Category Archives: Edward

Popping the Balloon

By Edward A. Studzinski

“We live in an age of great events and little men.”

       Winston S. Churchill

We have made it through another month, and another quarter. It was not quite so painless for either investors or money managers, as year to date the S&P 500 has now dropped into negative territory. Volatility is clearly back. And while active managers made a valiant effort during the last week of the quarter to move the averages back up into positive territory, it was not to be.

What comes next? Stocks are Continue reading →

It Was the Best of Times ……

By Edward A. Studzinski

“I have to change to stay the same.”

Willem de Kooning

Horses for Courses

One of the columnists I have a great deal of time for is John Authers, who writes the “Markets Insight” column for the Financial Times of London. On 22 February, his column discussed the publication of this year’s edition of the Global Investment Returns Yearbook produced annually for Credit Suisse by the Elroy Dimson, Paul Marsh, and Mike Staunton. Historically they have looked at Continue reading →

What You See …

By Edward A. Studzinski

“If you can’t annoy somebody, there’s little point in writing.”

       Kingsley Amis

These days, given the continuing march of new highs in the market indices, coupled with the ongoing extremes of most valuation metrics on individual securities, there is not a lot for a conservative investor to say that hasn’t been said before. What is different this time is the continuing flight from higher fee investment vehicles by both retail and institutional investors. And that money is flowing either into exchange-traded Continue reading →

Conflicts and Contradictions

By Edward A. Studzinski

“Success is never final. Failure is never fatal. It is courage that counts.”

        Winston S. Churchill

Some time ago, I was surprised by a conversation with my colleague Charles, finding him quite incensed about a visit he had made to a money manager, one of a series of such encounters that began at the Morningstar conference this year. It appears to have been a disconcerting discovery to Charles that the firm in question, rather than lowering their fees, which fell somewhat on the high side, preferred to keep the fees high so as to support the high life. Charles would define the high life as expensive office space in the high-rent district, along with a propensity for displays of Continue reading →

Rearranging the Deck Chairs

By Edward A. Studzinski

“In wars then let our great objective be victory, not lengthy campaigns.”

                  Sun Tzu, The Art of War

Another year-end is in sight. Those of us who have been conservative in our asset allocations and predicting the end of the world have once again it seems, been proven wrong. Or perhaps not, for as the market keeps rising, the breadth keeps getting narrower. Or least it had been. It begs the question of whether we are setting up for a blow-off, heading straight up through year-end, or something else.

Attached is a Continue reading →

Fall Frolics

By Edward A. Studzinski

“Maybe this world is another planet’s hell.”

                                 Aldous Huxley

Investment Committees and Performance

We are at that point in time when investment returns trickle in from the endowments of schools and other not-for-profit organizations for their fiscal years ending June 30, 2017. In terms of preliminary numbers, the top ten college/university endowments had total returns Continue reading →

“One for the Gipper”

By Edward A. Studzinski

“There is much to be said in favor of modern journalism. By giving us the opinions of the uneducated, it keeps us in touch with the ignorance of the community.” Oscar Wilde

A recurring theme in investment letters, usually when one suspects that performance or personnel issues (often directly related) need to be glossed over, is a discussion about the need to have “team players” in the investment management and research process. Now there were hedge funds, such as Tiger Management in its heyday and Maverick Capital which used to make a virtue of recruiting former athletes in high school or Continue reading →

Ruminations at Summer’s End

By Edward A. Studzinski

Silence is the most perfect expression of scorn.

                                 George Bernard Shaw

Book Review

David Snowball recently asked if I would have any interest in reading Joel Tillinghast’s (Fidelity Low-Priced Stock Fund) new book entitled Big Money Thinks Small. While I am usually reluctant to read what often end up being collections of anecdotes about how smart someone was, the fact that it had been published by Columbia Business School Publishing overcame my initial reluctance. Much to my surprise, I enjoyed the book immensely, and found it to be a very thoughtful work. Let me first say that I do not know Mr. Tillinghast, other than by reputation. However, I have served on committees with people who do know Mr. Tillinghast and have worked with him. They are uniform in their praise of him both as an investor and as an individual. He is a true polymath with almost total recall. And unlike many who content themselves with a formulaic approach to investing, e.g. mean reversion, he seeks to understand the quality of a business, the numbers supporting the business, and the character, intelligence, and integrity of management. Two chapters in particular I would recommend to all are “Gamblers, Speculators, and Investors” and the last chapter entitled Continue reading →

For Whom Does the Bell Toll?

By Edward A. Studzinski

In the dawn, although I know

It will grow dark again,

How I hate the coming day.

                        Fujiwara No Michinobu

Buffett’s irreproducible edge

First, some addenda to last month’s comments, as there were a number of readers interested in private equity. One reader, whom I happened to agree with, identified Berkshire Hathaway as a private equity proxy, given that (a) Buffett is dealing with permanent capital with a true long-term time horizon, and (b) he has been clearly disciplined and dedicated to going where opportunities surface that others are inclined or required to ignore. It has actually been quite instructive to watch him complement his major holdings in Berkshire’s insurance businesses as well as the equity investments that he owned pieces of, such as American Express and Coca Cola, with the wholesale acquisition of an Continue reading →

Summer Musings

By Edward A. Studzinski

“Change is the law of life. And those who look only to the past or the present, are certain to miss the future.”

      John Fitzgerald Kennedy. Speech, Frankfurt, 25 June 1963.

The first six months of 2017 are gone, and most global markets have surged during that period. So those like me who thought valuations were starting to look extreme at the beginning of the year, once again cried “wolf” too soon. For those six months, Vanguard’s S&P 500 Admiral Fund achieved a total return of 9.3%, with an expense ratio of four basis points. Many actively managed funds, alas, did not perform quite as well for their investors, although their managers continued to do quite well, purchasing Continue reading →

The Boys of Summer

By Edward A. Studzinski

Everything is on such a clear financial basis in France. It is the simplest country to live in. No one makes things complicated by becoming your friend for any obscure reason. If you want people to like you, you have only to spend a little money.

   ERNEST HEMINGWAY

In recent weeks, a number of articles and books have made their way into print, and they are things worth taking a gander at as one ponders where we are in the economic cycle One of my favorite blogs to read is “The Brooklyn Investor,” which can be found at brooklyninvestor.blogspot.com which is updated intermittently. A recent piece was titled “High Fees” and posted May 19, 2017. The author discusses a Continue reading →

The Fifty Year Reich

By Edward A. Studzinski

 

“It is dangerous to be sincere unless you are also stupid.”

  George Bernard Shaw

Some thirty-odd years after its founding, the transformation of Morningstar is complete. From a firm that got its start providing tools and research to assist the individual investor, we now see a firm that exists to offer tools, support, and research to financial advisors or intermediaries. To a large extent, that evolution was necessary given the changes in the marketplace for mutual funds, as well as the changes in the regulatory environment. And once Morningstar became a public company, it would have been incumbent upon its employees and management to focus on Continue reading →

Nothing Personal, It’s Just Business

By Edward A. Studzinski

“This is the business we’ve chosen. I didn’t ask who gave the order, because it had nothing to do with business.”

Hyman Roth speaking to Michael Corleone in the movie “Godfather II”

Another month has gone by, and the current period of disruption has not only continued, but accelerated in the mutual fund management business. For all but the true believers (or perhaps those holding stock in the publicly-traded fund managers), it should be apparent that we are witnessing not just a cyclical decline, but a secular one.

Let’s start with the settlement between Bill Gross and Continue reading →

Survival of the Flushest?

By Edward A. Studzinski

“Cynic, n. A blackguard whose faulty vision sees things as they are, not as they ought to be.”

Ambrose Bierce

A question I have been pondering with increasing frequency is, of the mutual funds around today, how many of them will still be around in ten years? This grew out of a year-end luncheon with a friend of mine who heads up the strategic planning effort for a large financial services firm out of Chicago that has gone global and now has its fingers in many pies. Our discussion started around the problem with Continue reading →

“What Goes Around ……”

By Edward A. Studzinski

Democracy – “The substitution of election by the incompetent many for the appointment of the corrupt few.”

        George Bernard Shaw

So, another calendar year has gone by, and fund managers everywhere are dissecting their relative performance in comparison to some benchmark index. To put things into perspective for a real-world comparison (at least in terms of the performance numbers), the Admiral shares of the Vanguard S&P 500 Index Fund, which charges a five basis point fee, had a one-year Continue reading →

Behind Door Number Two Is?

By Edward A. Studzinski

 

“I and my public understand each other very well: it does not hear what I say, and I don’t say what it wants to hear.”

Karl Kraus

I recently had occasion to read proxy materials for San Juan Basin Royalty Trust. The issue involved an attempt to remove the current trustee, Compass Bank, the successor to TexasBank, which had been acquired by Compass, with Southwest Bank. The story is a recurring one in banking – a smaller local institution gets gobbled up by Continue reading →

Priceless – Worth Absolutely Nothing!

By Edward A. Studzinski

“Under this flabby exterior is an enormous lack of character.”

  Oscar Levant

This has proven a rather difficult time to write something and feel that you are either (a) not repeating things you have said before or (b) speaking with the certainty that you are offering some genuine insight that will prove advantageous to our readers as they pursue their investment programs. For those reasons, I will endeavor to be brief, which will probably result in my being more obscure in my comments than usual. I offer thus a number of random thoughts which should Continue reading →

What Price Integrity?

By Edward A. Studzinski

“Question in a Field” by Louise Bogan

Pasture, stone wall, and steeple,
What most perturbs the mind:
The heart-rending homely people,
Or the horrible beautiful kind?

From: The Maine Poets

 

So we watch now the public flogging of senior officials of Wells Fargo by our esteemed members of Congress, which is not to say that the flogging is Continue reading →

Behind the Curtain

By Edward A. Studzinski

“Moon in a barrel: you never know just when the bottom will fall out.”

 Mabutsu (19th Century Japanese haiku poet)

So, August as usual is the period of the “dog days” of summer, usually a great opportunity to catch up on reading. A site I commend to you for all things investment is Hurricane Capital, recommended to me by my friend Michael Mauboussin, of Credit Suisse. Among other things Michael pointed out that the writer of this blog (from Sweden) had posted all of Michael’s strategy and thought pieces going back for years. A recent one, which I would suggest is worth a read is Continue reading →

Have We Been Here Before?

By Edward A. Studzinski

“The past is never dead. It’s not even past.”

William Faulkner

I recently had coffee with one of my former colleagues in the investment management world. He asked me if our readers understood that, in the world of mutual fund managements, it was all about assets under management and profitability to the various stakeholders in the business. Thoughts about the returns for the investor were generally secondary, or put differently, whether the investors actually got any yachts (or vacations in the Caribbean or second homes on Hilton Head Island) did not matter. Having recently reviewed some posts on our Bulletin Board, I told him that no, many of our readers were still operating under the belief that there was, somewhere in that room full of manure, a pony.

Our desire for hope and change (at least in terms of investment returns) often leads us to ignore the evidence of simple mathematics working against us. Continue reading →