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Tom Madell

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  • ETFs Vs. Mutual Funds: A Surprising Analysis [View article]
    I agree with you in terms of what "should have been possible." I don't want to argue about this but all I'm pointing out is due to the apparent fear factor, most investors, fund and hedge fund mgrs have not been able to excel "in reality"
    mainly because no matter what stocks one picked, there was little of the expected advantage of one set of picks over another. Bill Miller is a great example of one with a legendary record as are many others. It all about the math of highly correlated stock movements. Even for myself I had an excellent record of outperforming in the first half of the decade, but I haven't been able to beat the S&P 500 for a number of years now.
    Aug 4, 2012. 10:32 PM | 3 Likes Like |Link to Comment
  • ETFs Vs. Mutual Funds: A Surprising Analysis [View article]
    Hmmm ... I think reading an investment article is a little like looking
    at a inkblot - people are going to interpret what they see in different

    In my article, the chart near the bottom, which I call a summary, has two main variables - expense ratio and fund performance as compared to an index. The two main examples discussed are Fidelity Contra and Pimco Total Return, which in both cases I suggest that an investor own because they have been able to outperform and more than make up for their higher
    expenses. Therefore, if you read my article and come to the conclusion that I am focusing too "much on cost only," that is your prerogative. But an objective reading would suggest that I am focusing on both cost and finding funds that are worth their extra cost.

    I don't want to seem like I think I am the either the greatest investor or the greatest writer, but it seems to me that it is a common problem that US investors often just won't listen or remain open to input when someone gives them a different opinion; they just keep to their prior beliefs, it seems, no matter what is presented to them;
    this I believe is to their own detriment.
    Aug 6, 2012. 01:05 PM | 2 Likes Like |Link to Comment
  • ETFs Vs. Mutual Funds: A Surprising Analysis [View article]
    I base my assertion on a simple observation. If you look at the following results from all mutual funds covered by morningstar at

    you will see that over the last 5 yrs, there has been hardly any
    variation in the average returns betw. different categories of US stock funds. While obviously there still have been a small no. of mgrs. that have beaten the trend, the huge majority of all the thousands of funds have all been "clumped together" in returns.

    It was not this way before the fin. crisis - then, there were big
    differences in performance depending on which particular categories a mgr. chose, assuming he/she had such flexibility in his/her charter to pick large vs small, growth vs value, sectors, etc.
    Aug 4, 2012. 05:11 PM | 2 Likes Like |Link to Comment
  • ETFs Vs. Mutual Funds: A Surprising Analysis [View article]
    Will try to cover comments thus far in a single comment:

    To jweissman - thank you for the comment. Don't think your
    question is true - for ex., see

    comparing the Vang. REIT fund with the ETF - virtually exact same

    To Lucas Krupinski - It seems you are saying the same thing as I
    state in my article which is: Low fees are great, but there are
    some managed funds that seem to consistently beat the indices by
    a large enough amt. to make them better to own. One of them is
    PTTRX which has been far more profitable than a bond market index. So I guess I disagree with David Swensen - I have owned PTTRX for many, many years, and didn't have to do a ton of research to find it. And, incidentally, I personally pay more attention to Gross's advice on bonds than stocks; after all, he is a bond
    fund mgr. and is competing against stocks.

    To Snoopy1 - I agree that one can't be sure if a mgr. will continue
    a good track record, and most can't, and that index funds usually
    outperform most of the time. But, I don't think it follows that
    there aren't a small no. mgrs. that are exceptional and that it
    is impossible to find them. I guess Buffett is an example.

    As to your 2nd comment, I personally have identified 10 funds
    I think will outperform over the next 5 years - see

    A problem over the last 5 yrs. is that due to the financial crisis,
    almost all types of stocks have performed similarly. Therefore, managers have found it extremely hard to beat an index. But that is not always the case. Between say 2002 and 2007, it was somewhat easier to find the type of stocks that would outperform.

    To andres17 - agree with your comments. But, of course, when you
    pay an expense ratio, it's not just to profit a manager. You are
    getting a service - someone, or a whole team, to research and provide presumed expertise on the best investments. I admire people who can do without a manager and their expense, but this is not easy work since you are "competing" with all the professional investors out there who work full time studying stocks. I believe it is
    harder for an "ordinary" person to beat the markets than an
    experienced and well trained mgr.

    To ogd - yes, thank you for providing this info which I did not mention. My article could have been longer and more detailed but I wanted to keep it to a reasonable length. I believe there is more info on what you are describing on Vanguard's website and they take the bid-ask spread into account where they compare ETFs' to funds' costs.

    To jconger- I do not think most index funds have the cash cushions although many managed funds do. I do not know much about CEF (closed end funds) but I believe they have some issues of their own.

    To WKMA - I, personally, would rather invest my money with professional managers than to try out my own pet approaches, for the most part. So, I can't really comment on your approach.
    Aug 4, 2012. 02:33 PM | 2 Likes Like |Link to Comment
  • Why Plunging Investor Sentiment and Consumer Confidence Index Aren't Cause for Concern [View article]

    Comments on US debt are understandable, and I for one wrote about these problems years ago on my site as one reason for caution about the stock market. And several years ago, as investors went from little concern about debt to a greater realization that much of the US economy was "built on a house of cards," the stock market did suffer during the last recession.

    But now most people recognize this unsustainable debt as a problem that must be fixed. The bad news is out there for all to see and for this reason is likely already reflected in current stock prices.

    The real question, then, is not if there is a mountain of debt, but
    what, if anything, will be done about it. If you believe that
    virtually nothing can be done to improve the situation, then a
    pessimistic forecast for the economy, and likely for the stock
    market, would make sense. If, however, you believe that our country
    will learn from what has already transpired and start improving
    things going forward, then I don't think the pessimistic view
    is likely justified.

    But in any case, the debt problem, or any other problem that people
    are currently aware of, is not at all the point made by my article.
    By just stating that there are known problems with the economy,
    you are pointing out that the view that, as a consequence, stocks will suffer (or already have).

    But the research I am writing about, and which one can find many research articles supporting, is 'agnostic' about WHATEVER the reasons are for pessimism. It merely states that in the past, such excessive pessimism is more often associated with stock gains than losses. You should remember too that the economy does not always suggest the direction of the stock market. There any many times when the economy is not doing particularly well, yet the stock market excels (eg March 2009 to the present); likewise, the economy can be quite good, and not long after, the stock market can fall apart (e.g. at the end of 1999 when GDP was 7.4% and yet the S&P 500 returned -9.1% the following year).
    Jun 14, 2011. 06:29 PM | 2 Likes Like |Link to Comment
  • Why Plunging Investor Sentiment and Consumer Confidence Index Aren't Cause for Concern [View article]

    Please see the following for research studies supporting the ideas containing in my article: (by Mark Hulbert)

    Uninvested cash is also a contrary indicator. When fund managers have a high cash position, stocks more frequently will surprise to the upside; the opposite is true when they have a low cash position.
    Jun 14, 2011. 03:17 PM | 2 Likes Like |Link to Comment
  • An Alert To Investors [View article]
    hw102 - International funds, such as VGK that focus on Europe still look relatively attractive for the next mo. or so; however, without a serious correction of 10-15% they are on the path of overvaluation.

    Regarding VWO, emerging markets are still working off the excesses that began in 2009; over the last 3 yrs., they have been
    on a downward trend. It would appear to me that these excesses need to be further removed. VWO might not be technically overvalued yet, but it appears unattractive to me.

    As far as I am concerned "overvalued" is a relative term with no one agreed upon definition. But I use these terms to mean that according to my research, sectors that go up in price a great deal for a long time, such as these two (and most other ETF categories right now) will tend to underperform over periods of as long as the next 5 years. But things can change if there is a significant drop in prices, making them more attractive once that happens.
    Oct 15, 2013. 10:01 PM | 1 Like Like |Link to Comment
  • ETFs Vs. Mutual Funds: A Surprising Analysis [View article]
    At the Vanguard brokerage, they offer PTTRX at .46 expense ratio for a minimum 25K investment, not a million.
    Aug 5, 2012. 10:00 PM | 1 Like Like |Link to Comment
  • Empirical Buy Vs. Sell Signals Suggest Long-Term Gains Ahead [View article]
    The dialogue is thought provoking and I appreciate both of
    your inputs. Here are a few more points I would like to make:

    1. Obviously, people have different investing approaches, and if you
    are comfortable with yours, or Hussman's, I am not going to try to
    tell you my approach is inherently better. I originally
    invested in Hussman's fund because he obviously was very knowledgeable and he seemed to be a good choice for doing well even in a down market environment which I also foresaw during those mid-decade years. But the fact that even though he appeared
    correct in his warnings during the 07-09 bear market, he couldn't
    even outperform since then seems to show that his method is weakish. That is, if half the time you are right and half wrong, the net may be close to 0, which has been true in his case.

    2. Eric, I forgot to answer your earlier question about which I would
    invest in if I had to go to prison for a decade, an ETF or a hedged
    fund? My answer is neither if you are talking about an either or choice. I have my investments in many different types of funds, including in Hussman's (for now) and that's the key for me. I wouldnt trust any one manager or style of investing as an all or none bet. (I'm very glad I only have a little bit in HSGFX because it is perhaps the only fund I own that I have lost money on even though I have owned it for almost 7 years.)

    3. My strategy is not at all trend following. It advocates more heavily allocating in those asset categories that are among the worst performing areas. While this is not a guarantee of good performance ahead, it helps to avoid and even suggests selling categories that are going along the way that makes most
    investors get onboard. I do agree that most investors are very
    bad at getting in and out in a productive way. And trying and succeeding in any investment strategy is one of the hardest things for anyone to do successfully.

    4. I have recently recommended that investors pick from among what I would consider some (but not all) of the best funds I have come across - the list includes VFINX and bond funds:


    Each of these non-VFINX funds has outperformed VFINX by a wide amt. over the last 10 years and most have had the same ongoing mgr. Given these proven performances, why would I stick with Hussman whose track record over the period has been much
    Mar 17, 2012. 05:54 PM | 1 Like Like |Link to Comment
  • Determining Buy Signals for Long-Term Investors [View article]
    With regard to the last posted comment, I don't think you will
    find the facts back up the writer's negative assumptions.

    You can find my actual Model Portfolio performances relative
    to the S&P 500 Index at the following page on my website:

    The table there shows that my Portfolio was outperforming
    the Index on a 1 yr. (and 3 and 5 yr.) basis prior to the 2007 bear market and for several quarters during the next several years.

    The premise that I changed my approach because prior to that my methods were not working can clearly be shown to be incorrect from looking at the results presented in this link. In fact, my earlier method had a highly consistent, and I'd say admirable, record in beating the Index. I changed the method in order to quantify the process and make it more precise, not because it wasn't working.

    During the bear market itself, it became even more difficult than
    it already is for anyone to beat the Index because no matter what type of mutual funds one selected, there was little difference between how they performed and how the Index did. I have previously discussed this on my site for those who want to learn more about what my articles said.

    I'm glad that people are sometimes skeptical of things they read - that's fine. All I am doing is reporting on the results of my research; it's there for anyone to examine and either consider it worth following or ignoring it. (By following my own Model Portfolios myself, I have done far better than I would have by buying and holding the S&P 500 Index as the above table will demonstrate.)The data on my site, according to feedback sent to the site, shows that hundreds or even thousands of people, have felt that the information was highly helpful.
    Aug 1, 2011. 05:16 PM | 1 Like Like |Link to Comment
  • Determining Buy Signals for Long-Term Investors [View article]
    Well to some market timing is pretty much a no-no. In reality, I'm not sure what separates market timing from the approach employed by many investors, that of attempting to buy when the price is attractive. Of course, this is different from either dollar cost averaging or merely buying when you acquire some extra cash; or from merely "buying and holding." It makes sense to me, but not necessarily to everyone, that since stocks are a volatile asset and subject to what I consider to be extremes in terms of being in or out of favor, one should focus greater attention on buying when prices are significantly more modest than long-term expectations, and vice versa with regard to selling.

    Regardless of how else one might regard my methodology, it is above all empirical. This means that it assumes (and continues to test the proposition) that the way investors have reliably behaved in the past is a very good bet as to the way they will continue to act looking forward.
    Aug 1, 2011. 12:21 PM | 1 Like Like |Link to Comment
  • Why Plunging Investor Sentiment and Consumer Confidence Index Aren't Cause for Concern [View article]
    I think you have some erroneous ideas about the variety of mutual fund fee structures available. The funds I am interested in having no loads and very low annual fees with no back end fees. Usually these funds are purchased by self-directed investors who do not work with a broker or rep. For the most part, then, when investing in these very low cost funds (or ETFs), there is nothing stopping you from withdrawing from a fund when pessimistic.

    If you check my website at, you will see that I am not really a Buy and Hold investor. I adjusted my positions considerably during the downturns, mainly by buying beaten down investments and lightening up on the most vulnerable ones.

    You are expressing the opinion that you are pessimistic. That's fine but my article is about long-standing research that shows that when the majority of investors feel that the market/the economy is not going to do well, the market often surprises people by going the other way. So the point is that peoples' feelings in a negative direction, more often than not, do not turn out supporting the obvious idea that the stock market will do badly.

    Yes, there are plenty of problems out there. But there were probably as many or more at the beginning of 2009. People were very pessimistic then too, yet the market has done extremely well since.
    Jun 14, 2011. 03:01 PM | 1 Like Like |Link to Comment
  • Investors' Choices Of Funds/ETFs Tend To Underperform [View article]
    David - there are myriad points you make that have no bearing to what I state in my article:

    - your initial comment about past performance would imply that there are
    no people in the financial world/industry who can do better than average. But
    I would guess that many readers of Seeking Alpha would disagree; outperformance is never a guarantee, but it is certainly possible.

    -You fail to recognize that I never stated that investors need to pick
    funds that have "done well." Rather, I'm talking about funds that have
    done relatively better than the market averages. That means if the
    S&P index goes down say -20%, the fund that has outperformed may
    have only gone down -15%.

    -While you may focus on how funds do in the immediate future, most experts,
    and fund investors themselves, focus on holding on to a fund over at least
    a moderately long period to get the best results (and because most
    people don't have the time or interest to trade frequently).

    -You said five years ago investors might not have invested in equities
    if they focused on the prior 5 yr. performance. True, but since you
    think I said that one should only look for positive 5 yr. performers, I
    wouldn't have wanted stocks. Just the opposite: Five yrs. ago, I was
    recommending increasing one's allocation to stocks because stocks had
    become undervalued.

    -Methodology: I never said that all investors behave alike. What I said
    is that when someone picks a fund as a relatively long-term holding, they
    are often picking popular funds and maybe they should look for additional
    reasons for picking one or more funds.

    -You said "many investors are quick to jettison any investment that starts
    to lose money and replace it with another on the rise." If so, why did
    so many people lose so much money in the 2 bear markets of the last
    decade? Most fund investors are pretty poor at market timing.

    -My article is not about "distinguishing wise investors from unwise investors."
    It simply states that the most popular funds picked by investors turned out
    to be worse performing over a number of years than randomly picked funds.
    I also see similar trends in fund selection only one year later.
    Apr 1, 2014. 05:13 PM | Likes Like |Link to Comment
  • Planning For The Winding Down Of The Bull Market [View article]
    MrSun - my current Model Portfolios at show that I recommend a 52.5% allocation to stocks for Moderate Risk investors and a 70% allocation for Aggressive Risk investors. So, contrary to your assertion, my position is not one of "doom and gloom."
    Feb 5, 2014. 01:30 AM | Likes Like |Link to Comment
  • Planning For The Winding Down Of The Bull Market [View article]
    b3player makes some good points and it's hard to argue with some of them. I suppose the majority of investors would probably agree. But the point I am trying to make is that once you have say doubled your initial investment, unless you truly have maybe a decade or two ahead before you even want to think about this money, does it make sense to expect to keep on coming out ahead? Or, is a certain amount of "greed" (I hesitate to use this word because it may be closer to a psychological block that prevents people from taking money off the table when things are going well) built into most of our psyches?

    By using the casino example, I did not mean to suggest that investing is like a casino so perhaps another example would have been better, like winning a thousand dollars in the lottery after trying just once or twice, and then thinking that your odds are reasonable for that to happen again.) The example is not meant to disparage investors; it is merely to show that people who do extremely well at something that doesn't happen that often should not assume that this can keep repeating. In the case of the stock market, my research, which is pretty extensive, but doesn't cover the entire history of stock investing, shows that cycles and limits are definitely a big part of the picture even if we don't know exactly when they are going to happen.
    Feb 5, 2014. 01:22 AM | Likes Like |Link to Comment