Hedge Funds, the New Beatniks

Hedgies these days are racing into commodities.  Even big institutional institutions, such as Cal Pers, are rushing into commodities.  CalPers and Cal State Teachers Pension Funds are trying to get their allocation up to $7.5 Billion in their centabillion endowments.  Where have these people been?  The rise in commodity prices began in the first quarter of 2001.  The cut rate Greenspan plan of the 2001-03 era spawned a multitude of raw material price spikes.  There were articles on the web.  Morningstar dug up its old research in the early 1980s showing that bull equity markets and bull commodity markets were inverse…and we'd just done a half gainer off of the Y2K tower, splat onto the pavement.  Where were all these brilliant MBA and PhD types, the financial rocketeers of our time, with all their brilliant computers and the ability to type out a quadrillion number without breaking into an emotional sweat.  Huh?  Where?

They're piling into commodities.  And they're all showing up in early 2008.  Way to go, Charlie.  You were waiting perhaps for the two digit years decade to get going?

It reminds me of the old beatniks in the 1960s.  They were all hip, sophisticated dudes.  Each was unique in his own special way.  Yet they all seemed to wear goattees, or have facial hair.  They all feigned an interest in berets.  They all wore casual clothes leaning toward sloppy, but in elegant shades of black somehow.  They all worshipped poverty.  They all expressed an interest in the poetry of Alan Ginsberg, or poetry in general.  (Or in colonel…)

If hedgies were all that smart, why are they all jumping into commodities the first two months of 2008, seven years after the train left the station? 

It's cause hedgies are behaving like beatniks.  9000 unique and special snowflake hedge funds…each looking at the others trying to get a clue…and then copying what they see.  No wonder their performance sucks.  Being early means taking a risk.  "Not on MY watch," they said.  Not having any conviction means never having to say, "Oops, I meant to do that."