How to Buy a Glider Afordably, or Euro vs ContraFund

Andy Blackburn wrote:

Aren't you giving your money to the latter? Are you
saying in addition one should only pick fund managers
who didn't study finance, or what exactly?

No. As a first cut, I don't think I care what they've studied. I think
I'm primarily interested in consistent results (and that, EXACTLY,
is what I'm saying). What's your priority?

But if you're aiming to make money instead of just
not losing it,
maybe them Nobel folks aren't all that relevant. Making
money is as
much art as science.

What happened to "...if it were otherwise it'd be impossible to staff
grad schools of finance"?

...When I was a student, one of the school's Nobel-winning
finance guys was interviewed by an editor from a business
magazine. He was asked, 'If you guys are so smart,
how come you're not rich?' He answered, 'Many of us
are.'

I've spent my own time around grad schools. Guess what - he lied to the
business magazine. Only a very few of them are rich (see above).

Lesson 1 in investing - a lot of really nice people won't tell you the
whole truth.

GC

At 19:30 27 November 2005, wrote:
Your comments are exactly on point. If you could really
teach investing
to all of those MBAs everybody investing in the market
could only earn
an average return because market intelligence is evenly
distributed. Of
course this is not the case; funds managed by business
school graduates
have returns all over the map. My goal is to identify
those managers
who CONSISTENTLY beat their peers. The Contafund has
a 10 year
compounded rate of return of 12.4%, beating the S&P
500 by nearly 3%.
Perhaps BB ought to ask Will Danoff (the fund manager)
to lecture his
class; I think they would learn a lot from him. Will,
btw, has an MBA
from Wharton.


That's certainly true but not my point. I don't believe
that markets are 100% efficient, particularly in the
emerging world. My point was that 'past performance
is not a guarantee of future returns'. ContraFind
had two good years in the dot-com bust that made them
most of their superior 10-year return versus a simple
index (with very low load). The question is, does their
investment philosophy or market / company information
allow them to kick back into superior performance in
2006?

This is true of investments in general. Hedge funds
in particular use various philosophies that try to
play anti-correlated market relationships to improve
the returns at any given risk level. Some of the relationships
hold for a few months, some for a few years and some
get arbitraged away just because the investment philosophy
gets popular and bids the returns away.

If you've gotten rich from your ability to sort out
which historically successful investment philosophies
have legs left and which are played out, more power
to you. At least you needn't worry about how much gliders
cost.

9B

I am not sure what you are recommending, if anything. I do know,
however, that you haven't done your research (this seems to be a
recurring theme in this thread). The facts are that the ContraFund has
outperformed the S&P 500 in 8 of the last 10 years. The average
difference is 3.29%. It underperformed one year by 7.35%, but still
managed a gain of 23% that year. More importantly, it significantly
outperformed the S&P 500 in the down years. This translates into lower
risk for the investor (note that I said "lower risk", not "no risk").

Tom