by Richard Benkert, Planners Advisory, Inc.

Famed hedge fund manager John Paulson, who’s best known for personally making over $5 billion from the sub-prime meltdown, lost more than HALF of his investors’ money last year.   His Advantage Plus fund was down a whopping 52%!  That’s not a misprint.

Paulson’s thesis that US financial stocks would come bouncing back, for one thing, proved totally unfounded.

The fact that one of the world’s “previously” most successful investors can blow up so spectacularly is yet another indication to me that the old rules of investing and money management currently don’t apply.

Markets have been taken over by politics… which means that Paulson and many of his hedge fund cohorts must accurately predict what central bankers and politicians will do, correctly guess how such actions will affect the markets, and nail the timing.

This is a dangerous game to play.  Paulson’s epic failure last year is proof enough to me that it’s useless trying to play this game.

The worst part is, even if their investment thesis is well-grounded, the politics can still push the market in the other direction. You know that old Wall Street saying–”The market can stay irrational longer than you can stay solvent.” It certainly rings true now.

But it wasn’t only Paulson who imploded spectacularly in 2011.

According to data from Bloomberg, the average hedge fund return was -4.9% last year.   Hedge Fund Research says it was -5.17%.  However you slice the data, the bottom line is that, performance was lousy.

Even these traditional alternatives to the mainstream “buy-and-hold” strategy espoused by Wall Street failed investors in 2011.

So, what to do?

Well, as I’ve written before, cash is not a bad place to be right now.  Playing defense is likely to serve you best until we get some form of “system reset.”

But, with interest rates in most places across the globe (and especially the United States) negligible, the next question becomes how you can earn a return on your cash.

Panamanian Credit Union Certificate of Deposit Rate Schedule

To learn more about earning up to 8% return on your cash, contact us using the form below.