Turns out the CFAI was right on the money about analysts and stock pickers adding no value and suffering from a severe case of illusion of knowledge 
This guy was a rock star 3 years ago … http://www.bloomberg.com/apps/news?pid=20601087&sid=acr8X7C.wilo&refer=home Quotes: We've determined that active managers add no value over long periods of time,'' Michael Travaglini, director of the Massachusetts Pension Reserve, said in an interview. The long-term objective is to eliminate all long-only active management in the domestic equity portfolio,’’ This is not a temporary move,'' Travaglini said. We’ve reviewed 24 years of history. The domestic equity structure is not working.’’
24 years of data… that would start in roughly 1984, and the conclusion is that stock pickers don’t outperform. Now, there’s plenty of research that supports the position, and it might even be right, but I’ve never fully trusted economists when they assert efficiency. I don’t know of any human system that is truly efficient, although I am impressed with “The Wisdom of Crowds”. Also 1984 is basically the start of a 20 year bull market. Perhaps stock picking is not as effective in a bull market vs a bear market. I don’t have data here, but I do think that all this CFA study might come in handy less by helping people make good stock picks than by helping them avoid bad ones. That skill is probably more handy in a downturn than a bull market. I’ve been wondering about all the layoffs in the industry. I certainly understand that banks and funds can’t afford redundant people when profits aren’t rolling in, but surely the advent of a bear market and confusion doesn’t mean that people suddenly don’t need any advice or smarts on what to do with their money. Institutions even less so.
I think Bill Miller’s got his head up his @ss, but I also think that the Mass. pension fund has no clue what they’re doing. If I was a public employee in that state I would roll all my assets into some lottery tickets, probably get a higher expected return than letting those jokers manage it.
I would totally disagree. In the case if bill miller, he has allowed the value trust to become so big, that he is no longer able to buy stocks even if he sees value. His greed has put him in a position to shift his strategy from value to deep value-contrarian and has only bought unloved names such as the homebuilders. This technical issue is accompanied by a life-style change, where he has been more indulgent, for example he just bought a 30-feet yatch about 2 years ago, and is going through a divorce. The impending death of the value trust doesn’t support your premise by any means.
In my personal investments, I’m going the direction of enhanced indexing, which at least in theory has the best information ratio. BTW, isn’t enhanced indexing basically the same thing as Treynor-Black?
frisian Wrote: ------------------------------------------------------- BTW, isn’t > enhanced indexing basically the same thing as > Treynor-Black? By theory, they look very similar.
ws Wrote: ------------------------------------------------------- > frisian Wrote: > -------------------------------------------------- > ----- > BTW, isn’t > > enhanced indexing basically the same thing as > > Treynor-Black? > > By theory, they look very similar. Really? Are there different forms of enhanced indexing? From what I have seen it is using futures to replicate the index and trying to beat it by squeezing some extra yield out of the portion that remains in cash.
frisian Wrote: ------------------------------------------------------- > In my personal investments, I’m going the > direction of enhanced indexing, which at least in > theory has the best information ratio. BTW, isn’t > enhanced indexing basically the same thing as > Treynor-Black? No they’re not. TB is for asset allocation using the efficient frontier, enhanced indexing is to deviate from an index composition by overweighting/underweighting certain stocks/sector versus the index to try to outperform ( or done with derivatives).
I thought this over- and under-weighting was tactical asset allocation. From L2, I recall TB as being mostly indexing with a small portion of active management bets. What I really need right now is a silly essay question that asks me to distinguish between the two. Anyway, my larger point is that, from studying this curriculum, I think it’s dumb to go 100% active. What proportion of funds do that?
^Well, I can aruge that TB’s core is the index, the satellites are the sector/areas that PM feels he can add value therefore he can beat the index by overweight/underweight that particular sector/area.
http://en.wikipedia.org/wiki/Enhanced_indexing I have only had exposure to the form deemed “enhanced cash”
Geesh, the only thing I remember about Treynor-Black is that it was on the L2 exam and I was completely unprepared for it. Well, I also remember that it had something to do with adding an active portfolio to a passive investment strategy and how it shifts the sharpe ratio. I wouldn’t mind reviewing it, actually… this stuff interests me… it’s disturbing how much of these exams you forget after test day.
I’m personally still dreaming with the BRICS. My FXI shares are down 76% this year, but I’m still dreaming with those BRICS
FXI is only(only!) down about 40% this year of highs, how are you getting it so bad in the pants?
mo34 Wrote: ------------------------------------------------------- > I’m personally still dreaming with the BRICS. My > FXI shares are down 76% this year, but I’m still > dreaming with those BRICS On the other hand, i will start sh1tting BRICS very close to Aug 19
tvPM Wrote: ------------------------------------------------------- > FXI is only(only!) down about 40% this year of > highs, how are you getting it so bad in the pants? Right near the absolute high sometimes in November 2007. Talk of bad timing. In the mean time, my IAU gold ETF has done well, but not enough to carry the remaining crap in my “Efficient” portfolio …
comp_sci_kid Wrote: ------------------------------------------------------- > mo34 Wrote: > -------------------------------------------------- > ----- > > I’m personally still dreaming with the BRICS. > My > > FXI shares are down 76% this year, but I’m > still > > dreaming with those BRICS > > > On the other hand, i will start sh1tting BRICS > very close to Aug 19 Told you to print new business cards and update your resume, it’s in the bag man. Only way you fail, is if the MPS is set at 85%, which is not very likely.
cfa_b’more Wrote: ------------------------------------------------------- > I would totally disagree. In the case if bill > miller, he has allowed the value trust to become > so big, that he is no longer able to buy stocks > even if he sees value. His greed has put him in a > position to shift his strategy from value to deep > value-contrarian and has only bought unloved names > such as the homebuilders. This technical issue is > accompanied by a life-style change, where he has > been more indulgent, for example he just bought a > 30-feet yatch about 2 years ago, and is going > through a divorce. > The impending death of the value trust doesn’t > support your premise by any means. So all we need to do is talk to our manager’s marriage counselors and find out if divorce is impending. If the answer is yes, we know they’re not at the top of their game anymore and it’s time to bail.
aldford Wrote: ------------------------------------------------------- > So all we need to do is talk to our manager’s > marriage counselors and find out if divorce is > impending. If the answer is yes, we know they’re > not at the top of their game anymore and it’s time > to bail. ha ha + actually funds pulling out money is good for bill miller, his fund will no longer be “so big” that he can stay under the radar…
I actually have a small holding in this fund and I had to double check the last two statements, thinking I must have had a redemption I forgot about it was so down…time to pile in more money is what I say… mean reversion