I'm with you, Charles. I do just sometimes wish BB would seem a little more humble, that he might admit mistakes now and then and show that he'd learned from them. But hey, sometimes managers deserve their arrogance (cue Jeffrey Gundlach) and let's hope BB soon proves that he never lost his magic, it just was hard to see for a few years.

@Mona
Your frequent conversations with fund managers, while commendable, raises one concern - being related to the following: As I understand it, open-ended mutual funds are required by a 2004 SEC amendment to existing policy to publicly disclose their portfolio holdings quarterly. This rule replaced an older one requiring semi-annual reporting of holdings. Most fund companies argued strenuously against the adoption of more frequent reporting during the period of public debate, arguing among other things that (1) The new policy increased the likelihood of "front-running" of mutual fund sales and purchases and (2) It promoted "load riding" whereby investors could replicate a fund's holdings without having paid for the research costs.
- The first link is to a 2001 position paper by the Investment Company Institute stating their reasons for opposing more frequent disclosure. They lost the battle, but I still find their logic interesting and somewhat compelling. http://www.ici.org/pdf/per07-03.pdf
- The second link is to the actual SEC Policy adapted in 2004. As far as I know, it is still in effect.
http://www.sec.gov/news/press/2004-16.htm
- Virtually all mutual fund companies have written policy governing disclosure of portfolio holdings. These appear quite stringent. The following (inked) one from Dreyfus allows a manager (or his designee) to reveal a fund's top 10 holdings to non-company affiliated individuals - but only if those holdings have been previously made available to the public. Violations of policy must be reported to the company's compliance officer.
https://public.dreyfus.com/policies-information/holdings-disclosure.html
What I'm wondering is what you can learn from speaking to a fund manager that isn't already public knowledge available on the fund's website, in their annual and semi-annual reports, or in their SEC required quarterly disclosures? I like to suppose that if I phoned Dodge and Cox one of their managers would talk with me. (I'd thank them for making me a lot of money over the years.). However, if he/she revealed to me that they were considering adding to their position in Company X sometime in the next few weeks, I'd be a bit alarmed. I'd wonder who else had already been tipped-off about the impending purchase and whether the stock's price had already been driven higher as a result of this advance knowledge.
Just some thoughts on this whole issue of calling up fund managers.

Hi Hank,
Thanks for your thoughts and a few more of mine.
As I stated in both posts, other than speaking with Morty Schaja (which I also mentioned in a post some months ago), I am not speaking with "fund managers". I am speaking with someone on the "team". I tried to emphasis that by using the word 7 times. For example, this includes analysts, statisticians, Chief Marketing Officers, and others.
As stated in my most recent post, " Many times I do not get pinpoint answers, which probably relates to SEC issues". To alleviate concerns, I will be more precise. For example, I would not get a pinpoint answers to questions #2 and #4. But that would not prevent me from asking, hoping for a response that might contain some value to me.
Asking for an opinion on sectors that attributed to under performance is something that happened in the past. No secret, albeit I did not have, but wanted the information. Or asking "where the portfolio managers believe the best valuations currently exist" (small, mid or large cap), is not giving me any proprietary information.
Regarding your question:
"What I'm wondering is what you can learn from speaking to a fund manager that isn't already public knowledge available on the fund's website, in their annual and semi-annual reports, or in their SEC required quarterly disclosures?", I do not know how to answer that any differently than I have:
"All the dated quantitative information is certainly in public documents such as their Statuary Prospectus, Summary Prospectus, Statement of Additional Information, and their Semiannual and Annual Reports. I am searching for recent changes and current thinking.
And then I am back to " Many times I do not get pinpoint answers, which probably relates to SEC issues".
Best Regards,
Mona

@TSP_Transfer
Similar and related reporting, with a bit of added data.
We've (here) discussed some of this too many times over the past few years, regarding Greece and the related complex Eurozone structure.
A Guide to the debt standoff between Greece and the Eurozone.

@Mona
Your frequent conversations with fund managers, while commendable, raises one concern - being related to the following: As I understand it, open-ended mutual funds are required by a 2004 SEC amendment to existing policy to publicly disclose their portfolio holdings quarterly. This rule replaced an older one requiring semi-annual reporting of holdings. Most fund companies argued strenuously against the adoption of more frequent reporting during the period of public debate, arguing among other things that (1) The new policy increased the likelihood of "front-running" of mutual fund sales and purchases and (2) It promoted "load riding" whereby investors could replicate a fund's holdings without having paid for the research costs.
The first link is to a 2001 position paper by the Investment Company Institute stating their reasons for opposing more frequent disclosure. They lost the battle, but I still find their logic interesting and somewhat compelling. http://www.ici.org/pdf/per07-03.pdf
The second link is to the actual SEC Policy adapted in 2004. As far as I know, it is still in effect.
http://www.sec.gov/news/press/2004-16.htm
Virtually all mutual fund companies have written policy governing disclosure of portfolio holdings. These appear quite stringent. The following (inked) one from Dreyfus allows a manager (or his designee) to reveal the following to non company affilliated persons ONLY If the information has already been previously disseminated to the publuic:
"...Top ten holdings and the total percentage of the Fund such aggregate holdings represent ... Sector information and the total percentage of the Fund held in each sector ... Any other analytical data that does not identify any specific portfolio holding"
Violations of policy must be reported to the company's Chief Compliance Officer.
https://public.dreyfus.com/policies-information/holdings-disclosure.html
What I'm wondering is what you can learn from speaking to a fund manager that isn't already public knowledge available on the fund's website, in their annual and semi-annual reports, or in their SEC required quarterly disclosures? I like to suppose that if I phoned Dodge and Cox one of their managers would talk with me. (I'd thank them for making me a lot of money over the years.) However, if he/she revealed to me that they were considering adding to their position in Company X sometime in the next few weeks, I'd be a bit alarmed. I'd wonder who else had already been tipped-off about the impending purchase and whether the stock's price had already been driven higher as a result of this advance knowledge.
Just some thoughts on this whole issue of calling up fund managers.

I hold TVRVX, which was discussed in this month's commentary, and I've been happy for the last few years. I agree with others on the DCA plan.

"Believes current shareholders know what to expect and are in it for the long term, five years or more."
Five years is a long time to wait. With Six You Get Eggroll.

Berkowitz has proven himself an impressive and intelligent investor overall, but I think where things ran into significant trouble was after the financial crisis. Fairholme has always run a concentrated portfolio, but it got - I think - concentrated to the point of absurdity, with nearly half the portfolio in AIG. The bet on St Joe was matched on the opposite side by a notable short position by David Einhorn, who - so far - has been proven right. I believe Einhorn was still short it recently.
The Sears story? I've been a vocal opponent of the long story, as well and have gone into reasoning countless times before. Fairholme was buying Sears above $100. Is there more value in Sears than the current stock price? Perhaps, but there's no way the stock will see $100+. There's just way too much retail real estate, with Sears and tons of other retailers looking to offload real estate into a buyer's market. The REIT spin-off? No thanks and I just don't see the demand being there.
I really am starting to think a group of managers got sucked into the Eddie Lampert story ("It's the next Berkshire!") and are now finding out it wasn't what they thought. If it was such a tremendous story, the market wouldn't seem to disagree so much and for so long. Yeah yeah, ignore the crowds - but sometimes the crowds are right.
The thing that continues to get me was a Kiplinger's article with Berkowitz in 2009 where he talked about if he doesn't understand something, he walks away in reference to things like AIG's derivatives. Then shortly after he loads up?
There's also the Fannie/Freddie bet that's gone sour although he continues to fight the government. Good luck with that.
Financials have done (at least at last glance) worse than energy this year, which hasn't helped BAC/AIG.
And yes, Biotech has beaten a lot of things (and I think it probably will continue to do well and now it's starting to pay dividends (Gilead announcing their first dividend yesterday, Amgen increasing dividend with next payout.) I certainly see more tailwinds then headwinds for healthcare in general going forward.
As for Fairholme:
"Believes current shareholders know what to expect and are in it for the long term, five years or more."
LOL. They'll run to something else if things don't get any better without a second thought.

Right, so here's the allure...

Basically, investing with Bruce the past 15 years means you have more than quadrupled your investment since FAIRX inception. You've earned 11.7% per year!
Who has beaten that? Suspect very few.
But you are absolutely correct about performance last 5 years and one year. But he does have strong 3 year performance, so he's not a Three Alarm Fund, if that is what you mean.
I certainly hope he's not another Hussman from a performance perspective. And, their investing styles? Really, no comparison.
c

Thanks Charles. Although wondering if anyone here has been with the fund since inception, I can see where you are coming from and not trying to stir things up. But back to that topic we have discussed many times here, who is to say his early out performance wasn't simply a byproduct of luck?
Edit: Haven't many healthcare/biotech funds bested FAIRX over that 15 year period and with a much smoother ride?

Right, so here's the allure...

Basically, investing with Bruce the past 15 years means you have more than quadrupled your investment since FAIRX inception. You've earned 11.7% per year!
Who has beaten that? Suspect very few.
But you are absolutely correct about performance last 5 years and one year. But he does have strong 3 year performance, so he's not a Three Alarm Fund, if that is what you mean.
I certainly hope he's not another Hussman from a performance perspective. And, their investing styles? Really, no comparison.
c

Hi @fundalarm
I was reading through this thread again and looked again at PIMIX and its current holdings as of its last posting. This and its cousin, PONDX have a much different mix of holdings from the previous several years. The overwhelming majority of prior holdings were directed at the mortgage sector, both agency and non.
Disclosure: We hold PIMIX at this time; although it has had a rough start for this year, but rewarding for the past several years. I fully trust both managers and their skills with a multi-sector bond fund and the flexibility available to them.

Hi catch,
I am not fundalarm, but please bear with me.
As you know, PIMIX and PONDX are the "same" fund. The only difference is in the "share class" or expense ratio. PIMIX are "institutional" shares and have an expense ratio of 0.45% and PONDX are "D" shares and have an expense ratio of 0.77%. Other than that, no difference.
You are correct that PIMIX (or PONDX) has had a rough start, but rewarding in the past. You are also correct that Dan has reduced his exposure in the mortgage sector. That said, I am confident Dan Ivascyn is as bright and sharp as the past. However, where I have some reservation, is with his promotion with the departure of Bill Gross. With his increased responsibilities, will he be able to perform at the high level that we both are accustomed to? I have no idea.
This is how I am handling PIMIX. It's still positive YTD. If and until it goes negative by 1%, I am staying with it. Yes, Junkster has taught me a few things ;-)
Mona

>>>Volatility is needed to prosper.<<<<
Wrong, wrong, and wrong! I would say this guy is another Hussman except he is not losing money. It's just that over the past month, one, three, and five years he is massively under performing the S&P and his benchmark. I must have missed something when I was gone a couple years back but what is the allure of this guy and his fund - his ancient history performance perhaps?

Hi @fundalarm
I was reading through this thread again and looked again at PIMIX and its current holdings as of its last posting. This and its cousin, PONDX have a much different mix of holdings from the previous several years. The overwhelming majority of prior holdings were directed at the mortgage sector, both agency and non.
Disclosure: We hold PIMIX at this time; although it has had a rough start for this year, but rewarding for the past several years. I fully trust both managers and their skills with a multi-sector bond fund and the flexibility available to them.
And yes, high yield has been happier again these past several trading days. I can not confirm; but suspect some of the positive direction is related to more positive action in the energy sector and their junk bonds. I also feel that if crude prices remain below $60/barrel and especially around the $50 area for the next year or so, that there be both high yield defaults in this area; as well as stronger players in this area (fracking) to start to buy the companies that are on the edge, a consolidation.
Take care of you and yours,
Catch

Except for oil and gas issues, things are really looking up for junk rated companies.
http://blogs.barrons.com/incomeinvesting/2015/02/03/moodys-corporate-liquidity-rises-burned-by-energy/

Hi @fundalarm
I was reading through this thread again and looked again at PIMIX and its current holdings as of its last posting. This and its cousin, PONDX have a much different mix of holdings from the previous several years. The overwhelming majority of prior holdings were directed at the mortgage sector, both agency and non.
Disclosure: We hold PIMIX at this time; although it has had a rough start for this year, but rewarding for the past several years. I fully trust both managers and their skills with a multi-sector bond fund and the flexibility available to them.
And yes, high yield has been happier again these past several trading days. I can not confirm; but suspect some of the positive direction is related to more positive action in the energy sector and their junk bonds. I also feel that if crude prices remain below $60/barrel and especially around the $50 area for the next year or so, that there be both high yield defaults in this area; as well as stronger players in this area (fracking) to start to buy the companies that are on the edge, a consolidation.
Take care of you and yours,
Catch

Quick summary of today's call follows...
Classic Bruce Berkowitz.
Remains committed to investing in his best ideas.
Deeply undervalued stocks...far below assessed value.
Looks for large gaps between price and value.
Investing requires as much insight into psychology as it does accounting, along with patience and courage of conviction...until the crowd finally agrees.
Patience pays.
He has 100% of his savings invested in Fairholme funds and ideas. Employees continue to increase their investments in Fairholme funds.
He does not hedge. He does not short. "Not in our DNA." The closest thing to hedging is when he exits a position deemed at fair value. "Knowledge is our hedge."
Attempts to stay course under pressure, when he know he looks wrong...through inflows and outflows. Believes current shareholders know what to expect and are in it for the long term, five years or more.
He remains the sole asset allocator. He uses his staff of half a dozen analysts, along with outside experts to challenge his positions. His analysis staff continues to increase. He expects to remain leading Fairholme for life...at least the next 20 years.
His job is to find "fallen angels priced to fail," expecting Mr. Market to disagree with him at times.
He ties to focus on valuing positions. He tries to avoid predicting time-frames.
He believes risk is not volatility, which he recognizes some see as a proxy to risk.
Risk is potential for permanent loss of capital, adjusting for inflation.
Volatility is needed to prosper.
Perception and reality meet when price equals value.
Acknowledging returns can be "lumpy, but above average" over long run, besting SP500 index.
Remains committed to AIG, BAC, Fannie & Freddie, and yes, Sears Holdings...even, Eddie Lampert, who he knows is no longer regarded very highly by public.
AIG and BAC will continue to get stronger as Great Recession troubles get behind them. Both will benefit in higher interest rate environment.
He wove an amazingly detailed trail of folks once inside or now inside Treasury that likely aided FHFA take all Fannie & Freddie profits via conservatorship, though now deny Treasury involvement. He believes both agencies remain vital to nation and future growth and have made more money for government than any in history. Government can't be above legal scrutiny, and he remains confident he will win suit. The case is in discovery stage and Fairholme has been mandated to not disclose any of its material findings to public because of potential harm to government.
On Sears, he believes the real estate remains a "once-in-a-lifetime" opportunity. He denied that he is so committed to Sears that he can't turn back now. He and every real estate expert he has brought into review continue to see extraordinary value. The REIT, which he says he did not have details on, will likely help reveal true value. He also stated that he thought the retail losses were starting to stem.
He exits positions only when they no longer rise to top of best ideas at Fairholme.
He intends to post call transcript on-line.
And, if anyone has further questions, or thinks "he is full of it," he welcomes emails and opportunity to answer.

Hi Old Joe,
Thank you for the tip on Peter L. Bernstein’s “The Power of Gold” book. I fully trust your favorable endorsement.
I’m embarrassed to admit that I’ve owned a paperback copy of the book for years, yet never opened its cover. I bought it as part of a 3-volume set that included his “Capital Ideas” and “Against the Gods” works. I did read these titles. Later, he wrote numerous other financial books; I have read several of them. All are engaging and all act as excellent teachers.
Both referenced works are superb. I learned much about the financial world and investing from both of them. Today, I’m puzzled why I did not finish the trilogy. Perhaps I had no interest in gold at that time; not much has changed in the intervening years. But I accept your counsel and will put Bernstein’s Gold book on my reading list.
Thanks for your recommendation, and your advice to other MFO participants. Bernstein was a treasure and his legacy lives in this outstanding three volume set. All investors miss his wisdom, his clarity, and his wit.
Best Wishes.

Hi, Mo.
No problem. As I say in the recap of our conversation with Bernie Horn, a lot comes down to how you weigh 2008 and how you assess their response to it. It's a strategy that's worked exceptionally well in 15 of 17 years and really poorly in two. How important those two are (is worrying about 2008 the equivalent of fighting the last war? are we building Maginot-like portfolios) and how intelligently you think they've handled it strike me as major drivers of whether the Polaris products make it in.
In general, I'm agnostic on the first question and pretty pleased with the answers to the second but that's not necessarily definitive.
As ever,
David

We’d be delighted if you’d join us on Monday, February 9th, from noon to 1:00 p.m. Eastern, for a conversation with Matthew Page and Ian Mortimer, managers of Guinness Atkinson Global Innovators (IWIRX) and Guinness Atkinson Dividend Builder (GAINX).
Register
These are both small, concentrated, distinctive, disciplined funds with top-tier performance. Guinness reports:

Guinness Atkinson Global Innovators is the #1 Global Multi-Cap Growth Fund across all time periods (1,3,5,& 10 years) this quarter ending 12/31/14 based on fund total returns. They are ranked 1 of 500 for 1 year, 1 of 466 for 3 years, 1 of 399 for 5 years and 1 of 278 for 10 years in the Lipper category Global Multi-Cap Growth.

Why? Good academic research, stretching back more than a decade, shows that firms with a strong commitment to ongoing innovation outperform the market. Firms with a minimal commitment to innovation trail the market, at least over longer periods.
The challenge is finding such firms and resisting the temptation to overpay for them. The fund initially (1998-2003) tracked an index of 40 stocks chosen by the editors of Wired magazine “to mirror the arc of the new economy as it emerges from the heart of the late industrial age.” In 2003, Guinness concluded that a more focused portfolio and more active selection process would do better, and they were right. In 2010, the new team inherited the fund. They maintained its historic philosophy and construction but broadened its investable universe. Ten years ago there were only about 80 stocks that qualified for consideration; today it’s closer to 350 than their “slightly more robust identification process” has them track.
This is not a collection of “story stocks.” The managers note that whenever they travel to meet potential US investors, the first thing they hear is “Oh, you’re going to buy Facebook and Twitter.” (That would be “no” to both.) They look for firms that are continually reinventing themselves and looking for better ways to address the opportunities and challenges in their industry.
Matt volunteered the following plan for their slice of the call:

I think we would like to address some of the following points in our soliloquy.

• Why are innovative companies an interesting investment opportunity?
  
• How do we define an innovative company?
  
• Aren’t innovative companies just expensive?
  
• Are the most innovative companies the best investments?

I suppose you could sum all this up in the phrase: Why Innovation Matters.

In deference to the fact that Matt and Ian are based in London, we have moved our call to noon Eastern. While they were willing to hang around the office until midnight, asking them to do it struck me as both rude and unproductive (how much would you really get from talking to two severely sleep-deprived Brits?).
HOW CAN YOU JOIN IN?
Register
If you can't join but have questions for the guys, share them here. In general, either the managers will read them or folks from the adviser follow these discussions then brief them.
Hope you're all safe and warm,
David

I think what concerns me is the idea that a mutual fund owns more than half of a country's foreign debt. There have been a number of examples in recent years or funds holding much of an emerging market country or company's debt. Seems like a recipe for problems, in particular liquidity. If Hasenstab (apparently) owns more than half of Ukraine's foreign debt, how difficult would it be to sell if need be?
Hasenstab is one of the best bond managers around, but again, I've read a number of stories in recent years of a fund or funds taking up much of a debt issue or debt from a certain entity.

"Investors last year pulled a record $14 billion from the U.S. and European versions of the Templeton Global Bond Fund and Templeton Global Total Return Fund, which have a combined $150 billion in assets ..."
Same old. Same old. Money pours in. Money pours out.
If these "in-and-out" investors are making a lot of money in the process, that's fine. I'm all for making a fast buck any way you can as long as you can keep reinvesting it for greater and greater returns. However, all the evidence I've read or viewed on this forum indicates just the opposite. That average fund investors who move in and out of their funds fail to achieve the returns those funds themselves achieve over time. So, in all this coming and going, something doesn't add up. Investors do worse than the funds they own. And, where did these investors get the idea that investing outside the U.S., especially in emerging markets, is NOT risky?
Not sure what my main point is here. But, hate to see mutual funds designed for "longer-term investors" (as almost every prospectus reads) subjected to rapid inflows and outflows. Hurts the funds and probably doesn't do much for 90% of those who are running in and out. In the end, all of us pay a bit more in the form of added operating costs the funds experience in aggregate. Old school I guess. Back in the 70s and 80s you needed to wait until next morning to learn the % of change & NAV of a fund, and maybe 3 months to learn how it was performing relative to so-called "peers". Time to reflect and take a deep breath. People were much more long-term focused. We expected our funds would experience both good and bad years. Nowdays, we sit at computer screens watching green and red numbers flashing.
Fund disappointed? How dare it? .... Shoot the ##**!!**
---
*Slightly edited, mainly to delete an incorrect reference to Russian securities (not pertinent)

FYI: In terms of the AFC vs. NFC breakdown, of the 48 prior Super Bowls played, the NFC has the upper hand in championships with 26 compared to 22 for the AFC. Thankfully for the bulls, the S&P 500 has historically performed much better for the remainder of the year when the NFC wins. Following the 26 prior NFC victories, the S&P 500 has averaged a gain of 10.6% with positive returns over 80% of the time. That is more than twice the return of the S&P 500 following the 22 AFC victories. In those years, the S&P 500 averaged a gain of just 4.3% with positive returns less than two-thirds of the time. The AFC hasn't been a total slouch, though. The last six times an AFC team won the Super Bowl, the S&P 500 has been up for the remainder of the year every time for an average gain of 13.6%.
Regards,
Ted
http://www.bespokeinvest.com/thinkbig/2015/2/1/super-bowl-and-the-market.html?printerFriendly=true