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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (4888)	8/30/1998 8:47:00 PM
From: Jurgis Bekepuris	Read Replies (2) \| Respond to of 78507

Paul, Well, Marty Whitman was buying all week, but it did not do much good for his returns. ;-) I would think that TAVFX by now owns 50% of US semi-equipment companies and 50% of Japanese banks. If things keep going this way, we'll soon elect Marty Japanese PM and will force Japan to buy American semi-equipment solving all problems in one strike. But what does Marty know anyway? :-)))) Jurgis

To: Paul Senior who wrote (4888)	8/31/1998 12:09:00 AM
From: James Clarke	Respond to of 78507

No offense taken - I completely agree with you from the inside (and I am talking about pension fund management, not mutual funds), but let me fill in the blanks as to how this insular world of institutional investing works. How the world really works it this. My firm's and just about every investment firm's clients will not let us hold more than 5% cash. If you do that and are wrong for one quarter, you lose half your clients. So its not an option. From my experience, I would guess that over half of value managers are very much in cash right now in their personal accounts. BUT THEY ARE NOT ALLOWED TO DO THAT PROFESSIONALLY. They want to, but can't. These same clients are going to be screaming next quarter - WHY DIDN'T YOU WARN US?!? This business is idiotic. If I could have managed our firm's accounts as I have managed my personal account our clients would be much happier right about now. But even if I could have I never would have because the clients, or rather their consultants (who really run this business on the institutional side) demand "market performance" - which means if you lose your clients' money, thats fine, as long as everybody else does too. At the bottom of a bear market, I'm sure these same consultants will be castigating us for being fully invested. This is another secret to Buffett's success - he has found a group of "clients" (investors in BRK) who will let him do what he does best without trying to second guess him every quarter. That is a rare luxury, and a valuable one - not just to him, but to his shareholders. What do you think happens when you are an institutional investor who owns 5% of an illiquid company trading at half what it is worth? If a lot of your other investments look like that too (we know the feeling on this thread) you lose clients, you have to sell that stock whether you want to or not. And you can't pick your price - you HAVE to sell. And that drives the price down further, but you can't buy more. This is a vicious cycle that may explain why something like New Holland keeps falling no matter what it is worth. That is the game most value managers are in right about now. And it is gutwrenching. These consultants proclaim to hire us to invest, but do not seem to know what the word means. That is why value managers like me do much better in their personal accounts - its not that we are screwing our clients - we would love to do the same for our clients, but it is nearly impossible. I hope this helps to clear up what is a secretive business, but one which has a lot to do with the day to day prices of your investments. (Mutual funds are a different game, but just as much a game. I'm talking about pension fund investing which I know.) Now you know why I won't disclose who I work for. Jim