(Interloper) “Mr. Achuthan has been arguably the most accurate economic forecaster over the past five years and perhaps more importantly, is apparently using new analytical techniques and indicators – his emphasis on short and long-leading economic indicators is an excellent example. As he noted this morning, he was virtually alone among prominent economists in predicting a slowdown for the latter half of 2011, even if his predicted official recession has yet to become evident.”

” .. Achuthan presented his view that despite recent stronger data a US recession was still on tap, followed by Steve Liesman (fairly) asking ‘What about recent stronger GDP and consumer spending data’, followed by Achuthan saying that it didn’t matter because there is contagion in the data whereby more indicators were turning negative, followed by Liesman asking (again fairly) ‘like what’, and Achuthan responding something like ‘it doesn’t matter what, it matters how many‘. .. Liesman continued to badger his guest with ‘what do investors do today?’ ”

“.. Achuthan, in other words, is telling investors you something you will not hear from any employee of a brokerage or investment bank (well, maybe SocGen): wait.”

“.. My real issue is with those who will complain, ‘Why would I listen to that guy? He can’t even tell me which indicator he’s basing his conclusion on’. These people want THE ANSWER, stated bluntly, with conviction. To these people I respond; there is nothing you should be more afraid of than a market pundit who is certain.”

“Certainty is a tremendous marketing tool but there is a reason that the ‘con‘ in con man is short for confidence. Remember that it would only take one highly-leveraged trade to make someone wealthy enough to never work again. This implies that if the ‘certain’ dude (and its 99% of the time a dude) was really 100% sure, they would be leveraged 200-1 on the trade and, if it were successful, you’d never see them again outside of Saint Tropez-situated photos in celebrity magazines. In truth they are not sure – it’s a marketing gimmick to attract your investment dollars.”

“We are naturally attracted to certainty and we want to believe that someone has the answer because psychologically the random nature of markets is repellent. But in the end it is most often a trap and all investors should remember what a portfolio manager once told me: ‘People don’t like to hear it but we are in the probability game, not the certainty game.’ ”

Full Story: Liesman vs Achuthan and why investors should be terrified of certainty (Interloper)

(Interloper) “Outside of the entertainment factor, the primary differences between the two archetypes is that the first has risen to their position by attracting new money while the latter holds their position by effectively managing money. Type One*, with a travel schedule encompassing 150 days annually is dependent of their model for performance because they have much less time for specific analysis – hence the preponderance of more black box, momentum strategies. They are also much more dependent on their analysts and traders back at the office who must make the majority of the day-to-day decisions. Type Two* on the other hand, only really cares about the analysis. They are pissed when the marketing department drags them put of their cave before they’ve finished investigating a fishy footnote in the last quarterly statement. (Don’t think I’m exaggerating with that, btw. I personally know PMs that will spend weeks on a single footnote).”

“Here’s the important part: the industry loves them some Type One PMs. Momentum managers trade a lot more than value managers and this keeps the trading desk commission train rolling. The accommodating Type One manager is, unbelievably, available for evening functions where Financial Advisors can bring their top clients who, inevitably will be running around with blank checks by slide eight. Everybody makes money.”

“If you’ve read this far you have probably guessed where my preference lies. For my own money, I would much rather have the plodding, boring manager who obsesses about every aspect of a potential or existing holding, rarely straying from a concentrated portfolio of companies they are completely comfortable with. Like Buffett, they do not feel compelled to make changes (and thus rarely get referrals from capital markets) and will literally wait years for a stock to drop to valuation levels they find attractive. Type Twos will also avoid hot sectors and thereby escape the attention of the individual investor until the market craps out, and they don’t feel like putting more money into the market anyway. I pay Type Twos, in other words, to exhibit the discipline that I don’t have.”

” .. it remains important to understand the industry’s bias in this regard and that ‘best manager’ may mean something much different to the average investor than on the trading floor.”

* “Type One: Physically attractive, Ivy League (Harvard or Wharton, almost always), momentum-based investment strategy. .. They will be compelling, energetic, will pause and answer your question in a non-patronizing way. They will linger after the presentation until everyone has left, happily chatting about markets or whatever else the fellow-lingerers want to talk about. .. They are, in short, marketing machines.

Type Two will be older, having spent far more time as a senior analyst due to a dearth of personal charisma. They will likely not be Ivy League. Type Two will execute a more fundamentally-based investment process. Their longer performance track record has a better chance of being stronger, beating the index by a few percentage points per year by holding value during bad years. Type Two’s presentation will be so dull that you’ll want to gouge out your eyes after half an hour.”

Full Story: PORTFOLIO MANAGER SEARCH PRO TIP: FIND THE WORST PUBLIC SPEAKER POSSIBLE (Interloper)

And finally, this short passage from Michael Lewis’ book “The Big Short” seems to perfectly capture the essence of these points:

“In Dr. Mike Burry’s first year in business, he grappled briefly with the social dimension of running money. ‘Generally you don’t raise any money unless you have a good meeting with people,’ he said, ‘and generally I don’t want to be around people. And people who are with me generally figure that out.’ He went to a conference thrown by Bank of America to introduce new fund managers to wealthy investors, and those who attended figured that out. He gave a talk in which he argued that the way they measured risk was completely idiotic. They measured risk by volatility: how much a stock or bond happened to have jumped around in the past few years. Real risk was not volatility; real risk was stupid investment decisions. ‘By and large,’ he later put it, ‘the wealthiest of the wealthy and their representatives have accepted that most managers are average, and the better ones are able to achieve average returns while exhibiting below-average volatility. By this logic a dollar selling for fifty cents one day, sixty cents the next day, and forty cents the next somehow becomes worth less than a dollar selling for fifty cents all three days. I would argue that the ability to buy at forty cents presents opportunity, not risk, and that the dollar is still worth a dollar.’ He was greeted by silence and ate lunch alone. He sat at one of the big round tables just watching the people at the other tables happily jabber away. ”

How I wish I had been there that day to sit with him.

The economy has taken a spanking and beginning next week Craigslist’s cyber strumpets may be screwed out of hooking hot dates on the popular classified ad website.

Craigslist has decided to put a “red light” on the “erotic services” section of their website in response to legal woes from troubled hos and pressure from law enforcement.  Last month a young “masseuse” had her life abruptly cut short in a Boston hotel room after receiving an out call from her Craigslist listing.  As of today, upon entering Craigslist’s sexy time pages, a visitor is informed via waiver releasing Craigslist of any liability from whatever kinky and perverted rendezvous’ the visitor may be seeking.  Craigslist keeps their pimp hand strong and cautions their johns and aspiring “models” with this message: “Human trafficking and exploitation of minors are not tolerated – any suspected activity will be reported to law enforcement.” By the yellow highlighting and bold text I think they mean serious business.

The erotic services section will become “adult services” and all adult listings will be reviewed for approval by a staff member. Craigslist remains “hard and firm” in their decision to only accept listings from “legal” adult providers.  However, there is a “happy ending” from these new changes as Craigslist should benefit from the additional pimping revenue created by the ten dollar per ad adult listing fees. Conversely, that means price inflation for your massagey time (assuming your service provider will be allowed to advertise). So, in the meantime, you’d better squeeze in and rub out one last tryst from your friendly, local working guy/gal/or transgendered person.

As for me, I’ll miss my Tuesday “soapy sensual bathtime body slide“ nooners with freaky, hot harlot, Lana. The fluffy towels were the best! For those of you who like a well-rounded rump, Kim Kardashian is broadening her career on Craigslist by allowing you to explore her back country.  And judging by the pic, she’s got Bridget Jones beat with a “bottom the size of Brazil”.  Tri-state area pervs, check out this listing and give her a call while she’s in town, baby!