“I’m In It For The Action”–Joe Retail

• Posted by ZorTrades
• on May 28th, 2012

I don’t even know how to start this blog or even word it properly, so I’m just going going to allow my fingers to type whatever flows thru my mind;

• Is watching every SP500 tick beneficial to your account if you are not a day-trader?
• Everyone says that you cannot time the market, but yet they want to make sure that they are participating in every uptick and don’t want to be involve in any downticks.
• Jesse Livermore once said that he made most of his money sitting.
• Kevin Daly achieved  800% cumulative return in the same 12 years that the market was virtually flat, he accomplished that by sitting largely in cash during negative environments.
• Do investors realize that most mutual funds have to be to the tune of 95% invested at all times?  So, if your genius fund manager does not like the market and thinks we are going down there is not much he can do about it–he has to put that money to work no matter what, think about that the next time the market is going thru a correction.  And maybe that is the reason why when you put up a chart of most funds versus the SP500 they are pretty much identical.
• Do clients realize that brokers, mutual funds, subscription newsletters and money managers know that if they stay in cash chances are that the money they manage will walk out the door to the guy who is showing action, moving things around, and not necessarily doing better?   So in turn the broker, mutual fund, subscription newsletter, money manager will probably put that money to work when he knows he shouldn’t to justify his fees or even existence.  I know this first hand, and I learned a long time ago that when you manage other peoples money not only are you doing that but you are also managing their emotions. Subscription services who have never dealt with clients are experiencing this first hand and their churn ratio is sky high.
• Are you after the thrill, the action, or the performance?

These funds gave you a lot of action and made sure that you were involve in every uptick.  Just by looking at the chart you can see these funds move in lock step with the market for the most part. CMG focus fund and Fairholme are down 10% plus this month so far, the contrafund is only down about 5%.

• CMG Focus fund had a bang out first quarter, plus 16%, but down 18% in the last 52 weeks.
• Fairholme was up 31% for the 1st quarter but down 16% in the last 52 weeks.
• Fidelity Contrafund up 15% in the 1st quarter and up +3.8% in the last 52 weeks.
• Fairholme and CGM FOCUS take on very concentrated positions but I would bet that most equity funds that have to be fully invested share similar outcomes.
• The gentlemen who run these funds are brilliant by most accounts, but are their hands handcuffed because their mandates states they have to be as close to fully invested as possible?
• Sure the ride and thrill of not missing one single up day was fun, but was it worth it?

Lessons Learned From Last Years Summer Crash

DO NOTHING!!

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.