@expatsp , thank you for sharing your learnings. I also bought the fund at inception but had a much shorter leash. I don't remember the exact timing, but I believe I sold it after a couple years.
Berkowitz was heralded as a great fund manager being able to run a focused fund given his success early on with FAIRX. But as Charles points out, that fund was actually very well diversified by having the bulk (and if memory serves, close to 30-50%) of his money in BRK and LUK. When he relied on his own "value" stock picks, he chose nothing but value traps. So in retrospect, his only genius was riding the coattails of other well diversified, great stock picking masters.
My leanings from owning FAAFX:
- deep value managers are a huge gamble not worth taking.
- managers with huge egos who can't adjust or admit mistakes are a huge gamble (I would lump Berkowitz and Hussman in that same category for non-adjustment).
- If a fund has not kept up with peers or it's index over 3 years - find a better choice.
- Don't worry about the fund turning around the minute you sell. Remember you re-invested with another option. Be confident you made your best decision at the time.

I've said this before, and I'll say this again.
1) When you buy vs What you buy
2) do not reinvest dividends (especially in the Dweebners and the Dorkiwitzs)
I'm in both CGMFX and FAIRX playing with the houses money. I have the luxury to just wait and see if they turn around or go bankrupt.
No such luck with Hussman though. Because I didn't follow my 1-2 mantra when I bought it back first in 2001. I thought if anything this was the fund to DCA into, and so I did. Now I'm selling little every year. Might sell out completely this year. Funds managed by 1-2 people need 1-2 mantra.
PVFIX, I'm considering adding now after so many years of just holding.
COBYX, I did not time perfectly but not doing too badly. Not sending new money though.

@expatsp
Yeah... had about 6 GREAT years of tax loss carryover... followed by @5 years of not so great capital gains in my brokerage account!

Hi Charles,
Thanks for this. I'm a fellow sufferer, bought about the same time you did -- when it just opened. Like you, I'd been happy in FAIRX, which M* sent me to, but yes, this isn't the fund I thought I was buying.
I keep on thinking of selling, then hesitating, thinking he's bound to bounce back sooner or later (probably the day after I sell.) I sold FAIRX about a year and a half ago, but still have about 7% of my net worth in FAAFX.
It was my worst MF pick, I think, though I've had a few other bad ones. I've had even worse stock picks, though (like you, it seems) I no longer do those. I do still have a bunch of stocks that I've held for over a decade but I'm not adding to them.
When I do sell FAAFX, I'll probably move the money into DSENX or an index fund. I added up my winners and losers over the years, and I calculated that, after taxes, I would've done better in an index fund and had a lot less stress.
But that's me.
Here are my lessons:
Don't invest in a fund run by a single "great man" (prefer team-managed funds with great cultures like D&C or Primecap or index funds)
Don't invest in funds that make big macro / political / trend bets. They tend to look like geniuses--once.
Pay attention when a fund changes its approach, even if the names on top haven't changed.
Don't hold active MFs in taxable accounts unless they're tax managed.
All things I shoulda known years ago, but I'm a slow learner.

@expatsp.
Lucy recently woke me up from my sleep in the pumpkin patch and walked me into shelter. I've sold-out of FAAFX, which I first bought in 2011.
The experience is marked by much downside interrupted by very few upward periods.
Six years is not really a long time, but it sure feels like it with this fund! This allocation fund has existed entirely in a bull market.
The table below shows the sad numbers since inception through April (click on image to enlarge):

So far in May, FAAFX is down another 10%.
The firm has never touted "The Fairholme Effect" on performance charts for FAAFX.
DODBX, which I have owned since 2003, is now my longest holding.
Of the many fund investing mistakes I've made, including WBMIX and AQRIX, invariably because of misguided expectations, I think FAAFX is the most disappointing.
Expectations for the fund were built-on my favorable experience with FAIRX in 2000's, which I held from about 2002 through 2011.
But the two decades (or the two funds for that matter) don't compare. I examined them back in 2013 with Fairholme Fund (FAIRX) – What a Difference a Decade Makes, but I do not think it's improved much in the four years since, as evidenced in M*: Liquidity Risk Increases At Fairholme.
Which helps explain my disappointment. But four years ago, I wrote:

Yet, if I had to bet on one fund manager to deliver superior absolute returns over the long run, it would be Bruce Berkowitz. But many of us have come to learn, it’s gonna be a bumpy ride. Like some other deep value money managers, he may simply look beyond risk definitions as defined by modern portfolio theory…something fans of Fairholme may need to do also.

Good grief!
If I remember, Mr. Berkowitz stated during a Consuelo Mack interview on the eve of Trump's election that he can see light at end of tunnel ... and for a short time, it looked like maybe he did. But since about February, FAAFX is down another 20%, yet again.
Each quarter FAAFX reflects an ever increasing focus on extremely distressed, speculative, and illiquid securities.
Remember MBIA?
Remember St Joe?
Today, its Fannie/Freddie and SHLD.
Mr. Berkowitz hitched his wagon to Mr. Lambert and Mr. Mnuchin. I believe the latter was on SHLD's board while heading Trump's campaign finance committee, before becoming Treasury Secretary.
Has BB changed his stripes?
For years, he was heavy BRK and LUK.
The individuals behind all these entities are part of a billionaire's club: Lambert, Mnuchin, Buffet, and Cumming.
FAAFX is currently at $183M AUM, down substantially, half owned by Mr. Berkowitz. Flagship FAIRX is at $2.3B, about one tenth of peak.
Took me a while, as usual, but I'm joining kevindow, Sven, and others to be on sidelines going forward with Fairholme Capital Management, LLC.
Yesterday, SHLD popped 30% initially after a good earnings report, suspect short squeeze in play, but closed up "just" 14%. FAIRX and FAAFX jumped over 3%. But it is little solace to long-term investors.
This morning SHLD is down another 9%.
Maybe it's still possible for these bets to pay off.
Maybe it's just being part of what our friend Wes Gray calls "The Value Pain Train" and I've just fired god.
Maybe these really are the only deep-value investments, the "best ideas" Fairholme can find in the current elevated market.
But I don't think these are the investments that once earned Fairholme "Fund of the Decade" accolade or praise for being the next SEQUX (during its heyday).
So, after some 14 years investing with Fairholme, I'm out of the pumpkin patch and back in the crowd.
Hopefully, I've not disappointed you expatsp or other BB fans on the board. But if I have, my apologies. And if there are any friends still in FAAFX, I do hope the "Great Pumpkin" finally arrives.

I'd like to see GOOGL and AMZN do 10:1 splits, making their shares go down to roughly $100. AAPL did a 7:1 split a few years back as its share price was $700+. I own these stocks via funds, FCNTX has done well owning these names, but I'm worried that the law of large numbers may prevent GOOGL and AMZN from soaring to even greater heights going forward.

FYI: (I will link episode as soon as it becomes available, early Saturday morning.)
Regards,
Ted
May 25
Just about everywhere you look, America is awash in debt. U.S. households recently set a new record of indebtedness, $12.7 trillion, more than they owed at the height of the credit bubble in 2008
But context is everything. As last week’s WEALTHTRACK guest, Cornerstone Macro’s top ranked economist, Nancy Lazar told us, consumer debt is down significantly relative to disposable personal income at 88% of income vs. 115% in 2008, and savings rates are up.
Corporate debt is another story. It too has been growing significantly in recent years, but unlike more thrifty consumers, it is accelerating at a faster rate than revenues.
Corporate debt is more than 90% of revenues, a record during an expansion. And despite historically low interest rates, corporate interest expense is barely off its all- time high.
What about government debt? In 2016 total U.S. national debt was estimated at $22.5 trillion. The federal government accounted for the lion’s share, about $19.5 trillion. States had a little over $1 trillion and local governments nearly $2 trillion in debt. Again, context is everything. The last 10 years have seen federal debt skyrocket from about 60% of GDP in 2005 to over 100% of GDP, while state debt has held steady at 6%, and local government indebtedness has increased slightly, to a little over 10%.
There are always outliers. One of the biggest is in the municipal bond market. The largest issuer of tax free muni bonds by far is the U.S. territory of Puerto Rico.
With over $70 billion in bond obligations and $50 billion in unfunded pensions, Puerto Rico cannot meet its obligations and has gone to bankruptcy court. The outcome is yet to be determined.
This week’s WEALTHTRACK guests each manage several top rated mutual funds, investing in multiple types of bonds using different strategies. They also work together on the Fixed Income Team at Thornburg Investment Management. Thornburg is a WEALTHTRACK sponsor but their collective performance speaks for itself.
Jeff Klingelhofer is a portfolio manager on several Thornburg funds including its 5-star rated, Thornburg Limited Term Income Fund which uses a laddered strategy, investing in bonds with staggered maturities. He also manages the 4-star rated Thornburg Strategic Income Fund, which has a flexible mandate to invest anywhere in the world and in any kind of income producing security.
Our other guest is Nicholos Venditti, portfolio manager for several municipal bonds funds including the 5-star Thornburg Limited Term Municipal Fund, again using a laddered portfolio, and the 4-star Thornburg Strategic Municipal Income Fund which also has a broad, flexible approach.
We will discuss the state of the fixed income markets as a whole and the condition of different sectors specifically, as well as where they are investing and what they are avoiding. We will also get their very strong views on why the bond market does not lend itself to passive index investing. Yes, they are defending their profession but they also point out some key differences between stocks and bonds.
If you miss the show on television this week you can always catch it on our website. We also have an EXTRA report from another firm about why active is an advantage in bond investing. As always, we welcome your feedback. Click on the Contact Us link on our website, or connect with us on Facebook or Twitter.
On this Memorial Day weekend, please take a moment to remember those who have lost their lives in military service to our country. They sacrificed so that we could celebrate a holiday in freedom and peace with our loved ones. Make the week ahead a profitable and a productive one.
Best regards,
Consuelo
Video Clip:

utm_term=0_bf662fd9c0-606dd543f6-71656893
M* Snapshot THFIX:
http://www.morningstar.com/funds/xnas/thifx/quote.html
Lipper Snapshot THFIX:
http://www.marketwatch.com/investing/fund/thifx
THIFX Is Ranked #17 In The (S-T B) Fund Category By U.S. News & World Report:
http://money.usnews.com/funds/mutual-funds/short-term-bond/thornburg-limited-term-income-fund/thifx
M* Snapshot TSSAX:
http://www.morningstar.com/funds/XNAS/TSSAX/quote.html
Lipper Snapshot TSSAX:
http://www.marketwatch.com/investing/fund/tssax
TSSAX Is Ranked #57 In THe (MNI) fund Category By U.S. News & World Report:
http://money.usnews.com/funds/mutual-funds/muni-national-interm/thornburg-strategic-municipal-income-fd/tssax

FWIW, my take on Buffett's 90% equity/10% short term bond is that this was a retirement portfolio recommendation, and assuming 4% withdrawal rate, that is enough "cash" to wait out a 2-3 year market drop. Even if the market doesn't fully recover in 3 years, it should have recovered significantly.
The bond allocation wasn't an attempt to predict interest rates, but to provide a near cash allocation, ISTM.

FYI: BlackRock Inc (BLK.N) will initially pay about $60 per square foot in rent for its future headquarters in the Hudson Yards district on the far west side of midtown Manhattan, the company said in a filing on Thursday.
BlackRock, which oversees $5.4 trillion in assets and is the world's largest asset manager, is moving into 847,000 square feet (78,690 sq meters) of a development that will be part of a neighborhood rising over rail yards and tracks in a once-forlorn corner of New York City.
Regards,
Ted
http://www.reuters.com/article/us-usa-property-hudsonyards-blackrock-idUSKBN18L2BY?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+reuters/businessNews+(Business+News)

FYI: With Alphabet (GOOGL) and Amazon (AMZN) racing tick for tick towards the $1,000/share level but coming up just shy today, we just can’t help but be reminded of another run towards the 1,000 milestone 51 years ago. For the sake of the two stocks and the overall market, though, we hope that this time around, the $1,000 level isn’t nearly as tough a nut to crack. The battle for 1,000 we are talking about from 51 years ago was the Dow Jones Industrial Average. Back in 1966, after a rally of nearly 20% off of its June 1965 lows, the DJIA was knocking on the door of 1,000 but came up just shy of the mark, closing at 995.15 on 2/9/66. While the DJIA didn’t cross 1,000 on February 9th, we can’t help but think that most people felt it was just a matter of time before the 1,000 level was breached.
Regards,
Ted
https://www.bespokepremium.com/think-big-blog/alphabet-and-amazon-bring-back-ghosts-of-1000s-past/

Huh, the write is like she has been reading MFO posts over the years.
I need to see her verified and audited investment portfolio from May, 2007 to date to discover whether she still knows what she is talking about; as to placing her personal investments into the proper sectors, based upon her thinking.

Meb's shop had 8 funds (at least 3 months old) through April with about $400M in AUM. Average age 2.6 years with Shareholder Yield SYLD being oldest at nearly 4 years and largest at $126M. Average ER = 0.55%. The fund family has a mixed record with half its funds beating peers and the other half trailing since inception, giving it a "Middle" rating on the MFO Fund Family Scorecard. That's an improvement for this young family, which was in the basement for a while. The value-based funds have performed the worst, putting them in some good company. Click on image below to enlarge ...

FYI: Providing historical context is one of the roles we play on behalf of our clients.
And that’s a good thing, because for an investor who just began paying attention to markets in the last ten years, the extent of their context is that the S&P 500 is the only game in town worth playing, it always goes up, and dollars invested in anything else are wasted.
Looking out past this period, however, and you see that this is plainly not the truth. It’s our job to not only make sure that clients understand this, empirically, but that they’re invested in such a way so as to take advantage of the myopia of others.
Regards,
Ted
http://thereformedbroker.com/2017/05/24/what-were-telling-clients-about-european-stocks/

VF - it's been my experience that lawyers always get paid their "usual and customary" fees before whats left gets divided up amongst those who actually suffered losses. It's been going on here in MN in the Tom Petters ponzi scheme for over 8 years now. Claimants piss and moan but generally in the end resign themselves to getting something at least. Judges can rule that the fees are excessive but rarely do. Besides, that often involves hiring and paying more lawyers to fight that business.

The cef PDI has been at a nice premium for some time now, uniquely so, almost, and certainly the first time in years. I have sold some. Significant rise and decline just today's trading.
This guy thinks its future will probably not be as bright as its past:
https://www.forbes.com/sites/michaelfoster/2017/04/29/avoid-this-stealth-dividend-cut-now/#6ad284647a5c
What say you?
And alternatives? PCM? RCS? PCI? All different, of course. And different risk ratings, not simple to understand given their performance.

Here's another regret they might have--not having lived while they're young. The idea that all meals out with friends and family--moments you may treasure for the rest of your life--are "mindless" or that buying coffee to say study for a test or just for the sheer pleasure of being alive and enjoying a coffee is always a waste sounds like the typical view you hear from these financial planning types. They're busy wagging their fingers at kids when in fact young people are making less money today in low-end jobs on an inflation-adjusted basis than they did thirty or forty years ago in many states. It also makes the assumption that every young person will live to retirement age when in fact they won't. It's a matter of achieving balance--enjoying some daily pleasures--and saving. It's also a matter of paying young people appropriately.

FYI: (Click On Article Title At Top Of Google Search)
A firm hired by the U.S. to distribute $4 billion to victims of Bernard Madoff's Ponzi scheme has racked up $38.8 million in billings over four years. The investors are still waiting for their first checks, though.
Regards,
Ted
https://www.google.com/#q=Millions+go+to+Madoff+fund+lawyer,+nothing+for+investors

I think market knows there are enough crazy people, so yeah. I'm going to stay underinvested if this bull market continues for next 5 years, except for my retirement accounts where I tend to be fully invested.

I tend to pay attention to the theory of the Dow Transports being a leading indicator as to the strength of the economy. As it turns out, this warning sign has been flashing for 2 years.

FYI: In 2006, Anne Hathaway made People magazine’s 50 Most Beautiful People list. That year, the actress had starred in the film, The Devil Wears Prada. Nine years later, the now 34 year-old beauty reported that she’s already starting to lose roles to younger actresses. It’s a sad Hollywood truth. Time Entertainment reports that older male actors often get leading roles into their 40s, 50s, even 60s. Far fewer women do.
Once they hit a certain age, they become blasé, like a bond market index fund. Today, bonds rarely get respect. Stocks have won their Oscars for seven straight years. Bond yields, in contrast, are lower than a drug-addicted actor in rehab. But that doesn’t mean you shouldn’t own bonds.
Regards,
Ted
https://assetbuilder.com/knowledge-center/articles/-what-do-hollywood-actresses-have-in-common-with-a-bond-market-index-fund