Author Archives: Cameron Hight

About Cameron Hight

Cameron Hight, CFA, is an investment industry veteran with experience from both buy and sell-side firms, including CIBC, DLJ, Lehman Brothers and Afton Capital. He is currently the Founder and President of Alpha Theory™, a Portfolio Management Platform designed to give fundamental money managers the ability to create their own repeatable discipline to organize the complex process of portfolio management.

SuperFreakonomics on the Macro Economy

“Freakonomics” is a New York Times best-seller written by Steven Levitt, a professor of Economics at Chicago, and Stephen Dubner, New York Times writer, that discusses how our common assumptions about what are true are many times wrong. The book was a smash hit and was followed up by “SuperFreakonomics.” In “SuperFreakonimics”, Levitt, an economist, explains why they do not […]

Modern Portfolio Theory Stacked the Deck

I have often made the case to clients that diversification and volatility are portfolio management distractions. Not because they are uniformly irrelevant, but because industry dogma gives them a status well above their merit. Our industry uses diversification and volatility as yardsticks of comparison, so funds are naturally incentivized to alter their behavior to maximize their performance based on these […]

Debunking Dividend Dogma

As anyone that regularly reads my posts knows, I believe there is a general misunderstanding of dividends in our industry (Institutional Investor Article, Article with Dr. Laffer, Mauboussin Article). My basic point is that you cannot create value by paying a dividend. At best, dividends are a zero-sum equation. And if you include taxes, dividends are actually a net drag […]

The Marshmallow Experiment

In 1972, Dr. Walter Mischel performed an experiment in which he presented kids with a marshmallow sitting on a table. The kids were told that if they can wait until some later time, they would receive a second marshmallow for their patience. Of course, there were kids that could hold out for the extra marshmallow and others that ate it […]

Understanding Dividends – Michael Mouboussin Edition

As many who read my articles know, I am a big fan of Michael Mouboussin and not a big fan of dividends (more specifically, industry dogma surrounding dividends). So it was nice to read an article by Mr. Mouboussin which coherently makes the case that our industry looks at dividends through distorted lenses. From Mr. Mauboussin’s recent article, “The Real […]

Will We Ever Learn?: The Scary Similarities of the Subprime Mortgage and Junk Bond Crises

I have never claimed to be a market historian, but the obvious similarities of the Subprime and Junk Bond crises are staggering even to the casual observer. Maybe it is a confluence of my recent reading of Sorkin’s “Too Big to Fail”, Lewis’s “The Big Short”, and Klarman’s “Margin of Safety” that brings the parallels into clear focus, but I […]

Why Hedge Funds Benefit from the Asymmetry of Returns

I wrote an article last month about why 50% of upside is not as good as 50% of downside is bad (see article here– Recap: A $100 million fund that rises 50% then falls 50% the following year will be left with $75 million. This asymmetry highlights the critical importance of understanding downside in portfolio management). I subsequently went out […]

Which Way Is Up? Why six of one is not always worth a half dozen of another.

Rule No.1: Never lose money. Rule No.2: Never forget rule No.1. – Warren Buffett If a $100 million dollar fund is up 50% one year and down 50% the next, do you still have a $100 million dollar fund? No, the fund has been reduced to $75 million or a 25% loss. I use this question in almost every conversation […]

The Inefficient Market Theory

I was listening to Bloomberg TV recently and they had a floor trader talking about “the market.” He was articulating his S&P 500 trading strategy of being a buyer at 1116 and a big seller at 1125, but if the market rose much above 1125, he and the rest of the traders he knew would probably reverse course and get long (S&P […]

Probably is not a Probability

If I tell you that I believe something is likely to happen, what probability would you give my usage of “likely”? How do you know it is the same as my estimate of “likely”? We all use probability expressions in our conversations to express differentiated levels of uncertainty. The problem is that my expression may not match your interpretation. The […]