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Trapeze Asset management


Guest kawikaho
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Guest kawikaho

Was ranked the #1 asset manager by P&I / Morningstar for many years running.  Before the financial crisis, the compounded annual returns were 33% a year for the 10 years since 98.  Your assets would have grown by 10x.  Since the middle of last year, returns have gone down to only 6.5% compounded:

 

http://www.trapezeasset.com/trapezeasset/history.html

 

ZPRIM is another top 5 asset manager that had its returns destroyed.  Talk about mean reversion! 

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I just finished reading their April 20 letter. They feel the lows have been hit and it is clear sailing ahead with stocks clearly positioned to outperform all other asset classes for the next 10 years. A very different perspective than Van Hoisington! Interesting...

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Guest kawikaho

This was just to illustrate that past performance is definitely no indicator of future performance.  Another case in point is CGM Focus fund.  Prior to this year, their compounded annual return since 98 was an industry trumping 22% a year!  If you include this past year, the performance goes down to just 7% compounded.

 

 

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I agree with your comments John.  Virtually no one was spared in this environment.  At the same time though, there are plenty of lessons for everyone, including many of the Tiger Woods of investing, since we've all learned exactly what Buffett meant by how a long string of successes multiplied by one failure can be catastrophic.  Cheers!

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Guest kawikaho

No doubt.  The point I was trying to illustrate is: after a decade of huge outperformance, you have to be wary.  I was close to investing with CGMFX, or Trapeze, but better thinking got to me.  Statistically, these guys are due for a huge correction.  I know everyone's looking for the next Buffett/Munger, but realistically, the chances of you finding another one is remote.  I think it helps to look at statistics at times, even though it may be backward looking, to help make decisions.

 

Going forward, i'm really bullish on equities.  About as bullish as I was in 2003!

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It seems to me that the only ones who didn't get killed where Watsa, who hedged and took the smart side of the CDS bet, some other Hedge funds who also did the CDS thing, and the folks at Renaissance Re who just seem to be head and shoulders above everyone.

 

Everyone else got killed.  Kinetics Funds just put out a conference call, and it's an interesting read/listen.  One of the guy's points was that everyone got a giant collective margin call.  The only place they could sell stuff to meet that margin call was the stock market.  One of the only liquid regulated places left on earth.  So that's where they went.  So there are a pile of stocks that got killed for no fundamental business reason.  They got killed cause someone had to raise a heck of a lot of money very fast.

 

That said, there is a big difference in the way that these folks got blasted.  For example Fairholme, and Kinetics stocks got killed but the companies they own are doing as well as ever.  Bill Miller, Pzena, Dreman, Nygren, and others of the contrarian value line got killed with bets on financials like AIG, FRE, Fannie etc.  I'm not so sure about Whitman.  To me that makes a big difference even if the quotational loss is close.  But maybe I'm deluding myself that there is a difference...

 

 

 

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Bargainman, yes the 'margin calls resulted in much forced selling. On the other hand 'financial innovation' and leverage for years drove a lot of earnings that simply were not real. Bottom line is I think it is difficult to really understand much when you have an economy built on steroids.

 

I like the comment from Microsoft about the economy needing to 're-set' at a lower spot from which we will stabilize things and start to grow (at a more nomalized rate).

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If you did not see the potential for a "reset" in the economy coming or if you did not see the potential for a "reset" in the stock market back to a reasonable long-term average from the bubble level of S&P 1500, and if you did not see the housing bubble, then you missed a big important piece.  Both were fueled by leverage and credit.  So if you understood that, you looked for a trigger.  The trigger was the US housing decline which started in 2006 impacting structured credit in mid-2007.  After that, the stock market continued to hold up.  There was time to protect capital but you had to realize early on that we had bubbles in the economy, stocks, housing, credit, and structured credit, then you had to realize that the initial decline in housing and break down of structured credit were the initial triggers and take out insurance on risk assets.  Soros came out of retirement in September 2007 to protect his capital as the stock market continued to hold up but structured credit was imploding in August 2007.  I mean the stock market did not see what the bond market saw for months and months and months.  There was lots of time, but you had to understand the risk was there and the triggers had been triggered.

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Guest kawikaho

If you did not see the potential for a "reset" in the economy coming or if you did not see the potential for a "reset" in the stock market back to a reasonable long-term average from the bubble level of S&P 1500, and if you did not see the housing bubble, then you missed a big important piece.  Both were fueled by leverage and credit.  So if you understood that, you looked for a trigger.  The trigger was the US housing decline which started in 2006 impacting structured credit in mid-2007.  After that, the stock market continued to hold up.  There was time to protect capital but you had to realize early on that we had bubbles in the economy, stocks, housing, credit, and structured credit, then you had to realize that the initial decline in housing and break down of structured credit were the initial triggers and take out insurance on risk assets.  Soros came out of retirement in September 2007 to protect his capital as the stock market continued to hold up but structured credit was imploding in August 2007.  I mean the stock market did not see what the bond market saw for months and months and months.  There was lots of time, but you had to understand the risk was there and the triggers had been triggered.

 

Yep, for sure.  The past two bubbles were easy to see from a year out.  The housing bubble and dot com bubble had many detractors screaming, "DANGER, WILL ROBINSON!"  If you're a value guy, you should have seen the bubbles brewing.  I have a newsletter from Ken Fisher, and another from Bill Miller, that I still keep to remind myself of the dangers of following conventional thinking.  Those guys really blew it.

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I know little about this "fund" and I'm silly for making any sort of comment, but it appears as though they were and are heavily invested in commodity producers-which did very well as an industry.  They look almost like an energy/mineral ETF to be honest.  I doubt they will continue to do as well as they have in the past.

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