Wednesday, November 4, 2009

General Updates: Mutual Fund, Website, Misc.

Next week we'll have an update on our performance metrics (as we do every 4 weeks) and I'll do a full update on pledges for launch, but I thought I'd take a moment to address some questions I often receive - especially from newer readers.

We have a lot of email readers so I want to stress that on the website itself there are tabs along the top where just about anything asked has been answered before.  Performance & Portfolio is here, Mutual Fund Pledges and Frequently Asked Questions here, plus some of our history since August 2007 as we soon approach 5000 posts (ouch!) ... for example some of our calls on the economy, housing, etc from 07 and 08 are layered in this section. Understanding that new people show up every day, I tried to collect the main features across the top menu of the website so a new reader can jump in and get up to speed relatively soon.

That said, let's touch on a few topics.

1 - Pledges

This has been our best month of pledges ever, besting even our peak levels in summer 2008 when we were regularly getting $500-$700K a month.  Things were going  so well summer 08 in terms of pledges, the belief was we'd be up and running by spring 2009.  Then of course the crash of Sept/Oct 08 happened, and basically we were wondering if we'd have an economic system to wake up to, not to mention a stock market.  Then yet another crash in Jan/Feb 09 didn't help.   While we are ambivalent on market direction per our strategy, I've found an upward rising market certainly helps spirits since 95%+ of all money in the market is skewed to the long side.  Either way, it's been a long 14 months since August 2008 but we've not only passed our best monthly total in pledges at over $800K - both new pledges and past pledges who have increased their future investment - but we are also at the highest absolute level as well; closing in on 2/3rds of the way there.  Full update a week from now.

2 - When will you launch the real thing?

This is the #1 question I get, and I always give the same answer.  It is not up to me, it is up to the readers.  Frankly some of my readers have much more patience than I do as this has been an "open ended" journey of 2+ years, with no firm end date.  I'd have lost interest by now if I was on the other end of this website ;)  We have roughly 150 pledged investors now, and some 40-50 of them have been around  since we started taking pledges February 2008 - through both crashes ... and still kicking.

But as we get closer to the end goal let's look at some potential outcomes.  I will consider this month of pledges as an outlier - but hope it is not.  ("assume the worst, hope for the best" strategy)   Considering a more normalized run rate of $250K / month, we are talking 6 months before getting near to $6M in pledges which is when we'd begin the actual filing with the SEC for fund approval.  In the SEC hand's it could be 60, 75, 90+ days... impossible to determine, but from there it's "on" and we're live.  The time for SEC approval should give us a couple more months to go from $6M to "close to" $7M - which is roughly where we want to be at launch.   Obviously any pledge pace that surpasses the $250K / month to the upside means getting started sooner rather than later - and vice versa.  But throughout the past summer $250K has been a consistent floor.  In summary, this *will* happen - it's just a matter of when.

3 - Will you still have a "blogging" type website? 

Of course - how could you live without me now?  (don't answer that)  I will still do a commentary type website with much more than you see elsewhere in the mutual fund world - in fact "transparency" was my original selling feature.  Obviously performance in the long run is important as well... having a manager who is transparent but trails the market by 10% annualized is not going to help an investor very much.  But the idea here was to provide a lot more information flow so less passive investors can be updated on what is going on with their money.  I am sure there are countless people out there who are far better investors than I - who will never get an opportunity.  And there are far poorer investment managers out there, who by reputation or inertia run billions of dollars.  So we're here to fill a niche both in information flow and to a lesser degree - investment style. Our piece in Barron's last year sort of covered this from a 40,000 foot level.  [A New Kind of Fund Manager]

Some caveats - the website won't be the same as it is now, since the SEC won't allow it.  Essentially NOTHING stock or market specific can be forward looking, as per my understanding (made clear to me by advising lawyer).  So, FMMF website is basically a look at my day to day thoughts on the markets / stocks, to show strategy ... process ... technique.  Anyone who follows this site for a month can see the patterns and they are consistent.  But the future website will be different in that it caters more to fund investors or people who want to know what is going on the financial world; but in terms of "stock stuff" it will be backwards looking in terms of what we did, NOT what we plan to do.

Unlike most mutual funds who throw up a top holdings list every quarter, with commentary that is 45 days after the last day of the quarter, our investors will have much more timely information.  I expect to do quite substantial updates in terms of "this is what we hold, these were our main moves" every 2 weeks, or 26 times a year.  Meaning about 7x as often as most funds, with far less lag time.  On a daily basis I still expect to talk about the economic issues and highlight interesting financial stories - similar to what we do now.  The frequency of posting each day will be a bit less than is done now, because I need to concentrate more on managing money and actually getting more than 4 hours of sleep a night.  However as stated above, the core change will be with "stock talk", transactions, and the like.

One more thing, we'll be parting ways with this lovely website and moving on to other pastures.  Destination unknown ... I would like to create a relatively clean and simple site similar to this (see here), with a 'commentary' section for the blogging.  If any reader with super html programming skills HAPPENS to be available and has a spare 30 hours this spring - send me an email.

4 - Will the mutual fund be available in Fidelity, Schwab, Ameritrade, etc etc?

Short answer: no.  I don't like that, but it is just the economics of the situation.  Due to costs this has to be old school at the beginning where you download a form, fill it in, mail it and have a stand alone account.  Fidelity and Schwab have excellent supermarkets but it's akin to the Russian mafia... huge costs to get in, and they take a huge amount of ongoing fees each year.  If you are a $100M+ asset level fund it can make sense (maybe).  But impossible for a smaller fund, without destroying your cost structure.  As for the brokerage houses (i.e. Ameritrade) we'll eventually be on there but first you need some track record, and then pay some fees to be on a network.  However, the fees are relatively manageable versus the duopoly that controls the mutual fund supermarkets.

5 - Will there be retirement accounts, will their be automatic monthly investment options, etc.

I listed 2 questions but there are about 10 related questions I receive often.  The easiest way to answer is ANYTHING you can do in any other mutual fund, you will be able to do here.  Other than the items pointed out in item 4.  Simple as that.

6 - I need a name

We were originally going to go with Rising Tide Funds but I am not sure if I still want to go in that direction - maybe, maybe not. .  If you can think of anything creative but won't scare off people still embedded in "The Matrix" feel free to email me.

7 - FAQ

Again, I covered a lot of questions that typically come up about a year and a half ago in this entry.  [May 26: Frequently Asked Questions]  I have not looked at it lately to update it,  but I assume 90%+ of it holds true today.

To reinforce, outside of actual fund strategy everything I am doing is outsourced to 3rd party experts. I don't want to think about anything other than "buy stock, sell stock, short stock."  All the mechanics, NAV information, back office blah blah will be done by this firm: Mutual Shareholder Services - who caters to 80+ mutual funds, of the smaller to medium sized ilk.  


As always thanks for continued readership, pledges, donations, interest and it's been quite a journey - certainly we could not of started the website at a more incredible time in the country's financial (and otherwise) history.  I expect the unexpected as we continue to move forward.

Any specific question not covered in FAQ, or above - feel free to email me as always.

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