PART ONE
Contemporary Investment Conditions
CHAPTER 1
Hobson’s Choice 7
Current Situation: The Captive Client 8
How the Investment Business Changed 9
The Age of the DIY Investor 11
If You Can’t Beat ’Em, Join ’Em 13
Bad Apples and Unethical Practices 15
High Pressure Environment 17
The Regulators Crackdown 18
The Mother of All Mutual Fund Scandals 20
But Wait, There’s More Potential Scandal Ahead 22
Client Rumblings and Grumblings 22
I Still Want Someone Else to Do It 23
Reports of My Death Have Been Greatly Exaggerated 24
Future Area of Growth: Unified Accounts 26
The Future for Financial Advisors Never Brighter—Maybe 28
Two Body Blows to Wall Street Fees 29
Conclusion 30
CHAPTER 2
ETFs—The New Investment of Choice 33
DIY Investors Take Charge 34
What Took ETFs So Long to Catch On? 36

Indexing versus Active Management 37
ETFs and Indexing 51
The ETF Tsunami 51
New Quantitative Indexes 53
International ETFs 55
Inverse ETFs 57
Ultra, Leveraged Short, or Long ETFs 60
Commodity and Currency ETFs 61
Actively Managed ETFs 64
With Growth Come Other Problems 64
A Disruptive Technology Indeed! 65
CHAPTER 3
The Rise of Hedge Funds 67
What We Really Mean by Hedge Fund 68
Hot New Sector: Private Equity 78
Growth of Hedge Funds 78
Who Invests in These Complex Strategies? 80
Why Invest in Hedge Funds Anyway? 81
But Can Retail Investors Participate? 82
Hedge Fund Disasters 87
To Regulate or Not 88
Hedge Funds Are Here to Stay 90
CHAPTER 4
A Convergence Story 91
Mutual Funds, ETFs, and Hedge Funds 91
Mutual Funds Adopting Some Hedge Fund Strategies 92
Futures Investment Strategies in Hedge Funds 93
Rydex Investments Leads a Big Change 94
PowerShares Actively Traded ETF 96
PowerShares Private Equity ETF 99
Commodity ETFs Direct 102
Currency ETFs Direct 104
Inverse ETFs Direct 105
New Margin Rules 107
The Zero Commission 110
Convergence Well Underway 110

CHAPTER 5
The Bullish Bias Gets a Makeover 113
Other Contributing Forces 114
Commissions Out, Fees In 115
Recurring Fees 117
The Greenspan and Bernanke Put 117
Money Supply Shenanigans 118
Excess Liquidity and Stock Buybacks 120
I’m Forever Blowing Bubbles 120
Bye-Bye Glass–Steagall 121
‘‘Da Boyz’’ and Primary Dealers Merge 123
Does the Fed or Treasury Manipulate Markets? 127
Time to Connect the Dots 130
The New Robber Barons 131
Two Jokers in the Deck 132
What Bears Are Up Against 133
PART TWO
Strategies
CHAPTER 6
Market Neutral 137
The Northwest Quadrant 140
Even Here, Risks Remain 141
ETFs and Market Neutral Strategies 141
Alpha Strategies 149
Market Neutral Mutual Funds 155
Conclusion 156
CHAPTER 7
Global Macro 159
LTCM Blows Up 160
Gunslingers 162
Think Global, Invest Global 162
Trade Global 165
So You Wanna Be a Gunslinger, Too? 172
Conclusion 178

CHAPTER 8
Doing It Their Way 181
Selected Trader Profiles 183
Selected Stock Pickers Profiles 183
Selected Distressed Securities Profiles 184
Selected Quantitative Profiles 184
Other Famous Hedge Fund Practitioners 185
Insider Trading Building Performance? 186
So If It’s a Game for the Big Boys, How Can We Play? 190
CHAPTER 9
Trading—Do I Have To? 193
One True Thing 193
Market Timing Myths and Realities 197
The Lazy or Passive Investor: No Single Strategy Always
Performs Best 200
The Lazy Hedge Fund Investor: The Do-Nothing Crowd 202
Merrill and Goldman Try to Shake Things Up: Can Passive
Indexes Destroy Fees? 203
Day Trading: Frenetic and Intense 205
Shorting Explained: To Go North, Head South 208
Quantitative Trading: Reserved for the Left Brain Crowd 209
Multistrategy: All Things to All People 212
Conclusion 214
PART THREE
Hedge Funds for the Rest of Us
CHAPTER 10
Lower-Risk Global Macro Long/Short Strategies 217
The ETF Digest Methodology 217
Overwhelmed 217
Fast-Forward 35 Years 219
Trend Following 222
Risk Management 228
The Two-Thirds Objective 230
Finding Your Sacred Cows 233

ETFs Provide the Tools for Implementing Global Macro
Long/Short Strategies 238
The Trick Is Putting Them Together 242
CHAPTER 11
Constructing Your Own ETF Hedge Fund 243
Typical Questionnaire 244
Long-Term Investor or Short-Term Trader 246
Awash in ETF Choices 247
Performance Myths and Realities of Style 251
One World Market 255
True Diversification 257
Shorting Essentials 264
Portfolio Reallocation 264
Actively Managed ETFs and Mutual Fund Posers 265
Conclusion 265
CHAPTER 12
ETF Hedge Fund Portfolios 267
Long-Term or Short-Term Approach 268
Aggressive Growth 272
Growth 275
Growth and Income 277
Dave’s Special Portfolio 279
ETF Substitutes 280
Conclusion 281
CHAPTER 13
Tools and Resources 283
Where to Get the Help You Need 283
Online Tools 283
Important Tools I Like 304
Market Information Resources 305
Conclusion 308
CHAPTER 14
Eight Steps to Building Your ETF Hedge Fund 309
Step 1: Define Yourself 309
Step 2: Develop Your Hedge Fund Strategy 309

Step 3: Use ETFs as the Primary Tool 310
Step 4: Using Mutual Funds as an Alternative Vehicle 310
Step 5: Get Help, Even If You’re a DIY 311
Step 6: If You Want to Use a Financial Advisor, Find the
Right One 314
Step 7: DIYs Need an Online Broker 314
Step 8: Find the Support Tools You Need 315
Conclusion 315
Index 317