From an investing standpoint you may be aware of lead singer Bono's affiliation with Roger McNamee and a couple of other people in the investment firm Elevation Partners. McNamee has been on CNBC a few times since the formation of Elevation Partners to talk primarily about their investment in Palm and the merits of the Palm Pre.
You probably know that except for about ten minutes the market place never cared about Palm Pre and that the stock has been crushed as a result. In addition it appears that Elevation is down big on investments in Forbes and Move.com. This bad luck or poor decision making has caused 24/7 Wall Street to call Elevation Partners "arguably the worst run institutional fund of any size in the United States." Here is a link to a related story from the Biz Journal that has other information.Obviously I have no basis to know whether it is the worst run fund or not and obviously McNamee and the rest of the investment professionals did not get to where they are being idiots. I'm not sure what has gone wrong but obviously risks were taken that have not worked out thus far.
If guys with very good track records can misfire than anyone can misfire. Funds like Elevation Partners will probably become more easily available in the future. Some will be great and some will stink. This is not my preferred vehicle obviously but as they proliferate some folks may be interested in giving it a shot. It is important to realize that there is no stop order available. Your money is locked up for some period of time and that is that.
These types of pools, assuming I am right about being available to more people, make things far more complicated than a mix of stocks and mutual funds. To repeat from many past posts, I prefer simple whenever possible in all aspects of life.My wife and I saw U2 in concert in December 2001. Among other things it was right after the Diamondbacks won the World Series. During the encore Randy Johnson came out on stage with the World Series trophy and the place went berserk. Obviously it made a big impression.
9 comments:
When I read about something like this, I always want to learn more about their past. We assume they didn't get here by being idiots, but you never know. I wouldn't call an investment in Palm or move.com very bright. If you want to invest in a .com, and an IT guy who spend a lot of time on the internet doesn't know about your .com.....
IMO, what you have described is in essence is the major drawback to active management. One is simply making a bet on the manager. Also, as you have clearly pointed out, past performance is no indicator of future performance. So, what's an investor seeking active management to do? I have no idea, hence the appeal of passive management. I know of no method to select active managers in advance who can deliver market returns after expenses. So why bother?
I think an area of agreement is when stock market valuations reach extremes. I feel the best way to reduce risk in those situations is to rebalance to a pre-defined level. You on the otherhand seem to prefer moving averages and the shape of the yield curve. In a sense, both techniques offer similar outcomes.
I also agree with keeping investing simple. I think portfolio managers can provide a very valuable service for most people provided the cost is reasonable, and the client's needs are the priority. The situation described in your post today just seems like gambling pure and simple.
"I think an area of agreement is when stock market valuations reach extremes"
Unfortunately, it's hard to measure "extremes". When the DOW was at 6500 recently, that was an extreme, but it easily could have dropped to 3500. Extremes can only be accurately measured after the period. We are at a period of extremely low interst rates...but it is possible this can continue for a very long time.
Anon 9:30,
Very true. But to me, taking a leap of faith that world economies will eventually expand has better odds than taking a leap of faith with active management. I tend to follow the teachings of B Graham; in Chapter 4 of The Intelligent Investor, General Portfolio Policy, The Defensive Investor.
Saw U2 on that same tour in Chicago in October 2001. Hands down one of the best concerts I've ever seen (and I am not a huge U2 fan). Their tribute to the 9/11 victims was remarkable, and I get chills thinking about it today almost a decade later.
All western economies are now socialist economies that are by and large over indebted. They may eventually expand, but at what pace. The only big increases I see are TAXES. Society is now focused on providing the greatest benefits to high school dropouts, alcoholics, and other low achievers - at least we have a plan.
Asian and emerging markets are looking better and better.
Wow, BofA is looking at reducing some mortgage principles.
http://www.housingwatch.com/2010/03/24/bofa-to-reduce-mortgage-principal/?ncid=webmaildl4
A fool and his money are soon parted.
SD,
many years ago there was a study that smart phones would replace PC. It is natural to make a heavy investment in SP(Smart Phone) company. Buying Palm at 1 in a growth industry is a dream come true. So the move Revalation Part.(EP) made looks smart in the 2008. A wave of competative entries have come since EP purchase. Nokia and Google give away free maps on the hand set. This move has warrented a demise of Palm even if the Treon has the best OS. It reminds me of Dos and CPM. A smart move by Gates to partner with IBM became the demise of the better OS - CPM. However if one can do his own work, Roger, and get into prospects and sell when they are ripe there is no need to get into such vehicle. I know it takes a lot to keep up with such work of analysis.
Speaking of work, Roger, SD, MikeC, SEG, RW, and all, I have enjoyed reading and learning from this blog. I have enjoyed posting and hope I did not offend anyone, and excuse myself if I did or gave the appearance.
I like to thank you Roger, RW, MikeC, SEG, SD and all for this blog, however I have to go and concentrate on many studies that I need to take up and also concentrate on my Investing/Trading. For those that speculate on my leave, I am still making money and on my trades when I get out, I have not had any losses. I have taken up creation and keeping of many economic indicators and sayed before that like to study Roger Bobson's work. A big task to take on. From time to time I will peek on this blog and may say hello by post. Hope many more prosperous days ahead.
Best,
Jeff from Milan, Italy
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