation somewhere on Mr. Graham, so I looked him up on Wikipedia and what do you think I found?

The guy died in 1976!

I don’t know what Daddsie was thinking. Hedge funds are a modern invention.

I did really like this book “Way of the Turtle,” though. It’s about this guy who makes a bet that anyone can be a successful trader, and so he starts a little camp of sorts and teaches everyone how to make outstanding returns. Now that kind of thing is fun. So I got to thinking, I should use MuffCap, LLC to open a little school. So I decided to invite a few girls to my own little hedge fund camp, “Way of the Muff.”And the first girl to accept was: Bess Levin, genius finance girl from DealBreaker!

Bess is an official contributor to Muffie on Markets too. You can reach her here at bess AT muffmarkets.com!

Welcome aboard, Bess!

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 as I am sure you know, I used to work at a Highly Prestigious Investment Bank. I won’t name it, but you know the one I mean. It was a pretty tough environment, and being from Harvard just doesn’t do as much for you as you thought it would when you first called Daddy in the Cayman Islands to tell him you got accepted. Back then you thought that crimson colored ink on the parchment meant everything. It still means mostly everything, but life can really make you jaded, and reality can be disillusioning.

Part of the thing, I think, is that there are a lot of Harvard people at the prestigious investment banks. You sort of got the impression at school that you would stand out, but you sort of don’t at the best banks, since they are full of other Harvard people. It is hard to shine.

Competition was really thick at the Prestigious Investment Bank I joined, and unless you want to work ten hour days, or worse (I know what you are thinking, but some Associates were working fifteen hours a day for most of the week and going to the office Saturdays and many Sundays) you had to find other ways to stand out. Fortunately, not everyone’s father is one of The Bank’s best customers. I started off with a lot of clout and I got lots of perks, especially during orientation. Really, all that review on the numbers and stuff, who needs it? It was easier just not to go. And that, dear friends, was something I could shine at. How? I found a sponsor.

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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’s first foray into weblogging, an appropriate introduction to her years of investment banking ups and downs, is hereby reproduced):

My father was beside himself when he heard I had applied to business school.

Being fairly good at predicting the sorts of things that would cause an outburst from my father by that time, I had wisely gone through the process without a peep to either of my parents, even as they pestered me about what I was going to do with my life. This was unusual, as neither of them really aspired to anything like a career of substance for me.

I suppose if I had asked, my father would have grudgingly written a fat check to start an art gallery or a boutique for me and cajoled his, admittedly substantial, social circle to buy things they did not want or need in order to give me “a start.” In this case, “a start” was code for “find a husband to support you so we don’t have to.”

This too was unusual, the aversion to supporting me, because my parents had quite carefully picked for me the most useless of educational paths that almost guaranteed they would be forced to support me until I was married. I had been boxed into attending Vassar by clever sabotage on my mother’s part. She had failed to sign the application checks that had gone to Stanford, Brown and Berkeley and then quietly intercepted and disposed of the many letters of protest and warning that followed. I often wonder about the act of making the checks out but not signing them. Why bother? I never saw the applications after I handed the envelope to my mother. I never would have known if they had gone out empty. Or not gone out at all.

I had desperately wanted to go to California, imagining that the sunshine and tanned bodies would somehow restore something I had lost long ago but could not identify. It was not to be. I found out about the unpaid application fees only after I had accepted my offer at Vassar, my last choice. I suppose it is telling that I just shrugged off the incident. My parents had always interfered. Why should this surprise me?

Since they were paying for it, and the mere utterance of the words “financial aid” filled me with a lingering horror, I obediently majored in French and, after embarking on Vassar’s study abroad program in Siena, Italy (my parents made it clear I was not welcome at home over the summer and a job was out of the question), I added a second major in Art. Consequently, as graduation approached I was uniquely unqualified to be anything like a productive member of society.

I kept my mouth shut during the long one-sided family dinner conversations that contemplated my fate. I would be lying if I said it was easy, but that’s only because I like to talk. A lot of the discussion revolved around me taking a position at one or another of the many foundations my father donated vast sums to. This comforted my mother, who had met my father through a chairty event for just such a foundation and was now effectively a well kept woman.

I neglected to tell them I had already sent out applications to three business schools. Cindy and Betsy had convinced me to apply with them. It was hard to argue with their logic and though I hated math, Cindy pointed out that this was applied math, not math math. And Harvard didn’t really emphasize the math part at all in any event. The whole thing would be like 2 more years of college. One look at the brochure after that and Harvard was definitely my first choice!

I failed to catch one of the letters from HBS that ended up at home. I could have sworn I put my school address down for the mailing address but Cindy was talking to me the whole time I was doing the application so I don’t remember.

I was home the weekend it happened and I heard my father in the study yelling after my mother had brought him the letter and he only stopped when she coyly reminded him that husbands-to-be are plentiful– in the right MBA programs. I had broken up with Phillip a month earlier since I found out that he had been sleeping with Erika the entire time we dated, and my father had only just gotten over that. He and Phillip’s dad knew each other from work. Phillip was in law school. After my mother reminded him of that, my father was on the phone to the Harvard Board of Trustees daily for a week. I guess he has a friend on that board. I was accepted in the first round! I’m not even sure if I remembered to send in my last essay! Cindy and Betsy went to Stanford though.