money jungle

Heebner Long Financials

Posted in kenneth heebner by moneyjungle on December 6, 2008

The journal reports that Kenneth Heebner has made a big bet on financials and put over 40% of CGM Focus to work in the sector. Top picks include Citigroup, BofA, and Wells Fargo, which he considers to be historically cheap based on price-to-tangible book and price-to-preprovision earnings ratios.

Nassim Nicholas Taleb: “Markets are Stupid”

Posted in macro, nassim-nicholas-taleb, nnt, predictions by moneyjungle on December 6, 2008

“In a complex environment that is dominated by black swans and rare events, markets are not very good”

Wide-ranging Charlie Rose interview covers Taleb’s black swan theory, the roots of the current crisis, the future of banks as utilities, and a chilling view on the deflation and deleveraging to come in the market.

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David Swensen Slams Cramer

Posted in cramer, david swensen, index funds by moneyjungle on February 19, 2008

In an otherwise soothing overview of the investment themes outlined in Unconvential Success, David Swensen takes quite a crack at Jim Cramer:

“There is nothing that Cramer says that can help people make intelligent decisions,” Mr. Swensen said. “He takes something that is very serious and turns it into a game. If you want to have fun, go to Disney World.” 

Pay to Play

Posted in funds, index funds by moneyjungle on January 22, 2008

Gretchen Morgenson’s latest NYT column  points out FINRA’s Mutal Fund Expense Analyzer, a free tool that lets you model and compare the expenses associated with different mutual funds and ETFs. Also has a nice set of definitions to understand the various ways you are charged, like Front-End Load, and management fees.

Great tool, but a little depressing to realize that I just paid a 1% management fee to have Oakmark Select I tank last year.

Happy New Year

Posted in Byron Wien, predictions by moneyjungle on January 1, 2008

Via Bloomberg, here’s Byron Wien’s annual list of predictions. He believes that each of these items has more than a 50% chance of occurring during the year.

1. In spite of Federal Reserve easing, and other policy measures, the United States economy suffers its first recession since 2001 as housing starts stay soft and banks are reluctant to lend to anyone where a whiff of risk is apparent. Federal funds drop below 3%. The unemployment rate moves definitively above 5% and consumer spending is lackluster.

2. Standard and Poor’s 500 earnings decline year-over-year and the index drops another 10%. Energy and materials stocks hold up relatively well in what is viewed as a correction rather than a bear market. Market conditions start to improve during the summer.

3. The dollar strengthens in the first half reaching $1.35 against the euro and weakens in the second exceeding $1.50. The European Central Bank begins an accommodative monetary policy. Foreign investors flock in to buy cheap assets in the U.S. early in the year but the dollar declines later as several countries holding large reserves diversify into other assets.

4. Inflation rises above 5% on the Consumer Price Index as higher commodity prices and oil finally begin to have an impact in spite of modest wage increases. The 10-year U.S. Treasury yield rises to 5%. Stagflation becomes a frequent presidential campaign and Op-Ed discussion topic.

5. The price of oil goes down early in the year and up later, sinking to $80 a barrel in the first half as western economies slow and inventories are drawn down, and rising to $115 in the second. Established wells continue to decline in production while China, India and the Middle East increase their consumption.

6. Agricultural commodities remain strong. Corn rises to $6.00 a bushel and cotton to $.85 a pound. Gold reaches $1000 an ounce as disillusionment with paper currencies spreads across Asia.

7. The recession in the United States slows the Chinese economy modestly but its stock market declines sharply. Investors recognize that paying biotechnology stock multiples for highly cyclical companies doesn’t make sense. The Chinese revalue the renminbi by another 10% to control inflation and as a gesture to foreign governments participating in the Olympic Games who complain that Chinese terms of trade are unfair. Several long distance runners refuse to compete in certain Olympic events because of continuing air pollution problems.

8. The new Russian President Dmitry Medvedev, under the tutelage of Vladimir Putin, becomes more assertive in world affairs. He insists that Russian oil and gas be paid for in rubles and demands a Russian seat at major world conferences. Russia and Brazil stock markets lead the BRICs. The Gulf Cooperation Council markets begin to attract interest among emerging market investors.

9. Infrastructure improvement becomes an important election theme for both parties and construction and engineering stocks rally in anticipation of huge programs beginning after the new President’s inauguration. Water becomes a critical problem world-wide and desalination stocks soar.

10. Barack Obama becomes the 44th President in a landslide victory over Mitt Romney. With conditions in Iraq improving, the weak economy becomes the determining issue in voters’ minds. They want to make sure that gridlock ends and Congress gets something done for a change. The Democrats end up with 60 Senate seats and a clear majority in the House of Representatives.

Still Got It

Posted in funds by moneyjungle on December 26, 2007

Boston Capital’s fund manager of the year is sixty-seven-year-old Ken Heebner, whose $4.4 billion CGM Focus Fund is up over 75% year to date. This fund — one of four that he manages — is the top diversified stock fund in 2007, according to Lipper.

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Ben Stein on Life, Happiness, and Index Funds

Posted in ben stein, index funds by moneyjungle on October 14, 2007

This week’s Ben Stein column contains some sage advice on life and investing, as well as a few picks for low-cost index funds:

  • FSTVX — Fidelity Spartan Total Market Index, which tracks the Wilshire 5000
  • EEM — iShares MSCI Emerging Markets ETF, a developing countries ERF
  • EFA — iShares MSCI EAFE Index Fund, an Asia-focused ETF

Why am I such a big Ben Stein fan? His columns, of course. But also his byline: he bills himself as a “lawyer, writer, actor, and economist.” You could spend a lifetime working to (credibly) call yourself a member of any one of those professions, let alone master them. He does all four. In an age of incredibly competitive, specialized careers, I find this comforting and inspiring. 

Feature Request

Posted in features by moneyjungle on October 14, 2007

I use Ameritrade and don’t like its Portfolio management functionality all that much. In order to better track my performance, I would like a view of all my current holdings and past trades with the following: absolute return, percentage return, and annualized return.

I think the analyzed return is the key piece, particularly the ability to compare it with a number of indexes, perhaps over time.

Slowly but Surely…

Posted in GOOG, MSFT by moneyjungle on October 14, 2007

I am becoming a big fan of Google Documents. I have been using it for my business school essays and recently started using the spreadsheet to keep track of my running.

Since it is web-based, the software can be updated regularly. Two important new features that caught my attention were the addition of excel-style shortcuts to navigate through cells (e.g. ctrl-up, ctrl-down), and the ability to auto-sum highlighted cells, at the bottom left of the screen.

Over time, these incremental improvements add up, until some time in the future, the product will equal Microsoft Excel, but at a much lower price. This phenomena is exactly what Clayton Christensen describes in the Innovator’s Dilemma.

Blowing Up — The Postscript

Posted in nassim-nicholas-taleb, niederhoffer, nnt by moneyjungle on October 14, 2007

Like many people, Nicholas Nassim Taleb first came to my attention via Malcom Gladwell’s 2002 New Yorker profile, “Blowing Up“. The article, written shortly after the release of Fooled By Randomness, illustrated Taleb’s contrarian investing strategy by way of contrast to Victor Niederhoffer’s:

“Niederhoffer, like Buffett and Soros, was a brilliant man. He had a Ph.D. in economics from the University of Chicago. He had pioneered the idea that through close mathematical analysis of patterns in the market an investor could identify profitable anomalies. But who was to say that he wasn’t one of those lucky nine? And who was to say that in the eleventh year Niederhoffer would be one of the unlucky ones, who suddenly lost it all, who suddenly, as they say on Wall Street, “blew up”?”

And, as Gladwell goes on to write, their disagreement was more than conceptual:

The distinction between these two sides is the divide that emerged between Taleb and Niederhoffer all those years ago in Connecticut. Niederhoffer’s hero is the nineteenth-century scientist Francis Galton. Niederhoffer called his eldest daughter Galt, and there is a full-length portrait of Galton in his library. Galton was a statistician and a social scientist (and a geneticist and a meteorologist), and if he was your hero you believed that by marshalling empirical evidence, by aggregating data points, you could learn whatever it was you needed to know. Taleb’s hero, on the other hand, is Karl Popper, who said that you could not know with any certainty that a proposition was true; you could only know that it was not true. Taleb makes much of what he learned from Niederhoffer, but Niederhoffer insists that his example was wasted on Taleb. “In one of his cases, Rumpole of the Bailey talked about being tried by the bishop who doesn’t believe in God,” Niederhoffer says. “Nassim is the empiricist who doesn’t believe in empiricism.” What is it that you claim to learn from experience, if you believe that experience cannot be trusted? Today, Niederhoffer makes a lot of his money selling options, and more often than not the person who he sells those options to is Nassim Taleb. If one of them is up a dollar one day, in other words, that dollar is likely to have come from the other. The teacher and pupil have become predator and prey.

Well, it is almost five years later, and Niederhoffer is back in the New Yorker, this time in a piece by John Cassidy. The results are not good:

On Tuesday, July 24th, the Dow fell two hundred and twenty-six points. Two days later, it dropped three hundred and eleven points. Commentators on CNBC were making ominous pronouncements. I sent Niederhoffer an e-mail, saying that I hoped he had been well positioned for the market’s correction. He replied in three words: “I was not.” On Friday, July 27th, the Dow fell another two hundred points, closing four per cent down for the week. The markets were still volatile a week later, when Niederhoffer came into Manhattan for his monthly libertarian meeting. After it ended, we went across the street to a restaurant, where he ordered a cappuccino. He looked pale and haggard, and years older. For several minutes, we sat in silence. Then, in a low voice, he said, “Things have changed totally since we last spoke. The situation is fundamentally different. It is critical.” Kenner and Aubrey joined us, but Niederhoffer hardly seemed to notice them. “We are fighting for survival night and day,” he said when I pressed him for details. “I was caught wrong-footed in the market turbulence. I’m not as smart as I thought I was.”