Page 171

He says this keeps him in shape mentally and physically, and it is fun. He also plays golf and travels with his family.

INDUSTRY OUTLOOK

Is there a new-generation versus old-generation hedge fund manager? Not really. Kingdon's view is that some things never change. "There were crazy hedge fund managers who blew up in the 1968–1974 bear market by using leverage and illiquid securities, and we'll see that again during the next bear market. The large hedge fund managers who recently retired did so after long, successful careers and should be admired for their achievements, not pilloried for their mistakes."

Kingdon is concerned that many of the most successful mutual fund managers bought the "best" names regardless of price and have created a daisy chain that guarantees mediocre future returns.

Kingdon feels that over the past several years, day traders have moved the market as they jump on a move. He makes a distinction between day traders trading in parallel versus managers trading in series. Trading in parallel describes trading in the same direction as the market (i.e., buying strength and selling weakness.) Trading in series is the opposite—buying dips and selling rallies.

Day traders have caused managers to look more skeptically than ever at the message given by the market, observes Kingdon. "False, violent moves that are soon reversed occur more frequently and have created opportunities for us to be on the other side of the trade."