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8:30 AM EST Wednesday, September 13, 2006: Economic growth worldwide is slowing. The S&P 500, the Dow, the Russell 2000, and Nasdaq composite are all below their peaks this year. Commodities have dropped dramatically in recent weeks. Biotech is languishing. Only bond prices are up from their peaks, but will be down for the year. For many of us, our monies allocated to cash and some "special situations" (like Qwest and InSite Vision) will do best for us this year. The problem with "special situations" -- as you can see from this column -- is they're not easy to find. My Australian miners were up handsomely, now are basically break-even. Among my best performers so far are two Vanguard funds -- their International Value Fund (VTRIX) and their Mid-Cap Index Fund (VIMAX).

Some readers have asked, "So what's the total return on your portfolio?" I'll give you that measure at the end of this quarter. For now, I measure it in my own quaint way. I figure my net worth (the value of everything I own) on a weekly basis. If it hasn't fallen (which it hasn't this year), that means it's paying my living expenses. (Remember, I don't have a day job.) Paying my expenses is good because this year the expenses have been heavy (new house, law school, travel and charity).

I mention all this because today's Wall Street Journal's Heard on the Street column has this article. (There is joy in joint misery.)

Hedge Funds Miss Their Target: Some Prominent Names Are Coming Up Short Of Benchmarks

Some of the most hallowed names in the hedge-fund world are producing very human returns this year.
They've been dogged by confusion about where interest rates, stocks and commodity prices are heading, and poor bets on emerging markets and housing-related shares.

Jack Meyer, the former investment manager of Harvard University's endowment assets, set a record earlier this year by raising $6 billion for his new hedge fund, Convexity Capital. But it has produced returns of roughly 1% so far this year, after accounting for fees charges by the fund, according to people familiar with the results.

Another high-profile start-up, TPG-Axon, a $6 billion fund launched by Dinakar Singh, who previously ran Goldman Sachs Group's in-house trading, was up almost 3% through August after fees, according to an investor. ...

The Dow Jones Industrial Average is up more than 7% this year, by contrast. The payoff from owning short-term Treasury bills also has been greater than the returns of these prime-time funds. Some hedge-fund investors expect more, since these private investment partnerships, historically for the rich and institutions, are able to make bets on all kinds of global markets -- and in recent years have often scored big.

Meanwhile, the main hedge fund run by iconic investor Louis Bacon at Moore Capital Management was up only about 1.5% through August, while a big Moore bond fund was down about 3%, according to investors. Paul Tudor Jones's $4.7 billion Tudor B.V.I Global Fund Ltd., which makes bets on global "macro" trends, was up less than 3% through August, according to investors, and Richard Chilton's $800 million Chilton International Ltd. fund is down about 3% this year. ...

Some stars continue to tear the cover off the ball. David Tepper's $4 billion Appaloosa Management LP is up more than 10%, thanks in part to a recent bet in favor of semiconductor stocks, while a number of hedge funds run by Raj Rajaratnam's Galleon Management are profiting, partly from savvy tech bets.

Todd Deutsch's $800 million Galleon Captains Offshore fund is up more than 30% this year, according to investors, thanks to drug stocks and various contrarian calls, such as buying shares of Best Buy Co., which jumped more than 9% yesterday. And James Simons's $10 billion Renaissance Institutional Equities Fund continues to best the market, up almost 13% through August, according to investors.

Overall, hedge-fund returns are in line with markets. Merrill Lynch's hedge-fund index is up about 4% through Aug. 28, compared with a 7.2% gain for the DJ World Index, a rise of 4.3% for the Standard & Poor's 500-stock index, and a gain of 2% for the Lehman Brothers bond index. But hedge funds that focus on stock picking -- so-called long-short managers who buy some stocks and bet against others -- are up a meager 1.4% so far this year, according to the Dow Jones Equity Long/Short (U.S.) Index.

"There's plenty of mediocrity," says Joe Pignatelli, president of Archstone Partnerships, which invests $2.8 billion in various hedge funds. "But funds aren't going out of business. That would make it a much worse year." ...

Rallies in commodities such as oil helped many hedge funds earlier in the year, but the pullback in energy has hurt many big funds sticking to bets in this arena. Some large funds have been hurt by the tumble in oil in the last few days, though some big funds, such as Jeff Gendell's Tontine Management LLC, have been betting against the sector.

Some well-respected funds have been buying up housing shares this year, figuring they are now so beaten up that they are cheap, but those stocks have continued to underperform.

Meanwhile, some funds were riding gains in international stocks, especially emerging-market shares, but those markets have turned tame since May. Moreover, hedge funds tend to buy smaller stocks, believing they can dig out information that isn't yet factored into the market. But small companies have lagged behind larger companies in recent months. ...

The poor performance lately creates a problem for some hedge-fund managers, who argue that their returns provide diversification for investors, and that they can be higher than market returns. With those returns tracking more closely to market returns, both arguments could be undermined.

As hedge funds grow, and assets stream into the business, some managers may be finding it more difficult to find enough winning ideas -- the more money they manage, the more likely they are to have to reach beyond their best ideas.

At the same time, many managers speak to each other about their views -- making it more unlikely for them to develop unconventional, moneymaking ideas. ...

The best idea on combating hay fever: A lot of lovemaking can unblock a stuffy nose. Sex is a natural antihistamine. It can help combat asthma and hay fever.

Everyone loves hybrids: My friend Steve Schone has a Prius he's modified so it can provide electricity to his house -- in case of an emergency. When a power failure occurs, he plugs his Prius into his house. The Prius supplies emergency power for as long as there is gas in the tank. The Prius can provide 3 kilowatt plus of 115/230VAC power at any location to which it can be driven. There's a web site that tells you how to do it. Click here.

Reader Henry Seduski writes "Further to your note on hybrids. I have a Toyota Highlander 4WD and I really like it. It has all the benefits of an SUV with much better gas mileage than a non-hybrid. I bought the Highlander in February and have averaged 25.8 miles per gallon (my last tank was 27.9). I track this on www.greenhybrid.com. It's a site where hybrid owners can track and compare their mileage and discuss hybrid issues. Ford has a hybrid SUV (I think the Escape) which supposedly gets a bit better mileage than the Highlander. Lexus has a hybrid SUV also. My sister has a Prius and she gets similar mileage to Karen. See yesterday's column. Click here.

The funniest joke in the world: Be ultra careful watching this video. This joke will kill you. Click here. P.S. You need to watch this video. It's a lot more interesting than watching the ticker.

A Second Wife
When our second child was on the way, my wife and I attended a pre-birth class aimed at couples who had already had at least one child. The instructor raised the issue of breaking the news to the older child. It went like this:

"Some parents," she said, "tell the older child, 'We love you so much we decided to bring another child into this family.' But think about that. Ladies, what if your husband came home one day and said, 'Honey, I love you so much I decided to bring home another wife.'"

One of the women in the back of the room spoke up immediately. "Does she cook?"

The first husband
A nice, calm and respectable lady went into the pharmacy, right up to the pharmacist, looked straight into his eyes, and said, "I would like to buy some cyanide."

The pharmacist asked, "Why in the world do you need cyanide?"

The lady replied, "I need it to poison my husband." The pharmacist's eyes got big and he exclaimed, "I can't give you cyanide to kill your husband!

That's against the law! I'll lose my license! They'll throw both of us in jail! All kinds of bad things will happen. Absolutely not! You CANNOT have any cyanide!"

The lady reached into her purse and pulled out a picture of her husband in bed with the pharmacist's wife.

The pharmacist looked at the picture and replied, "Well now. That's different. You didn't tell me you had a prescription!"


This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads. Thus I cannot endorse any, though some look mighty interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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