Monday, June 29, 2009

Still More Observations from the Advisor Conference

Just found this note I wrote to myself on the plane ride back from the Insite Advisor Conference in Ft' Lauderdale three weeks ago.

Michael Lewis, the Liar's Poker guy, spoke at the conference and his presentation was called "What Happened?" (more or less). He went through the events leading to the meltdown, CDOs, leverage, hubris and everything else as though he wrote it for one of his books. Bottom line - there were some really big Wall Street geniuses who were allowed to run amok. Scary, obvious in hindsight and proof that greed drives bubbles.

Another session had three advisor/trainer types talking about how to restore client trust. They made a lot of sense with strategies of simply talking to client saying "I am still here for you."

Then they starting in with asset allocation does not work and long-term investing is still the way to go. They scoffed at timing. (Their timing at realizing asset allocation bombed was pretty bad, wasn't it?)

Of course, I was seething but it was their show not mine. They can figure out how a 20-year time horizon in the stock market produced a return of zero. That's zero. A bagel. Goose egg. Squat.

T-bills outperformed, I think you get my drift. But then again, that is a secular bear market and asset allocators were out or greatly underweighted in long-term portfolios.

They went on to say that clients need advisors more than ever now and I totally agree. But not the guys that were blind to what was happening as they clung to old ways of doing business - ways that worked in secular bull markets.

But now that we are at the back end of a bear, at least a cyclical bear, buy and hold is going to work again. Just when these knuckleheads have capitulated to the idea that it is dead.

1 comment:

Amalan said...

"Buy and Hold" depends on when you buy and how long you hold, which is essentially timing! If you bought in 1966 and held for 16 years, you got nothing. If you bought in 1982 and held for 16 years, you got richer than you ever thought possible. But, let us remember that no one really enters the market whole hog or leaves whole hog at the beginning/end of any cycle. Since most people enter or leave monthly or quarterly, the effects even out - and if you rush in with more money as the cycle matures, strengthened by gains of recent past and thinking there is more to be made, the portfolio is pretty much weighted at the back-end, which will dampen any time weighted rates of return.

As you say, Money Management is absolute key:
1. how much to get in with - visionary Templeton had this to say: spend 1/3, save 1/3, invest 1/3 - note the distinction made between saving and investing.
2. when to get in - honoring the probabilities.
3. stop loss orders - most money is lost watching the falling stock/funds/markets cascade gently down.