Comments on Fund My Mutual Fund: 'Rising Tide Growth' Performance vs Peers July Upd...

Hi BD,Thanks - it felt a lot better on Jun 30th bu...

2008-08-22T09:28:00.000-04:00

Hi BD,

Thanks - it felt a lot better on Jun 30th but relatively speaking and compared to people who do this full time, with teams of analysts and access to institutional research I feel like a good performance was accomplished.

Lawrence, we actually addressed that a lot in both jan and mar 08 during those swoons. #1 above all else I hope the transparency issue lets people in on thinking and hence leads to less redemptions - for example over at CGM Focus they are in the dark what is going on and when the fund drops 20% there is sheer panic. Maybe the transparency won't matter when people get emotional but I think it will help offset it. #2 Aside from maybe 4-5 weeks during the past 13 months I've held at least 10% cash, and many times up to 20-25%. So that would take care of a big swath of redemptions.

Legg Mason Value only has 9 Billion in total assets so I cannot imagine he lost 18.2B and 19.2B back to back - that would mean a 50B fund shrunk to 10B in 6 months. Thats a 80% reduction. Granted he has lost 30% from PERFORMANCE alone so you have to separate a fund shrinking from (a) losing a massive amount of money on its own vs (b) redemptions

But anyhow that is an outlier - you dont see 80% shrinkage in 6 months (if your numbers are accurate). In worst of time I could see 10,15% type of redemptions and again cash on hand usually would take care of that. If it had to get to liquidations I'd sell out of a lot of the small holding positions at the bottom of the portfolio - the 0.1%, the 0.2% type of stakes as needed. A lot of those are effectively 'closed positions' but I don't want to keep retyping 'I'm re-opening position ABC' or 'I'm re-closing position ABC' if I decide to add to them, so instead I keep them in a group at the bottom of the portfolio. But you could generate a few % of assets by selling those off incrementally. And then from there you sell partial positions off individually but it would not be 1% off of every position - its judgement call on each one.

There is something that is not discussed and that ...

2008-08-22T01:19:00.000-04:00

There is something that is not discussed and that is, how would your fund handle major redemptions? That would force you to sell positions. Would you sell everything in equal amounts or would you sell the ones you have the most gains on, or most losses on? What's your plan?

Look at Legg Mason's Value Trust run by Bill Miller. He had $18.4 billion in customer redemptions last quarter and $19.2 billion in the prior quarter.

Impressive results. You need to get the RTG fund ...

2008-08-21T22:37:00.000-04:00

Impressive results. You need to get the RTG fund up immediately. Every day down is more potential cash leaving my pocket! ;)

BD

AgreePeople piled into Heebner after 80% year and ...

2008-08-21T17:12:00.000-04:00

Agree

People piled into Heebner after 80% year and post Fortune cover story
that was the "top" within 3 weeks. Down 20%+ since. Now they pile out.

When if they believe in Heebner they should be piling in.

I invite you to go to Yahoo message boards for CGMFX and scroll back about 2-3 weeks and read the vitriol. I was a bit shocked. But then again people are swing trading mutual funds nowadays so nothing shocks me.

What is funny is most people sent him their money because they cannot manage their own accounts with any success ;) Anyhow, at this point its turned into apathy over there and probably that means its at or near a bottom.

But just another example of buying at top, selling at bottom. Human psychology is half the battle.

Over the last couple of months I have read books b...

2008-08-21T17:08:00.000-04:00

Over the last couple of months I have read books by David Swanson of the Yale portfolio fame, and you should see his take on the Wall Street sales machine. Basically his books say you can't beat the market eventhough he does consistently. He doesn't say what he does but as best as I can tell he diversifies, allocates capital, and rebalances constantly. He gives lots of examples of how Wall Street (not just main street) is buying at the top and selling at the bottom.

I've said many times they should scroll along the ...

2008-08-21T17:00:00.000-04:00

I've said many times they should scroll along the bottom of the screen the guests last appearance and what they said and/or stock picks and return etc.

It tells me very few use top down thinking (macro views) - and it confirms a lot of ills I view about the system. As much as I knock hedge funds the one thing about them is if you stink for a period of time you will lose your clients. That leads to other issues (only having a short term focus and crazy volatility) but at least if you stink you are eliminated fast.

In mutual funds they rely (as do our politicians) on ignorance and apathy and lack of financial education. Many are just giant sales machines as is most of Wall Street. Used car salesmen with better suits - send us your money, we know best.

Now this was a horrid year and one could argue -8% which for example was the average for mid cap growth beat the market indexes by a good amount, but of course you know many who were down 15,20,25% for the year at the bottom 1/3rd of the bell curve. I don't have an issue with lagging an index for 1 year... but many of these guys lag (by a wide margin) over the long run (5+ years). And just keep on rolling.

You do realize about 60% of mutual fund managers don't have a penny of their own money in their funds. That says it all right there.

Anyhow I consider this year to be an outlier on the "upside" - which I suppose is necessary for people to even give me a chance. But I won't be able to repeat that sort of out performance versus markets and peers every year.. but hopefully still stay in the top 10-33% most years.

TM: Good job on your returns!However, what does i...

2008-08-21T16:40:00.000-04:00

TM: Good job on your returns!

However, what does it say to you that the "best and brightest" really haven't performed all that well? Maybe they should take up new careers as teachers or doctors? Maybe we could free up some of that excessive pay and give it to those who might be productive? It is amazing that they are paid for such mediocrity. I am sure we will look back on this period of time and say what the hell were we thinking. Never have so many been so sure and so wrong about things they have no control over. Just think how much time is taken for people to come on CNBC to explain something that are passionate about yet in the end they are completely wrong about. It tis amazining!!