Category Archives: Mutual Fund Commentary

June 1, 2023

By David Snowball

Dear friends,

Welcome to summer.

Had I mentioned that I have the coolest job in the world? I love a challenge. Augustana offers them to me at the rate of sixty a week, approximately the number of students I work with. They often leave me stunned.

(See how important punctuation is? “They often leave me stunned” and “they often leave me, stunned” are two very different observations. Hmmm … both might be accurate, now that I think of it.)

My college started in 1860 with a very humble mission: it wanted to help the children of immigrants build a good Continue reading →

Modest protection from runaway inflation

By Devesh Shah

Introduction

Warren Buffet has a long history of sharing sharp, colorful reflections on inflation and its role in controlling your profits.

Before we drown in a sea of self-congratulation, a further – and crucial – observation must be made. A few years ago, a business whose per-share net worth compounded at 20% annually would have guaranteed its owners a highly successful real investment return. Now such an outcome seems less certain. For the inflation rate, coupled with individual tax rates, will be the ultimate determinant as to whether our internal operating performance produces successful investment results – i.e., a reasonable gain in purchasing power from funds committed – for you as shareholders.

That combination – the inflation rate plus Continue reading →

Helping a Friend Get Started with Financial Planning

By Charles Lynn Bolin

A close friend, who I will call Carol for this article, wanted to meet to discuss whether she should get a Financial Planner. Here is her situation and what she is interested in learning:

Carol and her husband were good savers and earned pensions and Social Security. He passed away a couple of years ago after a prolonged illness. Their focus had been on healthcare needs and not on financial planning. She also received an inheritance from her parents. Carol explained that she had savings scattered at multiple banks in savings accounts, Inherited IRAs, Traditional IRAs, and Roth IRAs. She had questions about why she should invest when her living expenses were met Continue reading →

A Dinner and Walk with David Sherman, fund manager of Crossing Bridge Funds.

By Devesh Shah

Last week I had the opportunity to sit down for dinner with one of our own, the legendary David Sherman. He is no stranger to regular readers of MFO. His funds, public and private funds through Cohanzick and CrossingBridge and the RiverPark Short Term High Yield Fund, for which he’s the sub-adviser, are uniformly first rate. He’s articulated four investing principles that are embodied in each of his portfolios: Continue reading →

Recession Watch

By Charles Lynn Bolin

The Chronology of the Economic Cycle provided by Joseph Ellis in Ahead of the Curve is an interesting chart that shows the ripple effect from left to right of inflation and interest rate increases across the economy over the next six to twenty-seven months. In Figure #1, I added my subjective assessment of whether the indicator level is currently positive (blue +) or negative (red -) for the Investment Environment and the direction of change, whether it is improving (red up arrow) or softening (red down arrow). Most of the indicators are softening, but not at a level to be considered negative (contracting) for the Continue reading →

Taylor the Investor: You belong with me!

By David Snowball

Taylor Swift might be the swiftest young investor of her generation. Ms. Swift, 33, saw her net worth creep up over the past year, from $570 million at the beginning of 2022 to $740 million now. Most of that wealth is driven by the feverish desire of her fans, the 120,000,000 or so Swifties, to transfer their money to her. At the same time, she’s done prudent and profitable things with her wealth. Other young investors can learn from her reasoning and parallel her strategy.

(Well, give or take the “multi-platinum pop Continue reading →

The Young Investor’s Secret Weapon: The HSA

By Mark Freeland

Many things in life suck. High on anyone’s list would be:

  1. Health insurance costs
  2. Taxes
  3. Being poor
  4. Ketchup-flavored Doritos. (And you know some mad scientist will have, like, mayo-flavored ice cream in the pipeline next.)

When it comes to Frankenfood, you’re on your own, but there’s major good news about the other three. It’s called a Continue reading →

Leuthold Core Investment (LCORX/LCRIX), June 2023

By David Snowball

Objective and strategy

Leuthold Core pursues capital appreciation and income through the use of tactical asset allocation. The objective is to avoid significant loss of capital and deliver positive absolute returns while assuming lower risk exposure and lower relative volatility than the S&P 500. Assets are allocated among stocks and ADRs, corporate and government bonds, REITs, commodities, an equity hedge, and cash. Portfolio asset class weightings change as conditions do; exposure is driven by models that determine each asset class’s relative and absolute attractiveness. Equity and fixed-income exposure each range Continue reading →

Briefly Noted . . .

By TheShadow

Jamie Cuellar, CFA, passed away unexpectedly and tragically on May 8. He was the co-portfolio manager of the Buffalo Small Cap Fund from 2015 and of the Buffalo Discovery Fund from April 2020. Our condolences to his family, friends, and co-workers.

Capital Group, parent of the American Funds and, with $2.6 trillion AUM, one of the world’s largest investment managers, has registered two exchange-traded funds, Capital Group Core Bond ETF and Capital Group Short Duration Municipal Income ETF. Management and operating expenses have not Continue reading →

May 1, 2023

By David Snowball

Dear friends,

A Tale of Two Cities

Nominally Chip and I reside in the Quad Cities, whose t-shirts describe them as “twice as nice as the Twin Cities.” It’s a lovely and surprisingly diverse urban area with about 450,000 people and an agglomeration of two dozen small cities and towns. Half of us reside in Illinois, just south of the Mississippi River, and half in Iowa, on the river’s north bank.

The Mississippi River actually flows from east to west here. Recently, though, it has been flowing east, west, north, south, and, more than occasionally, up. As I write, the Mississippi is cresting at 22′, about five feet above the level at which we declare a major flood. People in Davenport take notice. That’s one Continue reading →

Looking Beyond the Next Recession

By Charles Lynn Bolin

The Federal Open Market Committee minutes from March state that the staff’s projection “included a mild recession starting later this year, with a recovery over the subsequent two years”. Participants “generally expected real GDP to grow this year at a pace well below its long-run trend rate.” In addition, the Conference Board forecasts “that economic weakness will intensify and spread more widely throughout the US economy over the coming months, leading to a recession starting in mid-2023”.

With a high probability of recession and a high return on short-term cash, Continue reading →

Flows in Money Market, Inflation Linked Funds, and Series I-Bonds: Let the data talk.

By Devesh Shah

Inflation continues to be a hot-button topic. We (and many others) have written about TIPS, TIPS funds, and Series I Bonds. This article is not about adding or altering recommendations. Instead, we let the data do the talking. Instead of prescribing an investment thesis, I want to see how market participants are behaving by watching their actions. Some light commentary will try to connect the images and tables into a narrative. You could be forgiven if you detect an underlying theme that sounds like Continue reading →

Investing Without an Ulcer

By David Snowball

The good news is, in the long term, things will work out okay.

The bad news is that there are a lot of miserable short-terms between now and then. The most successful long-term investments are ones that allow you to endure the short term with a minimum of trauma.

Or drama. (Comedian Anita Renfroe offers, “Difficulty is inevitable. Drama is a choice.”)

Or ulcers. (Philosopher Marilyn Monroe: “If you spend your life competing with businessmen, what do you have? A bank account and ulcers!”)

Ulcers are to be avoided. We have a way. Continue reading →

Investor Life Cycle and Lessons Learned from Past Recessions

By Charles Lynn Bolin

I have made many mistakes investing and am an example that if one reflects upon their mistakes, they can recover. As George Santayana said, “Those who cannot remember the past are condemned to repeat it.”

I received assistance from Murray in writing this article.

In an AAII Newsletter, Warren Buffet’s mentor Benjamin Graham described individual investors as either “Defensive” or “Enterprising/Aggressive” based on how much “intelligent effort” they were willing or able to devote to investing. The Defensive Investor included professionals without much time and young investors without much investing experience.

In this article, I review Continue reading →

Briefly Noted

By TheShadow

Updates

In a “less than meets the eye” kind of way, the headline is “ESG funds lose $5.2 billion in assets in 2023.” The story behind the story: the Republican temper tantrum had led to outflows from BlackRock, whose ESG Aware MSCI USA ETF alone dropped $6.4 billion. In a defensive reaction, BlackRock reduced the ESG allocation in its model portfolios, which Continue reading →

April 1, 2023

By David Snowball

Dear friends,

Chip and I celebrated the start of Spring – or at least Augustana’s spring break – with a long sojourn to New Orleans. Our options were either a series of flights totaling about 10 hours or a 14-hour drive. For better and worse, we chose the latter, loaded the car with snacks, books, and music, and headed down the Mississippi from the Quad Cities to the Big Easy. The drive took us through seven states and one swath of utter destruction. The night before our passing, a tornado in Mississippi decapitated a forest adjacent to Interstate 55. Imagine, if you might, hundreds of mature trees either snapped off five feet above the ground or ripped up by their roots. It was spectacular and a sobering reminder of the price we’ll pay for a heating planet.

We ate well – she more Continue reading →

Bond Funds for a Recession and Falling Rates

By Charles Lynn Bolin

Bond investors think they’ve seen it all.

They are wrong about that. For people who first began investing in bonds within the past 4o years – say, since 1982 – the bond market must seem like a source of perpetual, reassuring, and unrelenting gain. Just chuck some cash into the Treasury market or investment-grade corporates, and voila! Instant wealth.

In that same period, global equity investors have been Continue reading →

Short Term Performance of Long-term Recommendations

By Devesh Shah

The eternal flaw of investment gurus, both on the web and elsewhere, is that they’re never held accountable for their bravado and bold recommendations. It is in the nature of the beast that one right guess lives on forever while an infinite number of horrendous recommendations vanish from the public mind. I think of Elaine Garzarelli, who made her fame from one right call – an impending market crash a week before the actual “Black Monday” crash in 1987 which saw the Dow drop 22% (7300 points in today’s terms) in a day – but somehow dodges rebuke for her Continue reading →

Artisan Developing World Fund interview

By Devesh Shah

An interview with Lewis Kaufman, founding portfolio manager of the Artisan Developing World Fund

My primary investment biases are two-fold. First, in general, I invest in public markets through low-cost, low-turnover passive vehicles. Second, in general, I invest in US equities. Both of those biases were arrived at through a combination of (painful) experience and careful research. That said, none of us benefit from being held hostage by our beliefs. In many ways, humility and self-doubt, curiosity, and the determination to keep learning are the hallmarks of our wisest citizens. And I aspire to learn from them. In consequence, I’ve spent a huge amount of time over the past six months talking with a cadre of the industry’s best emerging markets managers.

Home Bias

Investors worldwide have a powerful bias Continue reading →

The Tide Is Going Out

By David Snowball

“It’s like the tide going out; you’re starting to see all the things that have been waiting to happen,” David Sherman of Cohanzick Management, 15 March 2023 web call summary.

David Sherman is one of the industry’s most consistently successful fixed-income investors. He founded Cohanzick Management on the premise “return of capital is more important than return on capital.” His specialty is the pursuit of distinctive, low-risk diversifying strategies for fixed-income investors. “We try to focus on what we know and what we do well. We do not pursue investment ideas or strategies that are Continue reading →