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Market Upside Down: How to Invest Profitably in a Shrinking Economy by Vinh Q. Tran

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10. Absolute Return and Alpha

In 1966, a journalist at Fortune wrote an article about “the best professional manager of investors’ money these days,” a “quiet-spoken seldom-photographed man named Alfred Winslow Jones,” and called his investment partnership a hedge fund.1 Carol Junge Loomis, an editor and writer at Fortune for over 50 years, whom the New York Post touted as a “legend in financial journalism,” went on to cite Jones’ investment track record and gave an explanation of his strategy as to why short selling and leverage can be used “for conservative ends.”

In 1949, Jones formed a general partnership starting with $100,000 of capital. His portfolio was both “hedged” with short selling of stocks to reduce the risk of losses from market ...

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