Up 20% YTD, today!

[quote=skeedaddy]Sorry for toot'n my horn but I feel pretty good about it.     [/quote]

That's great. I started a new portfolio I started in July, I'm up 18% so far. My YTD figure is lower than that though...

I'm absolutely amazed by all the Peter Lynches and Warren Buffets we have on this board.  Skee, you'd be more credible if you'd tell us about some of your mistakes and what you learned by making them.  While your numbers are possible, the impression you give is that you consistently beat the market by a wide margin, and I'm sorry...I'm not buying it.  You remind me of my typical stock-picking client...focused on his two winners while ignoring his 20 dogs.

If you're as good as you tell us you are, tell us a bit more about your methodology...how you pick stocks...what stocks have done well for you this year...what you expect to do well over the next twelve months.  Give us something other than numbers that could be plucked from the thin air for all we know...

I'll ask you the same question I asked another "stock professional" on this board awhile back...if you're so damn good, why aren't you a fund manager making some serious jack?!!!

Indyone,

Aren't you the same guy that claimed he could run circles around the mutual fund sub accounts in a VA?

How about you share your investment choices that run circles around others and/or your mistakes?

meno,

I've done that...review my posts.  and yes, I've had the balls to discuss my mistakes also.

You, on the other hand, don't even have the balls to tell us which "top ten" firm you work for.

[quote=Indyone]

meno,

I've done that...review my posts.  and yes, I've had the balls to discuss my mistakes also.

You, on the other hand, don't even have the balls to tell us which "top ten" firm you work for.

[/quote]

Find a listing of the "10 largest" (not "top 10") financial institutions in the nation.  Pick one.

Sorry…I have better things to do with my time.  If you’re proud of your firm, just tell us…that shouldn’t hurt your anonymity.

[quote=Indyone]Sorry...I have better things to do with my time.  If you're proud of your firm, just tell us...that shouldn't hurt your anonymity.[/quote]

Don't be mad because I called you out on your hypocrisy.  Deal with it.

"I'm listening."

- Frasier Crane

You just don't know when to stop, do you?  Quoting directly from the post you referenced, I said exactly this...

"I can generally run rings around VA performance due to fewer choices in a given VA and higher expenses under the VA model."

Common sense will tell you that mutual funds, without the extra expenses and riders in VA's will perform better than VA subaccounts.  In addition, in a fee-based platform, I have several thousand mutual fund options available, far more than the average VA will ever have.  If you still think you can outperform my mutual fund list with your VA choices, we can always post our choices side by side and take a look at them.  I still don't think I'll have much problem running rings around your choices.  I'm up for it if you are...

I don't know what hypocrisy you refer to.  Did you honestly think I wouldn't remember what I said?  Keep listening...you might learn something...deal with that.

[quote=Indyone]

I’m absolutely amazed by all the Peter Lynches and

Warren Buffets we have on this board. Skee, you’d be more credible if you’d

tell us about some of your mistakes and what you learned by making them.

While your numbers are possible, the impression you give is that you

consistently beat the market by a wide margin, and I’m sorry…I’m not buying

it. You remind me of my typical stock-picking client…focused on his two

winners while ignoring his 20 dogs.

[quote=Indyone]

If you’re as good as you tell us you are, tell us a bit

more about your methodology…how you pick stocks…

[quote=Indyone]…what stocks have done well for you this year…what you

expect to do well over the next twelve months.

[quote=Indyone]

I’ll ask you the same question I asked another “stock

professional” on this board awhile back…if you’re so damn good, why aren’t

you a fund manager making some serious jack?!!!

Skeedaddy



You should be proud of your performance in your strategy.  If you
are a fee based advisor, your revenue from that strategy is up 20%
too.  If anyone out here is or knows a mutual fund manager ask
them of all of the positions in their fund, likely 75 to 200 companies,
which ones do they REALLY like?  They will tell you 10 to 20
names…the rest is to fill in the prospectus requirements.  A
good strategy marketed directly to a client or prospect is very
effective.  Skee- The pondits who take shots at you are likely to
be setting on portfolios that are up 4% this year…along with EVERYONE
ELSE. 



I have learned that in order to be good you need to be different, and
good.  For my group the past few years we have grown by leaps and
bounds, and that is largely due to individual strategies we have
marketed. 



Congrats Skee- now share your strategy!

Skee,

Not envious, but a skeptic.  It's pretty easy to pretend to be something that you're not on these boards and you'll have to forgive me if I am doubtful of you, or anyone's numbers on these boards.  We even have unlicensed folks participate as resident experts, so I tend to take a lot of what I read with a grain of salt.

It looks like you are using a momentum strategy and assuming the accuracy of your posts, it's worked for you this year.  I've taken a more fundamental approach in my stock picking and to a large extent used fund managers.  Rightway, I'm not up 20%, but my strategies are up YTD anywhere from high single to low double digits and my clients appear to be satisfied.  I'm just happy to outperform the related indexes on a consistent basis.

I'm confident that there are some good stock pickers on this forum, but I am just as confident that there are a lot of pretenders, which is why I tend to ask a few pointed questions when I see someone quoting above-average return numbers.  Keep on doing what you're doing.  If you're as good as you say you are on a consistent basis, eventually, you'll be rewarded accordingly.

Oh, and Rightway, I think he DID share his strategy...see above...

[quote=Indyone]Sorry...I have better things to do with my time.  If you're proud of your firm, just tell us...that shouldn't hurt your anonymity.[/quote]

Indy-

He sits in a little desk in a bank lobby, dude.  That's why Meno is such a big fan of annuities.

Here's something interesting.  I can't help but get a chuckle reading over a quarterly update from a portfolio manager from Pioneer Funds.

Size of portfolio: over $1 billion

Portfolio manager has an MBA from NYU. and has a "team" of equity portfolio managers and research analysts that support him. Has underperformed his benchmark for YTD, 1 year and 3 years. 4 Stars from Morningstar and 5 stars from S&P Fund Research.

Released a very apologetic update explaining what has gone wrong this year:

Tenet Health---hasn't he noticed that United Healthcare and Humana are kicking butt?

Blockbuster Video--I guess he hasn't heard of NetFlix

Mattel--In the summer? Buy what the Chinese are buying not what they're selling.

SimpleTech--Apple signed the deal with Sandisk.

Perrigo--not enough headlines for Bird Flu, I guess.

Sometimes it not what you know, but who you know.

Sounds like a great 500k job.

What is fund up or down for the year?

Skee,

When you say you look into the financial metrics of your screened list, what are you looking for specifically?  Also, where do you screen for your stocks? Thanks for your reply.

[quote=Indyone]

Skee,

It looks like you are using a momentum strategy and assuming the

accuracy of your posts, it’s worked for you this year.

I think “The Buffett” wants you to call him and share your secrets.

Buffet says "buy some “Eurodollar calls (he wishes that he did).” Never bet against America or the market.

[quote=Indyone]

meno,

I've done that...review my posts.  and yes, I've had the balls to discuss my mistakes also.

You, on the other hand, don't even have the balls to tell us which "top ten" firm you work for.[/quote]

Indy, From reading your posts I find you to be a person of high integrity. I believe most on this board would agree with me. No need to defend yourself from anyone on this board.

That said, I too am skeptical of unsubstanciated numbers. Yet, I accept that there are those among us who have developed stock picking systems that work for them. Some have staying power, most don't. The bigger question, how they get these systems past regulators, who focus on client accounts on an individual basis rather than a portfolio basis? What's right for client A can't possibly be right for clients B, C, D, and F. Yet, all stock picking systems rely on 100% participation in every recommendation to be successful. Regulators have field days when every account in an advisor's book is invested identically. Successful performence doesn't earn a pass. Still, Skee, Meno, and others who have found a way to make this work and have had good years deserve their 15 minutes of fame. Hopefully, for their clients, they can grab the spotlight again next year and for years to come.

[quote=dude]

Skee,

When you say you look into the financial metrics of your screened list,

what are you looking for specifically? Also, where do you screen for your

stocks? Thanks for your reply.

I appreciate that.  I'm just beginning to be sceptical of the trend to wrap people up with a grossly overdiversified and expensive index fund (90% of all wrap programs i've seen) and follow one size fit's all strategic allocations.  Anytime Wall Street comes together in unision to preach that this or that product is the saving grace and we all should line up like lemmings to be baptized in it's waters, I get a little sceptical (admittedly, almost all of my clients are in wrap products since that is all I know and believe it's better than me blowing them up with sh*tty stocks).  So I am just trying to glean wisdom from others who have been around longer than I.  Thanks anyway Skee.

[quote=Indyone]

meno,

I've done that...review my posts.  and yes, I've had the balls to discuss my mistakes also.

You, on the other hand, don't even have the balls to tell us which "top ten" firm you work for.

[/quote]

Give meno a break, why should he have to admit he works for an insurance company? 

[quote=skeedaddy2]

Here's something interesting.  I can't help but get a chuckle reading over a quarterly update from a portfolio manager from Pioneer Funds.

Size of portfolio: over $1 billion

Portfolio manager has an MBA from NYU. and has a "team" of equity portfolio managers and research analysts that support him. Has underperformed his benchmark for YTD, 1 year and 3 years. 4 Stars from Morningstar and 5 stars from S&P Fund Research.

Released a very apologetic update explaining what has gone wrong this year:

Tenet Health---hasn't he noticed that United Healthcare and Humana are kicking butt?

Blockbuster Video--I guess he hasn't heard of NetFlix

Mattel--In the summer? Buy what the Chinese are buying not what they're selling.

SimpleTech--Apple signed the deal with Sandisk.

Perrigo--not enough headlines for Bird Flu, I guess.

Sometimes it not what you know, but who you know.

[/quote]

I'm not a big fund fan, but it sounds like you're bashing a Value manager (those seemed like value names) that stuck to buying value stocks for not becoming a growth manager. You do realize some day it will be a value manager's day again, due nothing at all to his or your stock picking ability, right?

[quote=Indyone]

It looks like you are using a momentum strategy and assuming the accuracy of your posts, it's worked for you this year. 

[/quote]

Exactly. Next year, or the year after when the market isn't favoring momentum names, and he's using the same approach, clients will think he's lost his touch. Just like in the 1990s when Warren Buffet was universally known as a has-been and everyone flocked to Janus funds. Now the Janus managers are has-beens and <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Warren's considered a genius. It wasn't that either group was ever dumb OR genius, it was that the market was favoring a given style at a given time and even stock-picking cab drivers who used (knwingly or not) the "right" discipline at the time were hailed as market gurus.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

That's why when someone tells me their great strategy, I ask if they compliment their growth style (often they don't even know that's what they're doing) with a value style (or vice versa) manager. That’s why I hire and rate money mangers, I haven’t become one.

To each his own, eh?

[quote=dude]

I’m just beginning to be sceptical of the trend to wrap

people up with a grossly overdiversified and expensive index fund (90% of

all wrap programs i’ve seen) and follow one size fit’s all strategic

allocations. Anytime Wall Street comes together in unision to preach that

this or that product is the saving grace and we all should line up like

lemmings to be baptized in it’s waters, I get a little sceptical

[quote=mikebutler222]

You do realize some day it will be a value manager’s day again, due

nothing at all to his or your stock picking ability, right?

As far as index funds, its a mathematical certainty that you will
under perform when you add layers of fees. Where's the value
proposition? I haven' found it.

Good Luck[/quote]

As far as indexes under performing you will not have that problem with (DFA) Dimensional Funds!

You should check them out if you believe in indexing!

When I mentioned index funds, I was alluding to mutual fund wrap programs where each fund has 200 plus stocks in it charging 100 to 150bps, when aggregated (usually 8 or more funds), you've got well over 1000 securities.  It seems to me like a sure fire way to get mediocre performance.  In addition with more money flowing into these programs where the fund managers generally are benchmarked to the index (owning the underlying stocks and over/under weighting) and with more $ flowing into indexes due to fantastic marketing I get concerned that too much money is chasing down the same group of stocks.  Makes me pause a little when recommending wrap programs, although I realize no investment is perfect).  I'm not a defender of index funds per se, just curious as to others opinions.

Peace

We get hung up on beating or not beating the “index”.  We compare verything the the S & P, Russell, Whatever. 



Guess What?  The “Index” is the clients
required rate of return to meet their objectives.  This is
established through Non-Deterministic planning and keeping it up to
date.  You should have tools to monitor the relationship between
the risk and return for your clients portfolio to make sure they match
up.  What you use to fund the portfolio, whether it is indexes,
funds, stocks,  is up to you…just factor you fee in when
attaining their ROR.



 

Right on, Rightway!  Comparing performance relative to an index and/or other managers with the same style is primarily only of significance to evaluating a money manager and, of course, that evaluation must also consider the risk each manager is taking to achieve that relative performance. 

Many, if not most, reps don't try to be money managers -- we use resources to evaluate them to hire & fire them.  The "managers" (be they funds/SMAs for active management, or ETFs/indexes for passive managment) are just vehicles to implement the particular allocation that is appropriate for each individual client's needs.   To say that an index fund's performance is mediocre because of over-diversification (which may or may not always be an accurate statement depending on "mediocre relative to what") is not pertinent when viewed in the context of how that index may fit within a particular client's situation. 

I don't view myself as a money manager & my clients know that.  I know enough to know that I probably wouldn't be as good at it as some on this forum are, or as good as many others that I can hire for clients.  For those reps that position themselves as money managers, enjoy it, & have happy clients because of it, that's great.  It's not a question of which approach is better, as both approaches fulfill a client need.  They're just different.

rightway,

I agree.  Ric Edelman calls that the "individual investor index".

Nothing else matters as long as the client is on the path to reach their uniquely individual financial goals.

Thanks to the couple of guys that complimented me, but most of you guys sound like a broken record. 

I'm obsessed with making money for my clients.  Several years ago, I  met with a prospect who was a self-made millionaire.  After I finished my presentation he asked me how much of my own money was in that stuff I was pitching. Since then, I invest in the same equities that my clients are in.  

The whole problem with our fee based system is an inconsistent compensation for services provided.  We get paid a fee for asset management.  All other Financial planning provided is  either value added (free) or a fee is charged.  If we were to be fairly compensated for investment manager research and consulting, it would have to be for a retainer to be most appropriate.  I'm sourcing this opinion from Worth magazine from the guy who runs Lydian, one of the largest independants out there, who also happens to provide platform services for a lot of indy's as well. 

I tend (the key word is tend here) to agree.  If I'm paid a fee based on AUM and my compensation is directly affected by the performance of the account, it seems that our value (in the minds of the client) is tied to that accounts performance.  If we were compensated to evalutate managers and recommend allocations, do financial planning etc... then a flat fee seems more appropriate.  If we get paid like mutual fund managers do on a % of assets managed then why shouldn't we have to prove our value based on the same guidelines.  When you assess managers you probably gauge them relative to a benchmark? 

I fully understand Rightway, Duke and MeNoTells' point of view, it's just that   I have started to become sceptical of all the financial metrics we use to sell our services, since they are all based on past performance and I don't understand why we can rely on correllations, standard deviation etc...  which are all just as fickle and unpredictable as returns (eg/ international stocks are much more corelated than they used to be).  Even Mr. Sharpe chastised the financial services industry for using the Sharpe ratio incorrectly.  We build these portfolio's making all these assumptions that tommorrow it'll be the same: my bond allocation will go up when my stocks are going down etc...  As any student of capital markets knows, it's when you have a lot of people doing the same thing and subscribing to the same beliefs that a "correction" generally occurs.  If every major investment firm out there is pounding the table on wrap type investing based on the standard metrics used to determine the "correct" balance, maybe some inefficiency is developing that will cause the rules to change down the road? 

I guess I see that every fund company, brokerage firm and Independant is pushing what amounts to being essentially the same investment, benchmarked to the same indices, rebalanced (generally)around the same times (quarterly or yearly) holding (generally) the same stocks.  Maybe we're in the middle stages of a bull market in Markowitz (discovered the efficient frontier for those unfamiliar)driven investing and at some point the bubble will burst?  I guess we might be trend followers in this respect?  Remember, broad social and economic paradigms are the basis for the markets' behavior and inevitably some unpredictable event changes the basis on which broad paradigms are formed resulting in a dramatic divergence of expected outcome.  One size fits all, plug n' play seems to be too ridgid to respond.  Maybe 10 years from now we'll be hammered for charging our clients a fee for mediocre performance and just sitting on the assets (sure I know the argument that we meet with our clients quartlery, send 'em b-day cards, tell 'em they're up by 4% this year, review their plans, whatever) when we should have just charged them a flat fee.  I don't wish to get anyone's panties in a bind, I'm just being honest about some thoughts I've been having.

Peace 

“…have started to become sceptical of all the financial metrics we use to
sell our services, since they are all based on past performance and I
don’t understand why we can rely on correllations, standard deviation
etc…  which are all just as fickle and unpredictable as returns (eg/
international stocks are much more corelated than they used to be).”



Dude-



This is smart thinking.  The Baby Boomers have DRASTICALLY
affected every step of their way in history, the effects were all new
and un-tested.  Why are we to assume their retirement needs will
not take the markets into unkown territory as well?  This is only
1 factor in dispelling the accuracy of MPT and Monte Carlo. 



Fair enough.



If this a position one takes as an advisor, they will need to figure
out how to plan then, and pray it is right (for the sake of possible
Arbitration).  I think nothing is right on, but using the best
tools we have for what we know is the best we can do.  The real
key is mapping the treck of portfolios through the life needs of the
client…ala managing the relationship, plan, and assets for clients
all along their way.  Set it and forget it is gone. 

[quote=skeedaddy] [quote=mikebutler222]

You do realize some day it will be a value manager's day again, due
nothing at all to his or your stock picking ability, right?

[/quote]

Tell me Mike, how will you know when "value" is back?[/quote]

Ahhh, there's the rub. Those of us honest enough with ourselves to know we aren't the Ms. Cleo to the investment world realize we WON'T KNOW until after the rear-view mirror performance data tells us. OTOH, since I ALWAYS have style diversification, I'm not put in the position how having to guess which style will be in favor next.

YOU, otoh, should be asking yourself that question, since your investment style is of a specific and undiversified (style and cap, at least) nature.

[quote=dude]

I appreciate that.  I'm just beginning to be sceptical of the trend to wrap people up with a grossly overdiversified and expensive index fund (90% of all wrap programs i've seen) ....[/quote]

You've been looking at different wrap accounts than I have. I've yet to see a single one that fits that description.

[quote=mikebutler222]Ahhh, there's the rub. Those of us honest enough with ourselves to know we aren't the Ms. Cleo to the investment world realize we WON'T KNOW until after the rear-view mirror performance data tells us. OTOH, [/quote]

Is Ms. Cleo the best you can do? That's a cop-out and a cheap shot which demonstrates what we (at least I) know: that you're small-minded and an agitator who has an inferiority complex and tries to compensate for it by ripping into everyone on this forum.

Keep looking into the rear view mirror Mike. 

[quote=skeedaddy2]

[quote=mikebutler222]Ahhh, there's the rub. Those of us honest enough with ourselves to know we aren't the Ms. Cleo to the investment world realize we WON'T KNOW until after the rear-view mirror performance data tells us. OTOH, [/quote]

Is Ms. Cleo the best you can do? That's a cop-out and a cheap shot which demonstrates what we (at least I) know: that you're small-minded and an agitator who has an inferiority complex and tries to compensate for it by ripping into everyone on this forum.

Keep looking into the rear view mirror Mike. 

[/quote]

Sounds like you need decaf. I had no intention of likening you to Ms. Cleo (although there are plenty of people that are convinced than can predict the market). If that's what it sounded like to you, my apologies.

Now, how about re-reading that post, minus the Cleo reference.

[quote=SonnyClips]Yea what he said.
[/quote]

Hey, newb, stay out of the way when grownups are talking, ok?

Isn't there a test you should be studing for? A $2k IRA you should be opening?

Hey Clipper...ease up a bit and face facts; given that you just cleared your seven, you're going to get some abuse just like you did as a freshman in high school...

...and given the fact that you're at Kamp Kool-Aid, you might even get a double dose of abuse occasionally...

Fine.



Now, lets examine the issue you raised about growth vs. value. I’ve

noticed that during the same market periods some “value” managers

outperform “growth” managers and vice versa. One could conclude then

that your argument isn’t supported. If an investment style is in fact in

vogue, then the other style can’t do as well. So the argument could end

here.



Or you could start defining what is meant by “value”. Russell defines it as

low price-to-book ratio and a lower growth rate. I define value as buying

deep discount, out of favor, or turnaround situations. My problem with

that approach (and yes you can make money at it), is that these

investments take time to work out. I don’t have the patience to sit on

dead money while Apple, for instance, is on fire and setting new highs

every week.



My point is that it comes down to stock selection. Some managers

whether they call themselves growth, GARP, or value are better than

others regardless of the market environment. The approach I use does

well in an uptrending and flat market. So at least I’m covered 2/3 of the

time.    



      

MikeButler wrote:

I appreciate that.  I'm just beginning to be sceptical of the trend to wrap people up with a grossly overdiversified and expensive index fund (90% of all wrap programs i've seen) ....

You've been looking at different wrap accounts than I have. I've yet to see a single one that fits that description.

I am referring mostly to the wrap accounts which include8 to 10 mutual funds, each with 100 to 300 positions all weighted relative to their respective competitive index, charging 80 to 150 bps.  In my humble opinion any mutual fund owning more than 50 (ideally 25-30) stocks is overdiversified.  The research I've followed suggest that you get diminishing returns on diverisfication over about 16 to 20 stocks.  I guess that my insight (for whatever it's worth, maybe not much?) is that manager's who own over 100 stocks are hedging against the risk of underperforming the benchmark by a wide margin on a short term basis (maybe a year?) and therefore diluting their potential.  Perhaps they don't want to look too different from their benchmark so they can keep their jobs.  Sounds like an expensive index fund to me.  Now wrap it all in a 100 to 150 bps fee to feed my family and I've got a beautiful, overweight pig ready for slaughter.  I think the hordes of Financial Advisors, Brokerage Firms, Regulators, Mutual Fund companies, Index Fund companies and ETF companies following this investment approach will cause too many $$'s to chase down the same investments in close to the same proportions and rebalance roughly in the same ways around the same times (quarterly, yearly whatever).  Doesn't this concern anyone else?  I don't know maybe I need to go back to cleaning out toilets for a living. 

Cheers

[quote=skeedaddy]Fine.

Now, lets examine the issue you raised about growth vs. value. I've
noticed that during the same market periods some "value" managers
outperform "growth" managers and vice versa.

[/quote]

When you see value managers doing as well as growth managers during a growth market, look deeper into what they're actually buying and holding. As often as not you'll find they're not sticking to their style. A great example is the Legg Mason "Value" fund where the manager was buying bigtime growth stocks in 1999 and calling it value.

[quote=skeedaddy]One could conclude then that your argument isn't supported.

[/quote]

It's well supported, review MPT.

[quote=skeedaddy]

Or you could start defining what is meant by "value".

[/quote]

That's a fair enough point, there are many investment schemes that fir the broad descriptions of growth and value. Things are a tad clearer when you're talking about capitalization levels, or domestic versus international, which matters every bit as much as styles.

[quote=skeedaddy] My problem with that approach (and yes you can make money at it), is that these investments take time to work out.

[/quote]

Not so. In fact, deep value (Brandes, for example) made buckets of money in 2001 ans 2002 while the broader indexes treaded water.

[quote=skeedaddy]

My point is that it comes down to stock selection.

[/quote]

Nah, less than 6% of your success has to do with stock selection. You could be the best stock picker known to man, but if you're buying LC value in a LC growth market, well, you'll look like Warren Buffett during the late 1990s. Exactly like Warren, as  a matter of fact.

[quote=skeedaddy]

Some managers whether they call themselves growth, GARP, or value are better than others regardless of the market environment.

[/quote]

There's no doubt that that 6% makes a difference when you're comparing managers working in the same space.

[quote=Indyone]

Hey Clipper...ease up a bit and face facts; given that you just cleared your seven, you're going to get some abuse just like you did as a freshman in high school...

...and given the fact that you're at Kamp Kool-Aid, you might even get a double dose of abuse occasionally...

[/quote]

Sonny's a Joneser? Just when I thought the kid couldn't get lower... 

[quote=SonnyClips]I was just playin with the old crank. I'm a peaceful liberal and your man butler knows this. He's just such a dick. I was a fat kid in high school so don't worried I know how to take some good natured ribbing Brotha. Word to the wise duly noted and cataloged.[/quote]

You're "peaceful"? LOL, only if "peaceful" means "full of extrainious gas" 

BTW, it's obvious you were the fat kid in school, your attitude reeks of it 

[quote=dude]

I am referring mostly to the wrap accounts which include8 to 10 mutual funds, each with 100 to 300 positions all weighted relative to their respective competitive index, charging 80 to 150 bps. 

[/quote]

I'm not a fan of fund wraps, (and I wasn't thinking fund wraps when I read your post) but I wouldn't be so quick to assume that a fund having 100 (althought that's too wide for my taste) or more positions means it's weighted relative to an index. I also have to say I haven't seen fund wraps using that sort of fund, but I suppose it's not as uncommon as what I first thought when I read your post and assumed you meant SMAs.

[quote=dude] In my humble opinion any mutual fund owning more than 50 (ideally 25-30) stocks is overdiversified.  The research I've followed suggest that you get diminishing returns on diverisfication over about 16 to 20 stocks. 

[/quote]

That school of thought's pretty common. There's probably something to it.

[quote=dude]

  Doesn't this concern anyone else?  I don't know maybe I need to go back to cleaning out toilets for a living. 

Cheers

[/quote]

If there was such an impact, I don't think the few fund wrap accounts using that approach will make it any worse. OTOH, it's an interesting thought.

Mike,

I've seen soooo many iterations of the described product it makes me sick.  Fund of Fund products, lifestyle funds, mfund wrap programs.  In 401K's, VA's (you know my favorite!), 529 plans, etc.....  Maybe all the funds in the wrap program don't have 100 plus stocks, still..... there's a lot of stocks in those bloated pigs.  Also, if MPT is the governing factor of all these programs and they are all investing in the same manner what's it mean for the markets, especially as sh*tloads of $$$ come raining from above from all the retirees rolling over their pensions, 401K's etc... all falling into their appropriate MPT buckets in relatively the same %s (80/20,60/40,40/60: 40%LC value/growth,10% MC value/growth, 5%Sm Cp value/growth, 5% Reits, 20 Intemediate FI, 15% short term FI, 5% cash as an example) Just like the end of the 90's saw all the $$ chasing down the prominent paradigm then (New Economy, no rules, Sex drugs and rock and roll....Ooops wrong era) and wall street responded to the "need" we were blind then, what about now?  Maybe the result will be mediocre returns?  I don't know, I'm just trying to stimulate some thoughful ideas as to what it all might mean.

May the force be with you.

Mike,



Style drift doesn’t bother me if in the end my money is worth more. I

think too big a deal is made by that term. GARP, value, its all about

branding and promotion.   



Brandes is a fine shop, decent track record over the long haul, but don’t

forget your barf bag. Huge swings quarter to quarter, +15% then -18%.

Also, I don’t see enough of a negative correlation to the market. There

were a couple of instances when they were up when the market was down

but that is all. BTW, 2001 US Value was up 16% and then 2002 was down

22% in line with s&p 500.



If you’re convinced that you should have an allocation in deep value, and

don’t mind having that drag on portfolio performance then so be it. For

instance, Lg. Cap Value outperformed in 2 of the last 15 years. So if you

don’t mind seeing that drag in your account the other 87% of the time,

there’s nothing left to discuss.



Take care

Dude nice post...

Is most of this broker lingo. I do agree PFA's use the we hire and fire theory often. It works and shows customer we manage the big picture and hire a professional to manage the daily balance of the funds.

When I say the big picture I mean guiding them by risk, needs, time frames and performance.

Thanks Exec

I don't fundamentally disagree with the we hire and fire approach.  I just have some concerns about how it's marketed and implemented.  As I've mentioned before, I'm having a few doubts about the rationale for charging a % of assets for this approach.  It seems to me that clients will become antsy when markets are modest and question the fee they are charging.  Interesetingly enough I watched a DVD yesterday by the Russell group (formerly Frank Russell Company), who is one of the biggest promoters of the fee based wrap approach.  In fact I used to work down the street from their headquarters in Tacoma, WA and I know some people who work there.  Anyway, on the DVD they reflected the same thoughts; that charging a fee for a wrap program and providing basic services will eventually cause clients to do the cost/benefit analysis,  resulting in disatisfation or concern about the ongoing fee no matter how many birthday cards or performance reports you send them.  They provide some tools to solve this problem, like creating a client engagement roadmap, which is a small step in the right direction, but I still feel like a retainer seems to be most appropriate for manager selection, education, planning etc...   Anyway Blah, blah, blah.  Maybe this is a good topic to discuss on it's own or put to rest?

Thanks for listening

[quote=skeedaddy]Mike,

Style drift doesn't bother me if in the end my money is worth more.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

[/quote]

But once you understand how little stocking picking has to do with returns (less than 6%) and how much cap and style do, you’ll see your money not only grows faster, but with less volatility.

[quote=skeedaddy] I think too big a deal is made by that term. GARP, value, its all about branding and promotion.   
[/quote]

Not even close. In fact, you can win a Nobel prize in economics proving it isn’t “branding”. 

[quote=skeedaddy]
Brandes is a fine shop, decent track record over the long haul, but don't
forget your barf bag. Huge swings quarter to quarter, +15% then -18%.

[/quote]

You’re not looking at their LC Value portfolio. They don’t have swings like that, aside from the quarter including 9/11. In fact, when compared to the S%P 500, they’ve had over the past 6 years 112% upside capture with only 53% of the downside. Again, even if you hired Brandes, they’d only be around 24% of the portfolio.

[quote=skeedaddy]
Also, I don't see enough of a negative correlation to the market.

[/quote]

Since you’re talking about an equity manager you’re not going to see a negative correlation to the market. What you will see, and what matters  is that they have a low (.30) correlation to the typical growth manager.

[quote=skeedaddy]

If you're convinced that you should have an allocation in deep value, and
don't mind having that drag on portfolio performance then so be it.

[/quote]

If you consider +12 returns for the past 5, 7, and 10 years a “drag” (not to mention the past three at +23%), so be it. I know plenty of folks who would have been happy to have that drag, not to mention the “drag” that 25% of your portfolio in international equities have delivered. A one trick all growth, all <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />US portfolio has been the place to find “drag” the last 6 years.

[quote=skeedaddy]

For instance, Lg. Cap Value outperformed in 2 of the last 15 years. So if you
don't mind seeing that drag in your account the other 87% of the time,
there's nothing left to discuss.

[/quote]

I have no idea where you got that stat or what measure is used in it.

Go to ; http://www.russell.com/us/indexes/us/default.asp

 Then look to the right under "Historical Performance" and pull up the "Style Idexes" PDF. 

There you'll find a  a chart of the Russell Style indexes. You’ll see that in the last 12 years, LC Value has out performed LC Growth 67% of the time, and has done it with lower volatility. Just as important to our conversation, look how many times that both LC styles have been outperformed by SC or MC. In fact, looking at all caps and styles LCG has been at the top three times, and the bottom four times during this 12 year span. That “one size fits all” portfolio has been a relative dog.

I’m not making the case here, btw, for LC Value over LC Growth. I’m making the case that a diversified portfolio encompassing the various styles and caps (since I can't, and I’ve yet to see anyone else who could, predict which style/cap would be in favor next) provides better performance with lower volatility than a portfolio of either a single style or a one constructed ignoring style and cap.

That’s why when I meet a prospect that employs a single manager, connected to a single style I don’t denigrate him for employing the guy. I assume he’s done a fine job with what should be the smallish part of the portfolio he runs. I simply ask the prospect who’s running the other caps and styles that should be in their portfolio. When I hear he’s running 100%, I know there’ll be an ACAT signed soon.

Hey, wasn’t the gangster Stanley Tookie Williams also nominated for a

Nobel?



I still have a chance!

Yeah that was after he became a born again.

Mike,



I’m getting the data right off the Brandes and Russell websites.



On the Russell website, Lg. Cap Value is “color-coded” in a dark brown

and yes it was the best performing style in 2 of the past 15 years (about

13% of the time.)



Brandes US Value Equity fund did have huge quarter to quarter swings in:

1998, 1999, 2002, 2003 and 2005 (I can see your point about low

correlation )…the damn thing is all over the place.   



I would be inclined to go the Emerging Market route and get double the

return for that volatility. Anyway since no one else is jumping in, maybe

we should stop.

[quote=skeedaddy]Mike,

On the Russell website, Lg. Cap Value is "color-coded" in a dark brown
and yes it was the best performing style in 2 of the past 15 years (about
13% of the time.) <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

[/quote]

You’re sort of moving the goalposts there, Skee. If you mean of ALL ten of the styles, yes, LCV was the top only twice (LCG was only three times, see the chart I linked to),but jumping from that  to saying that any sector but the very top is a “drag”, well, that’s hardly true. LCV outperformed LCG 67% of the time. More importantly only two of the ten sectors beat that “only twice at the top” record. It sounds like you’ve made my case for me, guessing the next favored sector is nearly impossible.

Again, we’re talking as if I’m a proponent of LCV exclusively, and I’m not. What I’m saying is that your growth style of investing is favored when growth styles in general are favored. A balanced portfolio that includes all styles and caps will outperform that single strategy over any reasonable period of time.

[quote=skeedaddy]
Brandes US Value Equity fund did have huge quarter to quarter swings in:
1998, 1999, 2002, 2003 and 2005 (I can see your point about low
correlation <?:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" />)...the damn thing is all over the place. 

[/quote]

I can see what you’re saying from the Brandes website. Why that information doesn’t track what I have from my source on their SMA is a mystery to me. OTOH, without looking at quarter to quarter shifts in the S&P or the Russell 1000, you can’t really say it’s been a rougher ride than the indexes AND the Brandes portfolio on their website has made a habit of beating the S&P 500. With a lower standard deviation and beta than either index, it’s safe to assume there’s less volatility there. LCG is even more volatile as a matter of fact. Better still, combine Brandes with a low correlation LCG manager and you’ve come a long way to reaching that efficient frontier and with lower volatility.

[quote=skeedaddy]  

I would be inclined to go the Emerging Market route and get double the
return for that volatility.

[/quote]

If you think the volatility of the Brandes account is rough, you don’t want to venture near the international, much less the emerging market group.

[quote=skeedaddy]

Anyway since no one else is jumping in, maybe
we should stop.
[/quote]

If there aren’t any further takers, that’s fine by me. Thanks for the discussion.

I know it’ll piss some off but here are my final numbers for 2005:



up 23.8%



Top holdings:



Apple

Texas Inst.

Humana

Corning

XTO Energy



Worst holdings:



Qualcom

GE

Nordic American Tankers

Ebay

Starbucks



Have a happy and safe New Year to all!

SKEE

[quote=skeedaddy]I know it'll piss some off but here are my final numbers for 2005:

up 23.8%

Top holdings:

Apple
Texas Inst.
Humana
Corning
XTO Energy

Worst holdings:

Qualcom
GE
Nordic American Tankers
Ebay
Starbucks

Have a happy and safe New Year to all!
SKEE
[/quote]

Me, too. Jackson National VA. Up almost 24%, net of all fees.

50% in Value Line Target 25 and 50% in JNL 5 UIT strategies.

[quote=skeedaddy]I know it'll piss some off but here are my final numbers for 2005:

up 23.8%

Top holdings:

Apple
Texas Inst.
Humana
Corning
XTO Energy

Worst holdings:

Qualcom
GE
Nordic American Tankers
Ebay
Starbucks

Have a happy and safe New Year to all!
SKEE
[/quote]

NAT has clobbered me.  Normally I'd take the loss, but by this point I'm hanging on to see if we get a bounce now that tax loss selling is hopefully over.

Fortunately I have other holdings which have held up a little better.  ;-)

[quote=Dirk Diggler]

Me, too. Jackson National VA. Up almost 24%, net

of all fees.

50% in Value Line Target 25 and 50% in JNL 5 UIT

strategies.

[quote=skeedaddy] [quote=Dirk Diggler]

Me, too. Jackson National VA. Up almost 24%, net
of all fees.

50% in Value Line Target 25 and 50% in JNL 5 UIT
strategies.

[/quote]

Dirk, I looked at the Value Line Target 25 and its 65% in oils. I kept my
participation to about 30%.
It did well, how did you decide on that portfolio over others? And will you
keep it into 2006? And what is in the JNL 5 UIT?
[/quote]

The JNL 5 is a blend of 5 strategies, 20% in each. It was up about 9% in 2005. The VL 25 was up 37%. Both are net of fees. Unfortunately, my most aggressive combo was 60% in VL and 40% in JNL 5. Most folks were 50/50 and some of the more conservative clients were 100% JNL 5.

Why do I decide to use these over others? Mostly because I'm the most familiar with these two and because they've worked better than anything else I've ever done.

I'm aware of the allocation in the new strategy, but that's the strategy. Don't use a strategy if you don't have the discipline to stick to it.