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John Thomas graduated with a bachelor’s degree in biochemistry with honors and a minor in mathematics from the University of California at Los Angeles (U.C.L.A.) in 1974. He moved to Tokyo, Japan where he was employed by a medium-sized Japanese securities house. Thomas became fluent in Japanese... More
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  • My Interview With "Trader Mark" 0 comments
    Feb 5, 2010 7:43 PM | about stocks: DRWI, ATHR, ASIA, BFR, VNM

    “Trader Mark”, publisher of the wildly popular www.fundmymutualfund.com website, is the harbinger of a pioneering, disruptive, guerilla type of fund management that may set the traditional mutual fund industry back on its ear. He was not born into a family well connected with the east coast establishment, did not go to an ivy league school, nor even get an MBA. He has managed to scratch and claw his way into the industry through sheer grit, imagination, and a reasonable fluency in html.

    Grounded with a degree in economics from the University of Michigan, he does all of his own research on the Internet.  As he has no employees, his operating expenses are effectively zero, mere pennies for web hosting fees and the electricity that comes out of the wall. All of these savings will be passed on to the end investor.

    Mark employs a hybrid fundamental/technical, long/short approach to the market which he has developed through trial and error over the last 15 years. It was enough to deliver an impressive 77% return last year through model portfolio tracker, Investopedia.   His record enabled him to build a readership of 150,000 a month at his website, and brought him an impressive 13,482 followers at blog aggregator www.seekingalpha.com .

    I looked into starting up a mutual fund myself a few years ago and concluded that it couldn’t be done for less than $100,000, and needed at least $100 million in assets to cover operating costs.

    Mark will fill out his own forms to register as an investment advisor, having studied .pdf files of the necessary forms at government websites. He will skip the nationwide road show, won’t pitch pension fund investment committees, nor cultivate the fund of funds.

    Mark says he can break even with a mere $7 million in assets. His only real outside expense will be an independent annual audit, an item that fund subscribers will happily cover. Mark has already received commitments for this amount from his online followers for a mutual fund he will launch this summer. He is in effect building his own “homemade” mutual fund. Welcome to Internet economics.

    Given the vast reach of the Internet, free software, and the bargains in hardware and broad band, it was only a matter of time before a Trader Mark percolated up from the underground. He is doing to fund management what Amazon did to book sales, Travelocity to airline travel, and Napster to the big music companies. He is a disruptive force that will destroy traditional mutual funds, and possibly hedge funds as well, with a bottoms up, zero cost strategy that Harvard business professor Clayton Christensen would applaud. The real game changer is that there are thousands more “Trader Marks” out there, diligently building asset management businesses on home pc’s. Nobody really knows how many for sure.

    If there was ever an industry crying out for restructuring, consolidation, and price competition, and ultimately, a whopping great downsizing, it is the US mutual fund industry. It has mercilessly ripped off retail investors with notoriously bloated expenses and spendthrift marketing costs. Conflicts of interest are rampant. Any trainee assistant trader can tell you that more than 90% of all mutual fund managers reliably underperform the indexes, some grotesquely so.  Published performance is bogus, as they show a huge survivor bias, not including the hundreds of mutual funds that close each year. And there’s always that surprise tax bill at the end of the year. Even John Bogle, who broke ground with his own innovation in the seventies, the index fund, says that investors in America are at the bottom of the food chain.

     Mark believes that the US economy is in a “drugged pleasure dome that kicks the can down the road,” and will bring “another ugly episode in the market.” If the S&P 500 breaks the 200 day moving average, which is looking increasingly likely by the day, he’ll turn on a dime and bail on his longs.

    Longer term, Mark likes the small cap mobile technology area, and has traded in Atheros Communications (NASDAQ:ATHR), Asia Info Holdings (NASDAQ:ASIA), and Dragon Wave (NASDAQ:DRWI). China and India have great fundamentals, even though they are getting overhyped. More attractive is Brazil, which offers a small cap ETF (NYSEARCA:BRF). In the BRIC complex, he’d take Russia (NYSEARCA:RSX) out, which presents unquantifiable country risks, and substitute in Indonesia (NYSEARCA:IDX), another resource exporter with a growing middle class that is close to China. Also on his horizon are Australia (NYSEARCA:EWA) and Vietnam (NYSEARCA:VNM).

    Fidelity, T. Rowe Price, and Dreyfus, beware.

    To listen to my interview with Trader Mark in its entirety and get a glimpse into the future, please go to Hedge Fund Radio at my website by clicking here at http://www.madhedgefundtrader.biz/Trader_Mark.html .   For more iconoclastic and out of consensus analysis, you can always visit me at www.madhedgefundtrader.com , where the conventional wisdom is mercilessly flailed and tortured daily.


     

    Stocks: DRWI, ATHR, ASIA, BFR, VNM
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