Are We A Nation Of Wusses?

Yesterday CNBC had a segment about ETFs during its show Power Lunch that started with a snippet from Jack Bogle saying “they’ve corrupted it (ETFs) into a trading business. You can trade all day long in real time, that’s the tag line Tyler (Mathisen), to which I would ask what kind of a nut would want to do that?” Um, what kind of nut when able to choose, would prefer the more restrictive wrapper, that being traditional mutual funds? Bogle likes VTI and SPY to buy and hold forever but the assertion that ETFs are bad because they can be traded is ludicrous. As mentioned before he is really attacking human behavior not the product. A couple of years ago Dylan Ratigan was going to interview Bogle and of course this same line of thought was coming so I emailed Dylan before the interview and pointed out that this is really about human nature, by coincidence or not Ratigan asked Bogle about this on the air and Bogle sort of conceded the point. ETFs are just a tool. I promise you that people in the past have misused every single tool in existence and will do so in the future. The rest of yesterday’s CNBC segment focused on elementary discussions about potential adverse complexities with commodity based products, funds where the components are thinly traded and so on. It became a reminder (for people somewhat familiar with ETFs) or an introductory point that you need to do homework, look under the hood and understand the dynamics relevant to the fund. So telling people they had to do work. On...

Are We A Nation Of Wusses?

Yesterday CNBC had a segment about ETFs during its show Power Lunch that started with a snippet from Jack Bogle saying “they’ve corrupted it (ETFs) into a trading business. You can trade all day long in real time, that’s the tag line Tyler (Mathisen), to which I would ask what kind of a nut would want to do that?” Um, what kind of nut when able to choose, would prefer the more restrictive wrapper, that being traditional mutual funds? Bogle likes VTI and SPY to buy and hold forever but the assertion that ETFs are bad because they can be traded is ludicrous. As mentioned before he is really attacking human behavior not the product. A couple of years ago Dylan Ratigan was going to interview Bogle and of course this same line of thought was coming so I emailed Dylan before the interview and pointed out that this is really about human nature, by coincidence or not Ratigan asked Bogle about this on the air and Bogle sort of conceded the point. ETFs are just a tool. I promise you that people in the past have misused every single tool in existence and will do so in the future. The rest of yesterday’s CNBC segment focused on elementary discussions about potential adverse complexities with commodity based products, funds where the components are thinly traded and so on. It became a reminder (for people somewhat familiar with ETFs) or an introductory point that you need to do homework, look under the hood and understand the dynamics relevant to the fund. So telling people they had to do work. On...

Blasphemy!

Did you see the Bill Miller segment on CNBC yesterday morning? If not you can click through and watch it here. He is not on very often, very rarely in fact, but (and here comes the blasphemy) the more I hear or read from him the less impressed I am. He made a comment yesterday about when he first bought Amazon around $80 in the late 1990s but he said that unfortunately it went down to $6. The way he lamented I took to mean they sold none on the way down to $6. Obviously they bought more, he said the average price now is about $9 so it is up a ton from that average. We know that from the financial crisis he again held a lot of the wrong names for far too long like Freddie Mac and Citigroup according to this link and AIG, Bear Stearns, Wachovia, Washington Mutual and Countrywide according to this link. I weighed in on Miller a little over a year ago. In looking at the chart for the last decade it looks as though the decline has more than offset all those years of outperformance however that is not quite right. Adding in the dividends (per Yahoo finance) the fund is down 17.22% over ten years while the S&P 500 was down 21.1%. So for the decade it beat the market by about 0.38% annualized but took anyone who held for the entire ten years on a sickening ride. If you got in after those first two dividends however then you did much worse over the last nine years losing 18.47%...

Blasphemy!

Did you see the Bill Miller segment on CNBC yesterday morning? If not you can click through and watch it here. He is not on very often, very rarely in fact, but (and here comes the blasphemy) the more I hear or read from him the less impressed I am. He made a comment yesterday about when he first bought Amazon around $80 in the late 1990s but he said that unfortunately it went down to $6. The way he lamented I took to mean they sold none on the way down to $6. Obviously they bought more, he said the average price now is about $9 so it is up a ton from that average. We know that from the financial crisis he again held a lot of the wrong names for far too long like Freddie Mac and Citigroup according to this link and AIG, Bear Stearns, Wachovia, Washington Mutual and Countrywide according to this link. I weighed in on Miller a little over a year ago. In looking at the chart for the last decade it looks as though the decline has more than offset all those years of outperformance however that is not quite right. Adding in the dividends (per Yahoo finance) the fund is down 17.22% over ten years while the S&P 500 was down 21.1%. So for the decade it beat the market by about 0.38% annualized but took anyone who held for the entire ten years on a sickening ride. If you got in after those first two dividends however then you did much worse over the last nine years losing 18.47%...

"Its Not Obvious To Me That There Is Any Large Misalignment Currently"

Sweet Fancy Moses. I am not a big fan of the word bubble as I think it gets overused. Not everything that goes up a lot and then goes down a lot is a bubble. In all likelihood the best time to really assess whether something is a bubble or not is well after the fact. That does not mean you can’t assess when something is better to sell but declaring bubble or not is not easy and I don’t believe relevant. However Ben Bernanke’s comments yesterday essentially saying there are no bubbles would seem to be very misguided or poorly planned or something–something that is not right. The folks on CNBC said that Bernanke seemed to be greenlighting the continued move higher in equities, commodities and anything else that seems to go up when the US dollar goes down. CNBC gets heckled a lot but the conclusion of Bernanke greenlighting speculation on risk assets is not an unreasonable inference to draw. Greenspan came to be remembered, among other things, for a couple of very wrong comments and while I certainly don’t know what comes next this sort of comment from the Fed Chairman, aside from striking me as inappropriate, has a great chance of being spectacularly wrong. The notion of anyone with influence saying “keep on buying folks, its all good in the hood” seems outrageous. I typically do not get this worked up about things but this seems weird and not in a good way. Short post, I am hopping on a plane but hopefully this will whip up some good...

“Its Not Obvious To Me That There Is Any Large Misalignment Currently”

Sweet Fancy Moses. I am not a big fan of the word bubble as I think it gets overused. Not everything that goes up a lot and then goes down a lot is a bubble. In all likelihood the best time to really assess whether something is a bubble or not is well after the fact. That does not mean you can’t assess when something is better to sell but declaring bubble or not is not easy and I don’t believe relevant. However Ben Bernanke’s comments yesterday essentially saying there are no bubbles would seem to be very misguided or poorly planned or something–something that is not right. The folks on CNBC said that Bernanke seemed to be greenlighting the continued move higher in equities, commodities and anything else that seems to go up when the US dollar goes down. CNBC gets heckled a lot but the conclusion of Bernanke greenlighting speculation on risk assets is not an unreasonable inference to draw. Greenspan came to be remembered, among other things, for a couple of very wrong comments and while I certainly don’t know what comes next this sort of comment from the Fed Chairman, aside from striking me as inappropriate, has a great chance of being spectacularly wrong. The notion of anyone with influence saying “keep on buying folks, its all good in the hood” seems outrageous. I typically do not get this worked up about things but this seems weird and not in a good way. Short post, I am hopping on a plane but hopefully this will whip up some good...