A Revolutionary Take on Morningstar’s Style Box

“If we could first know where we are, and whither we are tending, we could better judge what to do, and how to do it.”

Abraham Lincoln

It must seem mighty strange for a blog about investment products to be ripping off quotes from the great emancipator, especially one that began his famous “House Divided” speech as the nation tore itself apart over the issue of slavery and states’ rights.  Then again, anyone working in the mutual fund side of the asset management business probably feels that it’s a pretty apt comparison to what’s going on in the business today.  Seems every armchair portfolio manager can only talk about underperformance by active managers and why passive index replicators charging low fees are the only way to go, a topic even the DOL enshrined in its recent Conflict of Interest rules.   Most are probably wondering if the situation could possibly get any worse as Morningstar says over $300 billion in AUM fled actively run funds for the year ending 8.31.

Now I’m sure you’re reaching for the world’s smallest violin thinking they have no one to blame but themselves after so many in the business got rich by running what amounted to closet index funds charging high fees which in turn helped spark the ETF revolution and brought the Feds down on them.  Picture the powdered wigs and finery of the French revolution but instead of aristocrats saying “let them eat cake” the masters of the mutual fund universe were saying “fees less than 1% and no 12b-1?  I never!” Continue reading

Morningstar’s Advice on Tactical Allocation Funds was Spot On….if it was 2011

That’s right folks, the Yinzer Analyst is back and this time, it’s personal.  You know it’d have to be to drag me away from sprucing up the lawn and my Friday afternoon tallboys and well, with me it’s almost always personal since I do this for pleasure and not currency, but today I intend to discuss a recent article that appeared at Morningstar.com.  Did they insult my mother or the Buffalo Bills?  No, what really grinds my gears is when someone writes an article that I feel doesn’t tell the whole story, this time on Morningstar’s tactical allocation category.

The article in question was John Rekenthaler’s weekly commentary, based on an earlier piece by Luke Delorme at Advisor Prespectives (here), where on August 30th he took the funds in Morningstar’s tactical allocation category to ask for offering the worst of both worlds.  And it’s not the he said anything wrong, in fact his advice to readers was perfect….if this was still 2011.  But it’s been a long five years and the story has changed and maybe it’s time to reconsider our attitudes on tactical allocation as well.  Continue reading

Three steps to outperformance in 2016 and other things that should scare you.

I don’t make any secrets of the fact that I feel a terrible love that in the world of investing dares not speak its name, that of loving actively run mutual funds.  From my own years of experience, I can tell you they still represent one of the most cost-effective ways for the average investor to access both some of the greatest individual money managers of our times along but to be fair, active managers have been getting killed with something like 98% underperforming their benchmark over the last ten years (according to FT anyway.)  Rather than join the crowd telling you this is just the last milestone on the path towards a world without active investing (which will never happen), let me tell you how I, a kid from the wrong side of New York (the non-NYC part) managed to create a top-performing mutual fund without even trying.  Continue reading

Closing Vanguard Dividend Growth is Bigger Than You Think

Normally when you do one of these Monday morning posts, you wind up recapping the prior week and trying to find some tidbits of useful information to parlay into a story about how the market is shifting direction.  Some Monday morning quarterbacks will point out the improving economic outlook from the Employment report and the big hits to utilities and consumer staples and say the economy is right back on track.  Global macro managers will say that it doesn’t matter what happens in one report, the global economy is shot and the Fed will never hike again.  Zero Hedge will say nothing ever matters because the market is rigged by the global elite in blah blah blah.

From my point of view, and at risk of sounding like a dog with a bone, I think one of the major events of the week was the announcement by Vanguard that they were closing their Dividend Growth Fund (VDIGX) to new investors after taking in more than $4 billion in new assets so far in 2016.  Having seen my fair share of funds blow up after taking on way too much new money (looking at you Marketfield) I have to be honest and say that I respect any manager who’s willing to say stop, but I think the market was too quick to dismiss this as a Vanguard or a fund-specific issue.  But the closing of Vanguard Dividend Growth is way more important to understanding the state of the market than simply saying the dividend income theme is played out.  Continue reading

The Hunt for Yield Part Three: Getting dividends is easy, picking the right ETF is hard.

Charles Booker said there were only seven basic plots in literature; turns out the same is true for ETF’s, they just have billions more to spend on advertising. 

-The Yinzer Analyst. 

If you’ve been beaten over the head with one investment theme in 2016, it’s that you need dividends.  Some want the income stream and the low volatility, some want the capital gains from the first group buying up dividend stocks and others just want their annoying clients to go away and think buying yield is a good way to make that happen.  We’ve already talked about why dividends aren’t likely to continue growing at the same rate in the future and what dividend payers are still “cheap” in this market but now comes the hard part, finding a good fund wrapper to buy them in.  Unfortunately for many investors, that means buying an ETF and then forgetting it, but I haven’t come to either bury ETF’s or praise them.  Instead I want to educate investors so they can avoid doing the one thing that will guarantee them a spot in the next Dalbar study; buying something that’s already expensive because they’re afraid and think it’ll solve all their problems.  Continue reading

The Hunt for Yield Part Two: What’s Still Cheap in This Market

So if our last post on how dividends aren’t likely to continue growing in the near future, or that they even might begin to contract, didn’t turn you off on finding some high paying stocks, then you’re probably starting to ask yourself what’s the best way to go about buying them?  The rise of passive investing means that most people will simply settle for an ETF or mutual fund instead of building their own portfolio of individual stocks and for many this is as simple as finding the strongest performing fund with the word dividend in its name and/or trying to find the lowest possible fee.  Seems easy but that overlooks one very important fact, that you don’t know anything about what’s actually in the fund!  Continue reading

The Hunt for Yield Part One: Can Dividends Continue to Grow?

“Those wounds are all the painful places where we fought. Battles better left behind, ones we never sought. What is it that we spent and what was it we bought?”

-Frank Herbert

What quote could better serve up the dilemma facing investment managers as another week of new highs for the S&P 500 which has them wondering, “to chase or not to chase?”  One the one hand, you have a line-up of investment greats like Byron Wein and Jeff Gundlach who think stocks are overbought, not to mention a likely fifth consecutive quarter of declining earnings and on the other…well you have demanding clients who see the market higher and want to participate or an angry MD telling you to clean out your desk if you’re not in the upper quartile this year.  So what do you do?  Continue reading

The Yinzer Analyst is Back!

So looks who’s come skulking back.  Remember in that last post when I said I would never again let this blog go unattended for long periods of time?  Well so much for that right?  Unlike a lot of financial bloggers, I won’t try to stretch the truth and tell you that I was off starting my own hedge fund, curing cancer or lounging on a yacht with a beautiful princess.  There were actually two princesses.  Continue reading

Can Monthly Crossovers Help Predict Turning Points?

You knew it would take some major market mayhem to bring the Yinzer Analyzer out from hiding but with the markets on the cusp and with investors running for the exits, he’s starting to wonder if now is finally the time to be looking to switch to a defensive playbook. We’ve talked a lot in the past about how this market’s major turning points have revolved around the Fed and its various QE programs and while taking down the beta before the next FOMC meeting seems like a good idea, the Yinzer Analyst is all about timing. Having been too early to call the end of the bull market before, I can tell you that having the right call and being early is the exact same thing as being wrong. So to make sure that this time, it really is different, I’m dusting off one of my favorite technical trading rules, the 2/10 monthly crossover rule (simplifying it as 2/10) to see whether or not the long promised pullback is finally upon us!  And with it shooting off signals like fireworks at a redneck Easter, the time to turtle up might be nigh. Continue reading

Waking up with the Yinzer Analyst: Can the market hold 2050?

The sun is up and finally so is the Yinzer Analyst and while he’s getting ready to host a discussion on active ETF’s at the Spring 2015 ETP Forum next Wednesday, there’s always time to discuss the market and man did this go south in a hurry. We’ve talked before about how this bull cycle (at least from 2011 on) has been a Fed induced rally because every bull cycle has a driver that allows investors to unleash their “animal spirits” that usually leads them to do really smart things like putting 100% of the their portfolio in small-cap biotechs who lack a marketable product like the Bioshares Biotechnology Clinical Trials ETF. Continue reading