HYBRID VIGOR: VOL 3 ISSUE 13 "Fresh Starts"

Ok, we got that out of the way. The first quarter ended up being decent for large-cap equity investors who stayed the course, excellent for traders who managed to double down near the bottom, and fairly lousy for most others.  High-yield bonds, left for dead earlier in the year, came back with a flourish, though there are reasons to be at least a little skeptical.  Lisa Abramowicz, a rising star in financial journalism with Bloomberg and a friend of this observer, wrote this morning that the improved performance and flows mask deeper fractures in the market for lending to high-risk borrowers.

But spring is the time of reborn hope—even for us Mets fans who faced the indignity of watching our heroes face their conquerors to begin the season last night. The hope took another hit when our star for extended hire, Yoenis Cespedes, dropped a routine fly ball because of an embarrassing lack of effort. Once again, we are finding that in some places, $27.5 million a year doesn’t buy the commitment it once might have.

Reborn hope took another hit on Saturday, when this often bent but never broken horse-racing fan saw his choice for this year’s Triple Crown, Mohaymen, suffer his first loss, and a bad one at that, at the feet and mane of the now-presumptive Kentucky Derby favorite, Nyquist, last year’s champion. But the good news here is virtually identical to the good news in the markets, for those who dollar-cost average as long as they still believe the story. With a win last weekend, Mohaymen might have been 2-1 on the first Saturday in May. Now, he’ll be closer to 8-1. For those of us who think he simply was not himself, the prospect is tempting—just as those who feel many small-cap stocks have been too-long underappreciated and offer outsized returns to current buyers.

We never get tired of telling the story of a boss who, upon hearing our complaint at being shut down when opportunity seemed huge, asked us, “what has changed, other than price?”  We will once again say what we thought then—anyone who would ask such a question should be in a different line of work.

(This is the cover letter for the subscription-based weekly Hillside's Hybrid Vigor newsletter. For a complete copy, please contact John Anderson at + 1 (646) 712-9289 x 107).