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I spent my professional life – more than 45 years – working for and with large well-known investment management and investment banking firms. I’ve served at various times as an analyst, portfolio manager, senior investment executive, senior business executive and corporate director. On the buy side, the firms I worked for managed and sold mutual funds to retail investors and separate account investment management in a broad array of investment disciplines to large pension, endowment, public employee and other institutional investors. On the sell side, I’ve been associated with a substantial investment bank offering corporate finance, M&A and institutional research to corporate clients.
I spent many years as Chairman of the Investment Committee of a large non-profit. Our portfolio was invested globally and my Committee’s responsibilities included hiring (and, occasionally, firing) consulting and portfolio performance measurement firms and, more importantly, hiring (and, more than occasionally, firing) institutional investment managers who managed portions of our overall portfolio. We used both active and passive managers.
My personal approach to investing is based on my professional experiences. A few of a very large list of guiding principles are:
• There is only one relevant measure of investment performance. It is the risk-adjusted performance of an overall portfolio compared to its pre-established benchmark over a reasonable period of time. Most plan sponsors will not hire a manager with a performance record shorter than 5 years. After hiring a manager, they look at performance on much shorter time frames. Portfolios that generate profits – but less than their benchmarks – are failures.
• Generating Alpha is the sine qua non of professional active investment managers and their clients. It is incredibly difficult to achieve, especially after transaction and management fees are included.
• Passive (i.e. index) portfolios don’t care about Alpha. Typically they care about “Tracking Error”. Passive funds have tiny costs (“friction”) so they can get very close to zero tracking error. But, as long as they trade at all or charge any fees at all or run the portfolio by sampling or need to rebalance because of cash flows in or out the tracking error will never actually reach zero.
• For most people and institutions – including me – the path to investment success is to focus hard on asset allocation, then buy low cost/low tracking error index funds for each of the categories you choose. On the other hand, everyone knows, especially people who read Seeking Alpha, researching and buying/shorting individual stocks or -- at the institutional level -- hiring or firing active managers is much more fun!
• Personally, I drink my own Kool-Aid. About 90% of my portfolio is invested using low cost index funds to execute on a carefully considered asset allocation focused on multiple broad sectors of worldwide markets. I rebalance about annually. But, I spend a wildly disproportionate amount of time researching and investing (long or short) in typically less than a handful of stocks I find interesting, and I do each one with enough money that I really care about how it works out.
• John Bogle was right. Years ago he created Vanguard on the principle that expense ratios matter. In aggregate, all investors' activities add up to average, by definition. And, it is unbelievably difficult to be above average.
• Relatedly... • In today’s usage, a “Hedge Fund” is generally a misnomer. When they were originally created, hedge funds had specific investment objectives and styles. Today, the closest style to a real "hedge fund" would be describes as "long/short equity". In today’s usage, “Hedge Fund” refers to a pricing structure. It is applied to any fund with any objective invested in any assets that is organized as a limited partnership and charges clients both a management fee and a carried interest in realized profits. These days, the management fee is ausually 1-1/2 to 2%, plus a carried interest for the manager, typically about 20%. The shorthand for the pricing structure is “2 and 20” or "1-1/2 and 20". In earlier days 1/15 was more common. This explanation is this profile because it is my view that it is unbelievably difficult, as a client, to earn an above average return when paying such enormous fees. But, plan sponsors continue to do it – so maybe I’m wrong.
• I have never met (or even heard of) a short-term trader who has had more than momentary success. Individuals engaged in short-term trading (vs investing) who claim long-term success have selective memories – eagerly talking about their winners and forgetting about their losers – and have never subjected their long term investment record to mathematical analysis. Institutional firms can't get away with that as they need to publish all their performance numbers.
• Similarly, I have never met (or even heard of) a professional or individual investor who has had long-term success by market-timing.
• Investing is fundamentally a batting average game. Long term, the best – not the average, but the best – professional institutional investors are successful on their individual stock picks around 55% of the time. Of course, that means they are unsuccessful about 45% of the time.
• I drink that Kool-Aid too. When I buy or short individual stocks, I do careful research first. Once I've made an investment, I spend almost all my time focusing on factors that could prove I’m wrong!
• When it comes to investments, I am a classic “on the other hand” thinker, and, therefore, please understand that everything I write on SA is caveated with the ending quote from any of Dennis Miller’s famous rants: "...of course, that's just my opinion. I could be wrong."
• Enormous self-confidence – almost arrogance – and, at the same time, enormous humility are required to be successful as an active investor! You have to have serious conviction about an investment to put up your money. But, deep down you have to remember that, by definition, investing and the future are uncertain.
• Money moves markets. Bull markets are most often driven by loose monetary and fiscal policies. Bear markets are most often driven by tight monetary and fiscal policies.
• Too much leverage stretching for extra return has caused every major financial crisis I’ve ever lived through or studied.
• Flexibility is a hallmark of great investors.
• It really IS true that Past Performance Does Not Guarantee Future Results.
• There are innumerable investment-oriented aphorisms and maxims that I believe have just enough truth in them that I repeat them when appropriate. Here is a very tiny sample:
o Don’t confuse wisdom with a bull market.
o Don’t fight the tape.
o Don’t fight the Fed.
o Most of the time, the market -- especially in big stocks -- is right.
o It's good to be right for the right reasons, but it's more important to be right.
o The first rule of making money is: don't to lose it! After a loss (realized or not) the mathematics of breaking even are daunting. If you lose 50% on an investment, you have to make a 100% gain on that or something else just to break even. If you lose just 33% on something, that, or something else, has to go up by 50% to break even.
o More money has been lost in the search for high yield (or return) than in all the financial scandals in history.
o Sometimes, the return OF principal is much more important than the return ON principal.
o Bulls make money and Bears make money, but Pigs get slaughtered.
There are lots and lots more of these!
All of the opinions and perspectives I express on Seeking Alpha are my own and in no way reflect the opinions or perspectives of any business with which I am currently associated.
Semi-retired CPA. 55 years old. I am steadily relying on my investment income for retirement. My practice is slowly fading away and is a means to pay my health insurance and medical expenses.
Started investing thru my mother's account at age 14. I owe so much to my mother who taught me so much about investing. She had me keep her charting up for her. She had me watching the ticker on TV when it became available to the masses. I learned company ticker symbols using California 3 letter license plates in a game we would play whenever we drove anywhere. I learned her investment philosophy which was based on long term charting of stocks that had remained dormant for years hoping they were on the verge of breaking out to the upside. She was very successful using this methodology.
My mom had me sitting with her watching the old Wall Street Week, Agronsky & Co., Washington Week, Nightly Business Report, etc. I started out understanding next to nothing in the beginning but gradually began to understand everything. She emphasized importance of understanding the interrelationship of the economy and government because government could make or break your investments.
Our investment philosophies ended up being so different but I rely on that solid core I learned in those early years for so many things even to this day.
My focus is constructing a portfolio of solid total return investments. Too many investors focus on high income at any price or high risky income because they did not accumulate enough assets to lower their risk profile and desperately need or want a desired level of income and are taking way too much risk to get it. We all need income to live in a retirement time frame much longer than anyone could have expected when we were all young. We also need a greater measure of capital growth because life's highest expenses may be in our future and our assets must keep up with the higher cost of living in the future.
I was smashed to pieces like so many in late 2008. Had to lick my wounds and figure out how to move forward. I read an article by Prof. Timothy Considine (then at Univ of PA) in late 2008/early 2009 about the future of energy and I completely bought into it choosing the MLP space as the primary focus believing in an eventual recovery of MLPs but more importantly the story that 25 years of incredible infrastructure growth lay ahead and the MLPs were best suited to perform that service so the E&Ps maintain their capital for exploration and production.
Still licking my wounds I focused on the MLP sector in general believing in a general recovery meaning all boats would rise which they did. BUT, there comes a moment and I learned this from my mother, there comes a moment where the general part of a recovery must give way to an intense focus on the very best companies within the industry you believe in. So I moved from a general focus to specific best of breed MLPs. I chose based on an understanding of each MLP's asset map and future potential to build out. I focused on organic growth over acquisition growth because Wall Street has destroyed so many companies over the years playing the acquisition game. Prof. Considine's thesis of a long term infrastructure build out meant you had to choose companies with the financial firepower (balance sheet) and asset map that allowed for much more organic growth than competing MLPs whose history was more reliant on higher cost acquisition growth.
In this zero interest rate environment many sub-par MLPs could prosper but the trick was to find the best of breed that could prosper in a normalized interest rate world which is the next chapter in our economy. I also focused on MLPs that were starting to jettison their GPs. MMP was the first and they paid 11x ebitda to buy out their GP. BPL and NRY were among the last to buy out their GPs and paid 23-26x ebitda which was crazy and an indication of how late they were to the game. MMP has prospered big time while the latter two MLPs have faltered in large part because they paid too much and waited too long to buy out their GPs. I bought MMP when they made the announcement. Wall Street analysts were skeptical about MMP's move and thought 11x ebitda was too much to pay. These same analysts thought paying 10x ebitda for a pipeline acquisition was reasonable but understand they get a lot more fees from the latter than the former. I knew I was on to something very good and have a large portion of my assets in the MLPs that bought out their GPs.
So to boil it down I have MLPs as core and absent tax law changes will be a major factor in my retirement plan. I also own a few best of breed BDCs and some common stock with good dividend payout histories and histories of good growth in dividends.
I used the 2008/9 crash to convert my IRA to a ROTH. My first transfer out of my traditional IRA was AAPL at $167; sold in my ROTH for $596. My mom always said use tragedy and adversity to your advantage an converting to a ROTH was my greatest leap of faith.
When I was younger I did very well in growth stocks without dividends but I have reached an age where I do not want to work as hard as I have worked so I do not have that same salary backup behind me that allows for taking that level of risk. However my risk portion of the portfolio is more measured with stocks like AIG, LCC, and WMB.
I am an HNWI. Not meant to brag, simply to state that I have accomplished my dream and enjoy responding to SA writings to give some wisdom from lessons learned, ideas for what to look for in (specifically) MLP investments, and in the case of Mreits hopefully get a few people to understand they must start learning about interest rate cycles in order to successfully play the cycle. I dumped all Mreits in NOV 2012 because I could see the winds of change that very much paralleled the GNMA and GNMA fund breakdowns in the 1980s. When the time comes I will begin looking at bonds and preferred again because the cycle will eventually reach that point where it will make sense to own bonds and preferred but not yet.
Editor for The Biotech Forum, the #2 subscribed to Marketplace investment service offered through SeekingAlpha. Top 5% ranked analyst (TipRanks) 2013 through first half of 2015. Daily contributor for Real Money Pro. Hedge fund manager from 2008 to 2011. Previously technology executive at Fortune 100 firm for a decade.
Please go to biotechforumsa.com for more on the Biotech Forum service available through SeekingAlpha. For Free Investment Reports on a variety of topics go to bretjenseninvests.com
I have been investing personally since 2008. I graduated from UMass Lowell with my BSBA in May 2009 and received an MBA with a Finance concentration in December 2012. I am pursuing my CFA certification and have currently (as of June 2014) passed 2 of the 3 examinations.
I am a senior business person that works in the real estate space largely dealing with stressed situations (not foreclosures) under court supervision. I am a licensed attorney with 45 years of business and investing experience. I manage a substantial portfolio of securities and properties and have been doing so for many years. I am not a technology whiz but use computers and smartphones and a tablet extensively. My interest in technology is based upon what can it do to make my life easier. That means that I seek out applications that do real world tasks as for example real estate management software. My activities are very document laden and hence, I have to do a great deal of writing, form completion, contract generation and review, etc. I have generally operated in the PC space and use a Samsung Galaxy II at present. My website is www.partitionlaw.com. I am fulfilling a long term dream and developing a winery which will have its first release in the fall of 2014.
I am a 40 something who has always been interested in investing. I am hoping to retire someday with enough passive income to enjoy the golden years.
I am primarily a value investor, believe beating the market is difficult at best.
I hold a CPA license, and have an MBA degree- but that really doesn't matter.
I enjoy Seeking Alpha for the learning environment, and developing a better understanding of both sides of the coin.
Retired investor, ex-Navy, ex-Big Oil, ex-French manufacturer.
My interest in investing came from both my grandfather/father and my boss at work. When my grandfather retired in the late 50's he spent his days either with some cronies watching the tape at the local ML office, fishing, or tending his flower shrubs. I didn't know what he was investing in until after he died which is normal as I was still in school and more interested in school than my future life. My grandmother started talking about the different companies and what was happening to them (buyouts, spinoffs, etc.). Then when she died and my mother inherited the portfolio I saw that it consisted of first quality dividend paying stocks. Until my mother's death the process continued without any significant purchases or sales -- nor any dividend reinvestments. The money was accumulated and invested in good mutual funds my dad liked.
My dad was a doctor and knew nothing about investing but a kind patient ( a crony of my grandfather) bought some stock for him in the late 50's with the comment "pay me when you can or give them back to me at anytime". He repaid him. The patient did this again about 2 years later. Same result. This small investment in a Louisiana land and oil and gas company (which no longer exists) paid for a new house and our educations, etc. My dad then started investing in mutual funds and dividend reinvesting. He loved Magellan and the Neuberger funds. He had them until his death.
My boss got me interested in AAII then when I moved to the home office I joined a small local investment club. Eventually I kept the club "sheet" -- the monthly tally of investments with relevant information (yield, gains/losses, tracking against the 500, etc.) . It was complex but fun. I stayed with that club even after moving away and kept their sheet too for almost 20 years. I joined a new club and repeated the process.
Now, I don't have any club but I continue to discuss stocks with friends.
The "dot com bubble" really crushed me and turned me into a DGI.
Now I have about half in stocks (COP, CVX, KMI) and half in funds/ETFs (Health Care, Small Cap, Medium Cap, Energy, Primecap, VNQ, VDC -- all Vanguard).
I want the portfolio to act as it did for my grandfather and mother. Hence, I am trying to educate our daughter in how this works. She's not investment savy but she is extremely smart and a quick learner in medicine so the process won't be too difficult.
Seminal reading: Atlas Shrugged, The Fountainhead, Think & Grow Rich, The Bible
Chris DeMuth Jr. is the founder of Rangeley Capital LLC. Rangeley is an investment firm that focuses on event driven, value-oriented investment opportunities. Rangeley Capital and his value investing forum, Sifting the World (StW), search the world for misplaced bets. Rangeley exploits them for its investors and then Mr. DeMuth writes about them on StW.
I am a licensed Psychologist, age 75, business owner and still work fulltime. I am interested in investments with high yields, which have a tax advantage, since I am in the high income bracket. I am a conservative investor since, at my age and with my critical mass, I have no need to take big risks. The taxable portion of my portfolio is totally invested in MLPs which has been my focus for the past three years. My retirement investments are in High Yield Bond funds which I trade in an annuity.
As a hobby, I am a ceramic artist and display my work on my website: www.rohrshack.com. My work is for sale on ESTY. I also give my pots to friends, relatives and to silent, sectarian, tax exempt, charitable auctions which are unaffiliated with politics.
I have been investing in the stock market since mid 1970's. My goal is to grow dividend income sufficient to ensure a secure retirement when combined with my other income. I believe that dividend growth investing is the vehicle that will make this goal possible. Since one of the most important aspects of DGI is never overpaying for any position, I use Capital IQ (which is available through my Vanguard accounts), Fast Graphs and David Fish's excellent CCC List. These tools help me identify stocks that are undervalued, or at least fairly valued, before I make purchase decisions. I am not an investment professional, just trying a regular gal trying to plan for her financial future.