Dear friends,
We're back after the long drive to and from upstate New York to visit family. One of the great joys of visiting is getting to go home again, if not to sanity then at least to the sort of insanity you're most accustomed to!
The January issue features discussions of two funds that we've touched on before. Standpoint has posted really startling numbers, beating pretty much all of its likely peers in both raw and risk-adjusted returns. I suppose you could say that all markets favor some strategies and the test comes when the market turns, but it sort of feels like the market has already done a series of 180s and they're still chugged along. And One Rock is the sort of fund that makes me scratch my head and go "huh?" Jeff seems like a remarkably good and humble guy with a very '90s investing style. Huge gains, nearly-as-huge volatility and very restricted access. In some ways I'm most impressed by the fact that he knows most of his investors and he's seen slow steady inflows (with the exception of one month) in good times and bad.
Devesh offered a lovely reflection and insightful commentary on what works and what's working. Lynn did the thing that Lynn does so well. Likewise, Shadow whose most immediately useful note might concern the reopening of Virtus KAR Small.
I'm hopeful that the piece on ESG held together for you. As you know it started as a post on the board but grew as I kept grinding through the data. Really, the argument that ESG investing require you to sacrifice either raw returns or risk-adjusted returns is, so far as I can tell, completely unsupported by the data. Some ESG funds are utterly rank and scammy ... as are some index funds, some small cap ETFs, and many of the new offerings that sound like desperate attempts to suck in people who have investing in the same mental box as "Call of Duty" and fantasy football.
Wishing you a joyful start to the year,
David
Comments
What an absolutely astounding thing to write for investor public consumption.
His wife was right. He is the worst marketer of his funds.
I cited Cathie Wood as a comp in part because there's an overlap in investing style and, in part, because there's an overlap in personal conviction. (You know: fund company named after the Ark of the Covenant and all.) Her faith seems not to have hinder asset gathering ($16 billion at the moment) or predicted performance (down 67% in '22, up 67% in '23). Her investing style does not align with mine; if it did, that would be enough for me to take her more seriously.
For what that's worth, David
"I am this kind of believer --- 'in the One so unmovable and unshakable' --- so you better know (go know) I will be tough as granite during rough times in the market (or elsewhere). You know this, that I am, because of how I profess."
Market discipline dressed up to sound like Luther's 'Hier Stehe Ich!' or some such.
Maybe I should cut the pronouncement slack because he does preface it / qualify it with 'if you’re a follower of Jesus, the Christ' ... although on the other hand that does make it all the queerer and Mel Gibson-inappropriate, to my mind.
Try and imagine if some other money manager believer in some other theology said anything along these intense lines.
If someone wants to invest in such things, it's totally fine by me. Each to our own, as the saying goes.
https://www.axios.com/2024/01/13/esg-blackrock-woke-capitalism
Charle’s article is so comprehensive and rich in documentation that any attempt to summarize or characterize it by me seems futile. He begins by linking to the thread, followed by a listing of a dozen or so different aspects of the study’s premise as identified by discussion participants. This is followed by literally reams of historical data. In essence, he’s trying to identify the “right balance” among risk, time span, relative asset performance over different time periods, withdrawal strategies, etc.
While stocks have beaten other investments over the past 130 years, Charles notes that most of us have a somewhat shorter investment horizon. And he identifies some potentially more reasonable risk-averse approaches: ”To illustrate the benefits of having a balanced portfolio, from 1999 until 2020, the conservative Vanguard Wellesley (VWINX) and moderate Vanguard Wellington (VWELX) have beaten the S&P 500. This illustrates the importance of starting and ending points – sequence of return risk. A high allocation of stocks in 1999 could have impacted savings for the remainder of retirement.”
Finally, Charles outlines his own investment allocation and approach, which includes modifying his equity exposure (within a set range) from time to time based on his read of market conditions.
https://www.mutualfundobserver.com/2024/02/patriotic-millionaires-and-the-uncertainty-of-taxes/
Those of us not in the "rich" category can still benefit. I have about 15% of my portfolio in after-tax accounts in a long-term investment bucket. In "No, The 60/40 Portfolio Is Not Dead", I show that stock valuations are high so now is a good time to be more conservative.
https://www.mutualfundobserver.com/2024/02/no-the-60-40-portfolio-is-not-dead/
When valuations fall in the next one to three years, I plan on increasing the allocations to stocks in these after-tax accounts to maybe even 100% to take advantage of the lower capital gains that are not occurred until the stock is sold. I will use a variable withdrawal strategy to withdraw extra from Traditional IRAs (Bucket #2) when market conditions are favorable and put the funds in a short-term Bucket for living expenses for when market conditions are unfavorable.
My article last month did not include taxes in some of the analysis. Having pensions and Social Security allows me to be less dependent upon withdrawing from savings. I will be adjusting my strategy based in part on the thoughtful insights in the MFO Discussion Board, and the research behind these articles.