If you want to argue against that type of person, please be my guest.
i hope to set things off on a better foot this time.
i think you may have misinterpreted my message, or perhaps i wasn't clear. i have nothing against Alsin--i was talking about my opinion of a certain venue for picks. i further made other statements that are almost truisms of modern portfolio theory (namely, that value managers exist in a value universe, not the SPX universe). but these things are not arguing "against that type of person".
actually, your posts on Alsin have intrigued me to read more of his stuff on Realmoney (though not the pay-per-view stuff), so it wasn't wasted breath.
i would need to see his record over his entire career, benchmarked against the relevant value index to comment on his record. but i agree with you that safety and dividends are "good things".
And I don't know anyone who has done better than Arne-- long-only and non-leveraged --
i'm not sure what period of time you're talking about--do you mean just this year? and i'm not sure who's being included or excluded. do you want to include long-only bond funds? if so, may i introduce you to the $68BILLION Pimco fund and the always entertaining Bill Gross.
if we allow value managers to be benchmarked against the SPX, then we might as well let bond managers benchmark against it as well.
i am curious about the qualifier "long-only and non-leveraged". is it to exclude others who did better?
in my opinion, either one should talk about managers within their particular asset classes, or one opens up the floodgates.
w/r/t his prescient comments on Tyco, that could have been valuable information for an active manager, but not very valuable for one who is "long-only". (assuming that we are talking about managers smart enough to screen out TYC as a long pick last year, as Arne obviously was).
basically, an active manager screens out a lot of stocks anyway. an active value manager could exclude MSFT because its PSR is too high. and TYC doesn't make the cut either. just another filter.
practically speaking, the only reason to drill down past the screening stage (to the point of uncovering some potential bombs like Arne seemed to have done) is if one is considering a short candidate.
based on the TYC share prices you listed, it seems Arne could've done quite well for his clients by shorting TYC at 57.55 on 11/15/2001. i imagine the return would have rivaled his better long picks.
speaking of which, there have been a lot of good short candidates this year. i have found it much easier to make money on the short side than the long side (surprise, surprise). so why would one exclude short/long as a valid strategy?
i can better comprehend excluding leveraged portfolios (although my best results came from very heavy leveraging on the long side in 99), because that is a very risky strategy.
but right now, where i have an unleveraged portfolio and consider 1% to be a "full" position and 2% to be "huge", i don't see how being short 5% against 25% long is greatly increasing my risk. in fact, i think it decreases my risk because there is considerable negative covariance between the shorts and the longs in my portfolio. obviously a personal decision for each investor, but i don't consider that kind of short/long approach to be incomparable to a long-only portfolio.
which brings me to a bigger issue: we critique equity managers for whether they have a positive or negative alpha or whatever, over a given time span, but naturally the greater determinant of results is what the equity allocation is in the first place.
in my opinion, even many "smart" active managers really take a conventional approach to equity allocation, and do not take it nearly as seriously as they take the act of choosing their picks. however, imho, the mark of a truly valuable manager is one who does a good job at the bond/equity ratio setting juncture, as this will have the largest impact on client returns.
conventional wisdom holds that equity allocation be 110 minus your age or something. in my case (mid 30s), that would mean my equity allocation would be around 75%, and bonds 25% (maybe a little cash on the side). if i had followed this strategy, then it is highly likely i would have had bad returns this year, regardless of the equities i picked.
however, simply by having a low equity allocation, i have been able to do OK despite the bear market. in fact, i could have lost ALL my money on my longs and i still would be better than the market.
so obviously, the equity/bond ratio is much more important to the returns one gets than the particular equities one picks. sometimes i feel investors lose the forest for the trees. they get caught up in the intricacies of this or that system--whether it is technical analysis or some type of fundamental analysis--without stepping back to look at the big picture.
personally, i find different equity analysis approaches quite intellectually interesting. even TA! and even though i admit that indexing is probably the intellectually correct choice. but i try to keep the big picture in mind as well. because it seems we are in a "big picture" kind of market.
and the big picture has been telling me for a couple years now that the greatest bull market in US history is over, and valuations remain higher than at the PEAKS of past bull markets. smart people like Jeremy Grantham have shown that every bubble gives back EVERYTHING that was gained in the mania.
the farther i zoom out in history, the less i feel that our correction is "over". every past bubble has ended in a negative 10yr return, whereas our own trailing 10yr return is still in the high single-digits. having a megabear end with 10yr trailing returns as high as they are would be like ending a bear market with a PE of 25, in my opinion.
meanwhile, all the pension fund stuff is just starting to hit the fan. what does that say about quality of earnings on the market? people keep saying the SPX will make $59 next year or whatever, so the forward PE is low. but if you look at several other ways to do the accounting, earnings will be in the $35 range.
that implies a PE of around 25, and that's before all the pension stuff, which the CSFB guy says could cost US corporations an enormous sum. i think earnings will continue to come down in this environment.
meanwhile, demand for stocks is likely to wane, imo, as Joe 6P realizes his 401k has been slaughtered and takes a look at all the scam artists populating corporate America.
so i think about those kind of things. perhaps they aren't as interesting as some innovative cash-flow model or dividend discount formula, but i think they matter more in a "big picture" market.
I would care to review/critique a Kevin Landis, a Munder fund, anyone long wcom/ene/flm/lhsp
as i recall you are an admirer of Longleaf, so i assume you are familiar with their championing of FLM. it appears Longleaf is standing by their pick. here is what they wrote in their just-released third-quarter review:
"Fleming is by far the most controversial
company we hold, with the largest short position in it that we have ever
experienced as an owner. Whether the shorts end up being right or wrong, their
actions are also unprecedented. Their influence in the press, their activism in
spreading negative stories, and their personal attacks on Fleming executives
represent a level of aggressiveness that is fairly unusual in normal markets."
i would be interested in your take on Longleaf's continued support of FLM. |
