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the Samhain edition of MFO is live

And either spooky or briskly autumnal, depending on your perspective.

Devesh and David Sherman had a sort of eat-and-greet in October. One thread of their discussion is whether stocks are worth owning just now. That seems to build on Howard Marks' "sea change" article. We shared David's thoughts, bits and pieces of Marks' article and then I tried to follow up by looking at the effects of stocks on your portfolio.

The traditional asymmetry would say: returns up, volatility way up, and so risk-adjusted returns down. That's certainly true in the very long run, say 1926-2008. Since 2008, in a period I dubbed The Great Distortion, that relationship dissolved. Stocks boosted both raw returns and risk-adjusted returns as the Fed's action eviscerated cash, punished caution and rewarded speculation. But if you begin factoring in the years beyond The Great Distortion, the 20 year record is the target in my essay, suddenly (a) more risks = falling risk adjusted returns and (b) high-yield bonds start working as a risk-reduced equity substitute. Not sure that "bonds for the long run" is the mantra of the future, but I wanted to share the perspective and a bit of data.

Did a quick study of First Foundation Total Return, mostly at the board's behest. The record is unambiguous but I'm still not 100% sure of why. The change from its performance as Highland TR to its new incarnation is pretty striking. And the managers are pretty ... hmm, restrained in the frequency and bread of their written communication with shareholders?

Lynn did a great piece on short-term momentum and The Shadow did great work on tracking down the reopenings of solid funds, among other bits o' industry intelligence.

I'm intriguing by the impending GMO US Quality ETF, which might be interesting for those of us who'd have to choose between picking up something nice for the holidays or making the $500,000,000 minimum for GMO's lowest cost shares.



  • The @DavidSherman article falls in the category of BACK BY POPULAR DEMAND. I hope our readers get as much out of it as they did from the last article.
  • David is a smart guy, for sure. Part of his charm is that his intellect is wide-ranging and restless, so he shares stuff that you would never normally encounter.
  • edited November 2023
    David. Thanks as always. Haven’t gotten too far in … But intrigued by your mention of LCORX. $10,000 minimum. 1.28% ER. Apparently very overweight fixed income presently. A few short positions. And what appears to be a stellar long term risk adjusted record.

    One interesting observation, however - If Yahoo Finance is to be believed, the fund fell 27.4% in 2008. Not bad compared to the roughly 50% drop in equities globally that year. Still, a bit more than I’ve have expected from such a cautious bunch.The nice thing is that the fund has such a long term record to be compared. A lot of us, self included, own things that weren’t around in 2008. That’s the year “the rubber really hit the road” or “the Kool-Aid hit the fan”. Whatever ….
  • We could ask for details. That was before Steve Leuthold retired and the system got ... tweaked.

    If you work through a brokerage, the minimum is often $100. That's my recollection of Scottrade / TD Ameritrade / Schwab - one morphing into the other.
  • @hank Just for the heck of it....although not look-a-like investments, the chart covers 2 years for LCORX v FBALX v SPY, beginning in June, 2007; through 2008 and into mid 2009. This, of course; includes the full bottom of this time frame in March of 2009.
  • @David_Snowball-
    "Samhain"... OK, showoff, we know that you've just sampled many things Scottish. :)

    Being almost desperate to find anything to bring home from Scotland that wasn't made in China, I got really lucky in visiting the Inverewe Gardens- the gift shop had a collection of genuine plaid wool blankets, made in Scotland by genuine Scottish people from genuine Scottish wool from genuine Scottish sheep.

    Every winter I snuggle under my beautiful warm blanket for an afternoon nap and remember Scotland. And winter is just starting here, now!


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