Bloomberg’s Dani Burger is a time bandit.
I haven’t the faintest idea what the average salary is for “future sled dog breeders” and current Bloomberg columnists who cover quants, but what I do know, as of this morning, is that money is no longer a concern for Dani.
Because do you know what she did? Well, let me tell you. She built her own factor fund based entirely on an index that invests in companies whose names contain the letters “C”, “A”, and “T” arranged next to each other and in that order.
In other words, she built a “Cat” factor model.
Here’s Dani to explain further:
So how, exactly, did I go about investing in cats? Factor funds rely on formulas, preset criteria that tell you which stocks to include and which to chuck out. It’s the idea behind things like value ETFs, which gather groups of shares that share the common characteristic of cheapness. The idea is that put together, they’ll beat the wider market.
My model buys any U.S. company with “cat” in it, like CATerpillar, or when “communiCATion” is in the name. It rebalances quarterly to keep trading costs low. That’s important for when Vanguard or BlackRock license it and charge a competitively low fee.
Suspecting that she might be onto something – because you know, “people love cats” – she jumped into her DeLorean, smashed on the gas, hit 88mph, and Marty McFly’d herself back in time so she could get in on the ground floor of the “cat” factor revolution.
And that was a good fucking move, because when you run a six-year backtest on Dani’s “cat” fund, it returned 849,751%.
So, after returning to the present day nearly 850,000% richer, Burger decided to ask a bunch of quants how exactly it is that for all their PhDs, they haven’t been able to replicate her returns.
And this is where it gets truly hilarious, because based on the quotes in Dani’s article, I’m not entirely sure the quants she spoke with thought this exercise was as funny as she did.
Here are some of the better ones complete with what we imagine Dani wanted to say but couldn’t because you know, “decorum” and all…
From BlackRock’s Andrew Ang:
I love cats, too, and obviously cats are superior, so this is a great investment strategy. I’m joking, of course. The No. 1 thing is that it lacks an economic foundation.
And the “No. 1 thing” you lack, Andrew, is a fucking sense of humor because although Dani was “of course” “joking,” the “joke” here is actually on the quants.
From Goldman’s Nicholas Chan:
It’s very curious, and I appreciate the effort. But you came up with an investment idea that doesn’t have economic intuition. When we come up with an investment hypotheses, we’re economists first and statisticians second.
Well, Nick, we’re so glad you “appreciated the effort” because clearly, Dani was trying to launch a career as a quant and that’s why she really needed you to express a little benign paternalism and constructive condescension. On the other hand, it’s a good fucking thing Dani isn’t a quant because if she was, you’d clearly be out of business.
Back to Ang:
We’re after broad and consistent sources of returns. Since you’ve tweaked it by so much [the original model invested in things that started with "CAT” as opposed to in anything that contained "CAT”], that gives me less confidence that there’s underlying economics in the source.
Andrew, it does occur to me that you probably told yourself that the very fact you agreed to be interviewed for this piece proves you do in fact get the joke, but that quote right there “gives me less confidence that there’s any underlying humility in the source” where the “source” is you.
And best of all is this from the infamous Cliff Asness whose last name, if you add one more “s” to it, quite literally means “this is what an ‘ass’ looks like”:
Everything you can sort on can be a factor, but not all factors are interesting. Factors need some economics, theory or intuition even, to be at all interesting to us. Thus the cat factor fails as we have no story for why it should matter at all. Now, in contrast, we are active traders of the dog and parakeet factors, which are based on hard neo-classical economics married to behavioral finance and machine learning. But the cat factor is just silly.
Before you go thinking that Cliff is another person who was just trying to be funny and that his quote was completely harmless and devoid of pretentiousness, recall that this is the same guy who once said this to Stephanie Ruhle on live television:
So yeah, you’re giving me that look that I get when I talk to women about quant stuff.
Ultimately, it all sounds like sour grapes from a bunch of folks who are mad that Dani Burger is now officially the most successful investor of all time.