Investors undaunted as Apple's Jobs steps aside

By Poornima Gupta and Edwin Chan

SAN FRANCISCO/LOS ANGELES | Thu Aug 25, 2011 11:19am EDT

SAN FRANCISCO/LOS ANGELES (Reuters) - Apple Inc began a new era on Thursday without Steve Jobs as chief executive, a momentous shift that surprised investors, but barely dented confidence in the near-term outlook for the stock.

In announcing that he could no longer fulfill his duties, Jobs stepped away from his CEO duties and cleared the way for Tim Cook to take over leadership of one of the world's best known and valuable companies.

Cook, 50, must now convince investors that Jobs' vision and spirit have been institutionalized within Apple, a company that revolutionized entertainment and communication with its iPod, iPad and iPhone devices. Jobs, who has been on medical leave since January, will stay on as chairman.

"Investors are coming to the realization that this is a natural transition. It may have already been built into Apple's valuation," said Hendi Susanto, a Gabelli & Co analyst.

Apple's shares were down less than 2 percent in early trading on Thursday, showing more resilience than when the departure was initially announced late Wednesday.

"Over the course of last year, investors have become more comfortable with the idea of life after Jobs," said Bill Kreher, an analyst with Edward Jones. "I think it is encouraging that he will remain with the company as chairman but the real story is that Tim Cook has emerged as a capable successor."

Jobs, who has fought a rare form of pancreatic cancer, is deemed the heart and soul of a company that became the most valuable in the world for a brief period this year.

"I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple's CEO, I would be the first to let you know. Unfortunately, that day has come," Jobs wrote in a brief letter announcing his resignation.

While it is unlikely that his departure as CEO will derail Apple's ambitious product-launch roadmap in the near term, there are concerns about whether the company will be as creative without its founder and visionary at the helm.

Jobs' battle with pancreatic cancer, which has stretched over several years, has been of deep concern to Apple fans, investors and the company's board.

Over the past two years, even board members have confided to friends their concern that Jobs, in his quest for privacy, was not being forthcoming with directors about the true condition of his health.

Wall Street also wanted a clearer picture of plans at Apple.

"I think a lack of clarity of its succession plan in the past has been a distraction so we appreciate that this plan represents a smooth and orderly transition," Kreher said.

Jobs, 56, has been on medical leave since January 17, with his duties being filled by Cook, who was chief operating officer.

Jobs had briefly emerged from his medical leave in March to unveil the latest version of the iPad and later to attend a dinner hosted by President Barack Obama for technology leaders in Silicon Valley.

But his often-gaunt appearance had sparked questions about how bad his illness was, and his ability to continue at Apple.

Cook, a former Compaq executive and an acknowledged master of supply-chain management, has taken over the helm in each of Jobs' three health-related absences.

One Silicon Valley CEO, who declined to be identified because of the sensitive issues involved, said the tone of Jobs' statement indicated his health may be worse than feared.

The Apple chieftain has earned a reputation for commanding every aspect of operations -- from day-to-day running to broad strategic decisions -- suggesting he would not give up the job if he had a choice.

"It's really sad," the CEO told Reuters. "No one is looking at this as a business thing, but as a human thing. No one thinks that Steve is just stepping aside because he just doesn't want to be CEO of Apple anymore."

"It feels like another shoe is going to drop."

Brand research company Millward Brown said Apple's brand, which it values at over $153 billion, should remain intact.

"Steve Jobs resignation from Apple is sad for him as it presumably presages more illness. However he has left the Apple Brand in rude health so that the company is still poised for future growth," global brands director Peter Walshe wrote.

"The future direction is mapped out, the successor is in place (also a designer by background), and consumers rate the brand uniquely 'creative', 'fun' and 'adventurous.'"

'ARTISTS' TOUCH'

While Jobs did not give details on the state of his health, oncologists who have not treated the Apple founder said he could be facing several problems tied to his rare form of pancreatic cancer and subsequent liver transplant.

Such problems include possible hormone imbalances or a recurrence of cancer that is harder to fight once the body has already been weakened.

"Steve Jobs is the most successful CEO in the U.S. of the last 25 years," Google Inc Chairman Eric Schmidt said in a statement.

"He uniquely combined an artist's touch and an engineer's vision to build an extraordinary company."

Nokia CEO Stephen Elop said in a statement: "Steve Jobs is a visionary in the computing industry. We look forward to both Steve and his team having a positive impact on our industry for many years to come."

Elop was appointed last year to lead Nokia's fightback against Apple, whose iPhone posed a challenge that the world's biggest cellphone maker has yet to meet.

Analysts again expressed confidence in the Apple bench, headed by supply-chain maven Cook.

"I will say to investors: 'Don't panic and remain calm -- it's the right thing to do. Steve will be chairman and Cook is CEO," said BGC Financial analyst Colin Gillis.

Nomura's Global Technology Specialist Richard Windsor agreed, although he said rival smartphone makers would be quick to take advantage of any Apple weakness.

"This looks like a pretty smooth transition with the slight risk of a dent to its image if the next product launches are not perfect. Its competitors are waiting to pounce and here we think that HTC has the most to gain," he wrote.

Apple previously did not have a chairman, but had two independent co-lead directors.

(Additional reporting by Bill Rigby, Alexei Oreskovic, Sarah McBride and Jim Christie in San Francisco, Lisa Richwine and Nichola Groom in Los Angeles, Peter Lauria, Paul Thomasch, Liana B. Baker and Tiffany Wu in New York, Tarmo Virki in Helsinki and Georgina Prodhan in London)

(Editing by Andrew Callus and Maureen Bavdek)

U.S. probes S&P, Moody's over financial crisis: sources

WASHINGTON | Thu Aug 18, 2011 7:55pm EDT

WASHINGTON (Reuters) - The U.S. Justice Department is investigating the rating agency Standard & Poor's over its actions on mortgages leading up to the financial crisis, a source familiar with the matter said on Thursday.

The investigation -- which the source said relates to what S&P analysts wanted to do and what they were told to do instead -- began before the ratings firm, downgraded the long-term U.S. debt to AA-plus from a AAA rating this month.

The probe is being led by the Justice Department's civil division, the source said, declining to be further identified because the investigation is ongoing and not public.

The Justice Department has also been investigating the rating firm Moody's in connection with the ratings of structured products during the financial crisis, a source familiar with that matter told Reuters.

Michael Adler, a spokesman for Moody's, did not immediately return a phone call and email message seeking comment.

The Securities and Exchange Commission has also been probing S&P, a unit of McGraw-Hill, over its role in the crisis, the first source said.

Representatives for the Justice Department and SEC declined to comment.

Confirmation of the probes come after the New York Times reported that the S&P investigation centers on whether the company improperly rated dozens of mortgage securities in the years before the financial crisis that unfolded in 2008.

The department has been asking about instances in which S&P analysts wanted to assign lower ratings to mortgage bonds but may have been overruled by S&P business managers, the newspaper reported.

Ed Sweeney, a spokesman for S&P, said that its core principles had included "analytic independence and objectivity" and that since 2008 the firm had taken steps to enhance those policies.

"S&P has received several requests from different government agencies over the last few years regarding U.S. mortgage-related securities. We have cooperated and will continue to cooperate with these requests," he said.

It was unclear whether the Justice Department investigation involves another ratings agency, Fimalac SA's Fitch. Neither Fitch nor Moody's have downgraded U.S. debt.

The Times said that despite the outcry over the ratings agencies' failures in the financial crisis, investors still rely heavily on ratings from the three main agencies for their purchases of sovereign and corporate debt, as well as other complex financial products.

The Senate's permanent subcommittee on investigations, headed by Democratic Senator Carl Levin, issued a report in April that included scathing criticisms of S&P after holding hearings on the financial crisis.

"The hearings held by the Permanent Subcommittee on Investigations and our subsequent report documented reckless actions and significant conflicts of interest on the part of the credit rating agencies that contributed to the financial crisis," Levin told Reuters in a statement.

"It is totally appropriate for U.S. law enforcement agencies to review that sad record," he said.

Senator Chuck Grassley, a Republican from Iowa, said he hoped the investigation would focus fresh attention on the inherent conflict of interest in the industry, which is paid by potential borrowers to rate their credit-worthiness.

"Maybe a Justice Department investigation will force action on the conflicts of interest problem and accomplish what should have been done a long time ago," Grassley said in a statement.

Additionally, S&P has been under fire from lawmakers, market players and the U.S. Treasury Department since its decision to cut the U.S. credit rating earlier this month. Key committees in Congress may also hold hearings about the downgrade and reforms of the ratings industry.

(Reporting by Jeremy Pelofsky, Sarah Lynch and Andrea Shalal-Esa, in Washington and Moira Herbst and David Henry in New York; Editing by Sandra Maler and Christopher Wilson)

Wall Street edges up, helped by commodities

By Rodrigo Campos

NEW YORK | Fri Aug 19, 2011 10:57am EDT

NEW YORK (Reuters) - Stocks edged higher in early trading on Friday, with miners rising on higher commodity prices and the S&P 500 index finding technical support.

Major indices opened lower but quickly turned higher, reflecting the volatility that has rocked market action in the past weeks.

"Commodities are trading well with the weakness in the dollar," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

A rally by the euro to the high of the day brought in buyers seeking bargains from Thursday's selloff, Boockvar said.

There was also an upward boost on technical trading, analysts said. The S&P 500 bounced off a session low of 1,130, a key resistance level during last summer that is becoming strong support.

"Technical levels are what market participants are focused on now," said Robert Pavlik, chief market strategist at Banyan Partners LLC in Palm Beach Gardens, Florida.

Commodity prices rose as the U.S. dollar weakened, with U.S. crude prices sharply recovering from a 3 percent decline earlier to gain 1 percent.

The materials sector of the S&P 500 gained 1.6 percent while energy stocks added 1.3 percent.

The Dow Jones industrial average was up 28.19 points, or 0.26 percent, at 11,018.77. The Standard & Poor's 500 Index gained 6.84 points, or 0.60 percent, at 1,147.49. The Nasdaq Composite Index added 22.40 points, or 0.94 percent, at 2,402.83.

Hewlett-Packard Co slid 22.3 percent to $22.91 and was the largest decliner on the Dow industrials a day after it said it may spin off its PC business, the biggest in the world, and cut its outlook.

(Reporting by Rodrigo Campos; Editing by Kenneth Barry)

Google to buy Motorola Mobility for $12.5 billion

By Franklin Paul

NEW YORK | Mon Aug 15, 2011 10:52am EDT

(Reuters) - Google Inc will buy phone hardware maker Motorola Mobility Holdings Inc for $12.5 billion to bolster adoption of its Android mobile software and compete with smartphone rival Apple Inc.

In its biggest deal to date, Google said it would pay $40 per share in cash, a 63 percent premium to Motorola Mobility's Friday closing price on the New York Stock Exchange.

"What it says is that Google wants to provide a total experience that's hardware and software (like Apple)," said BGC Partners analyst Colin Gillis.

Shares of Motorola Mobility, which focuses on smartphone and TV set-top boxes, jumped 59 percent on Monday.

Google, maker of the Android mobile phone operating system software, has been forging ahead in the smartphone market but has been hampered by a lack of intellectual property in wireless telephony.

Earlier this month, fresh from losing a bid to buy thousands of patents from bankrupt Nortel, Google Chief Legal Officer David Drummond blasted Microsoft, Apple, Oracle and "other companies," accusing them of colluding to hamper the increasingly popular Android software by buying up patents.

A source close to the deal said Google swooped in to buy Motorola Mobility after losing out on Nortel's patents.

"It is much more than just a patent sale. It is obviously more than a strategy shift for Google that is very significant," the source said.

The Motorola Mobility deal may represent a victory for activist investor Carl Icahn, Motorola's biggest shareholder. He has urged Motorola to consider splitting off its patent portfolio to cash in on surging interest in wireless technology. As of July, Icahn held an 11.36 percent stake in the company.

In a statement, Icahn said the deal is "a great outcome for all shareholders of Motorola Mobility."

Google, which plans to run Motorola Mobility as a separate business, said the deal will close by the end of 2011 or early in 2012, and requires regulatory approvals in the U.S., European Union and other areas, as well as the blessing of Motorola Mobility's shareholders.

Lazard advised Google on the deal, while Motorola used Centerview Partners and Frank Quattrone's Qatalyst Partners, sources told Reuters.

(Reporting by Franklin Paul in New York and Sayantani Ghosh in Bangalore; additional reporting by Nadia Damouni and Phil Wahba in New York; Editing by Saumyadeb Chakrabarty, John Wallace, Dave Zimmerman)

Gold slides off record after margin increase

By Claudia Assis, MarketWatch

SAN FRANCISCO (MarketWatch) — Gold futures traded lower Thursday, taking a breather after topping $1,800 an ounce the previous session and after the exchange operator increased the money needed to trade in futures contracts.

Gold for December delivery declined $22, or 1.2%, to trade at $1,760 an ounce on the Comex division of the New York Mercantile Exchange.

Gold on Wednesday settled at a record $1,784.30 an ounce and traded as high as $1,801 an ounce, an intraday record, on concerns about the health of European banks and France’s sovereign-debt ratings in addition to worries about the U.S. economy in the wake of the Standard & Poor’s U.S. credit downgrade last week.
After settlement Wednesday, the CME Group Inc., which owns the main U.S. exchanges for metals, grains, and energy, raised margin requirements for gold trading, prompting investors unwilling or unable to put up more money to sell.

In May, a string of CME margin increases in silver futures rocked the metals markets and brought losses upon all commodities futures, as investors who couldn’t meet the new silver requirements had to liquidate their positions, dragging prices down.

Silver suffered its worst five trading days in more than 30 years during the first week of May, with silver-futures prices down almost 30%.

Initial margin requirements to trade gold rose to $7,425 per 100-ounce contract from $6,075, and maintenance margins increased to $5,500 from $4,500, CME said.

The changes are effective Thursday. The CME also increased margins for a host of lesser-known products such as foreign-exchange futures and a small-cap equity index futures.

Claudia Assis is a San Francisco-based reporter for MarketWatch.

Legend or Mirth?

A climate mangles a rush myth.They's only 1 way to interpret this-what has been there for a longer time holds more sway than that that has only began to bein existence.Rings true in the financial markets this week.
The fundamentals have more sway than the technicals-mark these words!

Gold shoots past $1,750 ahead of Fed meet

Latest rally comes amid global equity sell-off, before Fed meeting
By Claudia Assis and V. Phani Kumar, MarketWatch

SAN FRANCISCO (MarketWatch) — Gold prices traded at a record Tuesday, slicing through the $1,750-an-ounce milestone as a massive sell-off in global equity markets drew safety-seeking investors to the metal.

Gold futures for delivery in December added $24.50, or 1.5%, to $1,738.90 an ounce on the Comex division of the New York Mercantile Exchange.

The contract traded as high as $1,782.50 an ounce earlier. Gold has gained more than 20% so far this year, including a gain of 5% this week.

“The U.S. credit downgrade, coming so close on the heels of the debt-ceiling crisis, has left investors searching for a safe haven and choosing gold,” HSBC analyst James Steel wrote in a report, referring to Standard & Poor’s decision to downgrade U.S. debt late last week to AA+ from AAA.

“There may also be an element of concern among investors that the [Federal Reserve] may monetize the debt. The inflationary consequences of such action are supportive of gold. Even if this is not policy, the fear among some investors that this might occur should keep gold well bid,” he said.

The U.S. Federal Open Market Committee is scheduled to meet Tuesday to decide on its monetary policy, amid a debate over whether weakening economic indicators will force its hand in launching a fresh round of monetary easing.

The day’s surge in gold prices have come as most other asset classes got pummeled on mounting worries about U.S. and euro-zone sovereign-debt issues.

The broader suite of metals futures tracked gold higher, with silver the lone exception. September silver declined $1.59, or 4%, to $37.85 an ounce.

Copper for September delivery added 4 cents, or 1.1%, to trade at $4 a pound.

Claudia Assis is a San Francisco-based reporter for MarketWatch. Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.

Volatile Markets Look For Direction After Upbeat Jobs Report

By Stephen L. Bernard
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Markets retreated from an early rally as investors remained unconvinced that a single promising jobs report signaled a turnaround in the U.S. economy's declining fortunes.

The jobs data showed employers added 117,000 jobs last month, topping forecasts for a 75,000 increase. The report provided a brief respite for traders who had been bombarded by disappointing economic data in recent weeks.

But in most markets, steep post-data gains evaporated almost as quickly. The Dow Jones Industrial Average was recently down 0.1% at 11369 after jumping to 11555 after the opening. Oil prices were down 30 cents at $86.33 a barrel, down from an intraday peak of $88.32 hit immediately after the jobs data.

Still, the employment report helped steady markets that had seen some of their biggest declines since the 2008 financial crisis on Thursday. With investors fearing a second recession, the Dow index had tumbled 512 points in the last session, its biggest point drop since Dec. 1, 2008 and plunging into the red for the year. But one report doesn't lift the worries the world's largest economy could be stalling at a time when Europe is still facing major debt problems and growth concerns of its own.

"The July payroll employment report may temper some of the panic that set in earlier this week," said Sophia Koropeckyj, managing director and senior economist at Moody's Analytics. "The report suggests a rocky recovery is still occurring."

The dollar gained against safe havens and fell against riskier currencies immediately following the report, but those moves have been unable to hold.

The dollar hit a fresh record low against the Swiss franc, falling as low as CHF0.7578. It had been as high as CHF0.7720 after the jobs data.

The greenback was at Y78.45 from Y78.31 just after the report was released. It had jumped above Y79 following the report.

"The market is trying to figure out which way to go," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. Esiner said that while the jobs report topped modest forecasts, it still wasn't particularly strong.

Safe-haven assets saw a slight bump, with December gold futures up 0.4% at $1,666 a troy ounce.

"All the long term problems that droves us down here are not going away anytime soon," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, N.J.

-By Stephen L. Bernard, Dow Jones Newswires; 212-416-4528; stephen.bernard@dowjones.com

--Brendan Conway, Min Zeng, Cynthia Lin, Steven Russolillo, Dan Strumpf, Tatyana Shumsky and Katy Burne contributed to this report.

SNB cuts rates to counter soaring Swiss franc

By Katie Reid and Martin Desapinto
ZURICH | Wed Aug 3, 2011 11:19am EDT

(Reuters) - The Swiss National Bank announced a shock cut in interest rates and threatened more action to cap a soaring Swiss franc, but the impact was expected to be short-lived given the currency's safe-haven appeal amid mounting concerns about global growth.

The SNB said on Wednesday it would cut its target rate to "as close to zero as possible" from an already rock-bottom 0.25 percent, and said it would very significantly increase the supply of francs to the money market over the next few days.

It said it would not tolerate the effective tightening of monetary conditions imposed by what it called a "massively overvalued" franc which was threatening economic growth and increasing downside risks to price stability.

"The SNB is keeping a close watch on developments on the foreign exchange market and will take further measures against the strength of the Swiss franc if necessary," the bank said.

The euro jumped 2.5 percent versus its Swiss counterpart after hitting a new record low before the SNB news. The dollar also rose sharply. But the franc recouped most of its losses later in the day.

"These measures will probably not bring a halt to the Swiss franc's appreciation," said Neil Mellor, currency strategist at Bank of New York Mellon. "It will be a hard fought battle for the SNB and at most this will slow the pace of appreciation."

With low-debt Switzerland seen as a safe haven from an escalating euro zone debt crisis and fears of a U.S. rating downgrade, the franc has surged 18 percent against the euro and 22 percent against the dollar in recent months.

The SNB is the first central bank to cut rates since the global economic outlook deteriorated with expectations for higher rates from the European Central Bank and U.S. Federal Reserve pushed back since signs emerged of a new slowdown.

"It's a very difficult situation for them with the ongoing issues in the periphery in Europe. The Swiss franc is a sort of default option here," said Henrik Gullberg of Deutsche Bank. "That is unlikely to go away as long as we have these issues in Europe."

SWISS EXPORTERS SQUEEZED

Swiss exporters have called on both the SNB and the government to take action against the currency's steep rise although the bank has also been criticized for the heavy losses it incurred in its post-crisis interventions in 2009 and 2010.

Nick Hayek, chief executive of watch maker Swatch, who has been one of the most outspoken about the impact of the strong franc, welcomed the SNB move. "This is wonderful. Speculators should brace themselves," he told Reuters.

The SNB said in a statement the global economic outlook had worsened since its last monetary policy meeting in June, while the sharp rise in the franc meant the outlook for the Swiss economy had "deteriorated substantially."

The euro was up 0.6 percent to 1.0907 at 1436 GMT after hitting a record low of 1.0794 on trading platform EBS before the SNB comments. The dollar gave up earlier gains to trade flat at 0.7643 per franc.

After the Swiss franc rose about 12 percent against the euro in July alone, economists began to warn that a recession could be looming in Switzerland with forward-looking indicators such as the KOF economic barometer pointing to a slowdown.

The strong franc has also begun to hit the manufacturing sector, data for July showed on Tuesday.

Analysts said the SNB could resume the foreign exchange interventions it stopped in June 2010, even though its previous attempts were seen by many as an expensive failure.

"Maybe the threat of intervention will force people to look for other potential safe havens," said Lloyds Banking Group currency strategist Adrian Schmidt.

The SNB announced last week it suffered a 9.9 billion Swiss franc ($12.8 billion) first-half loss on its foreign exchange holdings due to the surging franc, increasing criticism of Chairman Philipp Hildebrand and making interventions politically more difficult.

Christoph Blocher, a leading figure in the right-wing Swiss People's Party, who has already called on Hildebrand to quit, launched a new attack on Sunday, saying the SNB boss behaved like a speculator and was not qualified for the job.

Before the big franc jump, Swiss interest rate futures had priced in the possibility of a first post-crisis rate hike for September, but Wednesday's news pushed back expectations for a rise in the rate target to 0.5 percent to June 2013.

To increase liquidity to the franc money market, the SNB also said it would expand banks' sight deposits at the SNB and would no longer renew repos and SNB bills that fall due and will repurchase outstanding SNB bills.

(Writing by Emma Thomasson and Catherine Bosley; editing by Mike Peacock)

Soros serves as warning to mutual-fund investors

By Chuck Jaffe, MarketWatch

July 31, 2011, 12:01 a.m. EDT

BOSTON (MarketWatch) — There was a lot of speculation this week about the reasons why legendary money manager George Soros is shutting down his hedge fund and sending investors their money back.

Some said the 80-year-old Soros — who has run the Quantum hedge funds since the late 1960s — doesn’t want to face the heightened regulation of hedge funds that’s part of the Dodd-Frank legislation. Others suggest he wants to focus on his philanthropic and political causes, and still others suggest he is protecting his investment legacy, because Soros’s record is no better than average in highly turbulent market conditions.
Whatever the reason, Soros’s decision — his firm will return outside investors’ money but continue to operate like a family business — should not go unnoticed by ordinary fund investors.

If one of the most successful hedge-fund managers of all time is hanging it up in current market conditions, what does that say for the future of all of the open-end mutual funds and exchange-traded funds that have “alternative” or hedge-like characteristics?

It’s particularly worth answering that question in light of a sentiment survey of hedge-fund managers released by Infovest21, published by Investment News this week, which showed that many managers expect other hedge-fund operators to follow suit and start returning client money to run a family operation, just like Soros. (Clearly, since those other managers aren’t all octogenarians, avoiding additional regulation and transparency is a key motivating factor.)
The wrong kind of volatility

Hedge-like mutual funds have been a booming part of the fund business for more than a decade now, but that trend has corresponded with a big macro-economic cycle that favored commodities investing, a cornerstone of many hedge/alternative strategies. For anyone who believes in looking at the biggest possible picture, the stretch of time that favored those investments is getting long in the tooth. That would suggest that some alternative strategies that have been popular and successful — the kind that cemented Soros’ legacy — may be in for rough times.

Even if you don’t subscribe to that biggest-picture view, there is no denying that many hedging strategies do best when the market is volatile, but with a strong sense of direction. Many market-neutral and long-short strategies — hedge strategies designed to profit no matter which way the market moves — struggle when the market lacks a trend.

“There is a growing, yet subliminal, sense of expected overall lower volatility moving forward,” said Stephen L. McKee of Investment Selections & Timing Inc. in Dallas. “For some, it doesn’t matter the direction as long as the direction is severe; that might be disappearing... Tighter circuit breakers, a more intertwined, cooperative world financial system, greater regulation of those on the edges will all contribute.”

For the rest of us, McKee noted, lower volatility would be a positive, but for many hedged strategies it’s a problem. Just as hedge funds have high costs — typically 2% of assets plus 20% of profits — mutual funds with hedge-like strategies tend to have above-average costs. Even the exchange-traded funds following alternative strategies are pricey compared to peers pursuing more mainstream tactics.

It’s fine to pay for performance, so long as you actually get it. That hasn’t happened for most hedge/alternative funds; instead, they’ve been all sizzle and no steak.

Russel Kinnel, director of mutual-fund research at Morningstar Inc., said investors should be less concerned with Soros’s departure than with all of the famous guys who enter and exit the business without fanfare.

“The hedge funds and hedge-like mutual funds that flop are the ones that should be of concern to investors,” Kinnel said. “The fact that so many have not succeeded despite the fact that the managers sound like brilliant rocket scientists is a concern. But Soros seems to me more to represent the promise of them. He and others show that there are hedge funds that can do well.”
Don’t wait for another Soros

That doesn’t mean average investors should hold out hope for the “next Soros” to show up in the fund game at a time when the first Soros is leaving the biz.

Industry consultant Geoff Bobroff of East Greenwich, R.I., noted that many of the biggest, best-known fund firms have no offerings in the hedge-like or alternative space. “Maybe you could say they missed the boat or are behind the curve,” he said, “but you can’t say their investors are missing out, because you can reach your goals with mainstream funds that have solid track records and understandable strategies.”

And that’s why Soros’s departure reminds ordinary investors not to fall in love with the idea of investing like the wealthy in a hedge-fund style. Hedge-fund tactics don’t always work in mutual funds, and if the market is entering a time when those strategies don’t even work for hedge funds, average folks should steer clear.

“Investors should stick with what they know and can understand; not based on someone they think they know or whom their friends claim to know, not based on claims of a better mousetrap without a few furry grey skins thumb-tacked above the trap to prove it, not based on what they think will make them the most money quickly,” said Jim Lowell, chief investment officer at Adviser Investments in Boston. “The biggest risk to investors is assuming the like of Soros know more about the markets than they do; leaving them prone to all kinds of spellbinding claims.”

Chuck Jaffe is a senior MarketWatch columnist. His work appears in many U.S. newspapers.