keithpiccirillo

Smart Funds Appear to Be Surprisingly Defensive

Another informative article, especially the insight in the first paragraph. The "Idiots Market Neutral Fund" could also appropriately be called the kiss principle.
I occasionally use ETF shorts as a pairs trade to parlay CGMFX, darting in and out of SKF and SRS when I read about great pain, and yes, sometimes my own.
Heebner's returns seem to have consistently underperformed the S & P 500 since mid November with CGMFX not gaining much ground on rising above the moving averages. He is not yet outperforming his peers.
CGMFX was in the bottom decile recently, a place he rarely visits.
Perhaps he has added other shielded positions as of last quarter besides WMT and MCD until he can see glimpses of a Phoenix type sector in the sunrise.
Clearly the bank financial play did not work, insurance was his latest dance, and he has lost his old Mojo. He must still have the gold and mining exposure and may add to it.
Weakened demand will equal lower earnings and lower stock prices across all sectors, making a focused fund even more challenging.
Transports and shippers in particular, with improving BDI index is the one I am watching but don't want to dock with the shipping stock without a chair when the music stops.
An informed trader type growth fund manager does not concern themselves with liquidity, yet one would think near term a heavier low beta exposure is the place to mend wounds until the slow and labourious opportunities present themselves.
Mid November marked a low that may yet be revisited in 2009, and big hulk funds are just not nimble enough to turn their frigates in time.
I tend to believe more in what Roubini and Marc Faber say to help keep my guard up.
In bear markets one should be basically neutral or bearish.
Thanks.

The Mini Ride of the Phoenix

Dr. Hui,
Thanks for the article about The Phoenix Effect, it is a term I rarely hear, and seldom see.
Perhaps the best way the individual investor could reap these benefits would be to make an initial entry, or a switch into an existing no load small cap mutual fund with an initial entry and then monthly amounts in ever increasing amounts over a 3-4 month period.
It would be very difficult for the layman to perform so much fundamental analysis and even if one could, the metrics in our current environment with so many stain glassed windows would make these on-the- brink" businesses masquerading as stocks, nearly indiscernible from each other. As TraderMark has pointed out, they mimic each other like twins.
Timing rarely works, but if the BankIndex (KBX) , Vix, Libor rates, housing rate hope, and infrastructure spending are all in improving and accelerating modes, perhaps this is how to catch the Phoenix effect from the recent market lows.
Most of us have so much committed and re-committed at a loss, perhaps the re-test entry point needs to be 7500 Dow, and 750 S & P.
I squinted, and missed the infrastructure moves of Nov. 10 when the engineering firms like JEC, FWLT, FLR and their brethren rose like a beaming sun facing east.
My triggers are now daily readied for that next big drop when it comes.
I cannot gauge the sector or countrie(s) I believe will likely lead us out of this. One would think it would be the money centers but this is not certain with so much government involvement.
I tend to believe owning emerging markets, and Asian stocks would be the most rewarding strategies in the next quarter or two.
As Roubini has said, we are a nation of first consumers and first debtors, but will now have to become a nation of last consumers and last resort debtors, savers, and producers of something sustainable.
It saddens me to see how we demanded so many short lived disposable products from world markets, that ended in recycling centers, or worse, landfills.
The supply/demand shift paradigm is being made to the BRIC countries as the world will become more realigned with economies of scale and more global "evenness".