How to Blow $12.2 Billion in No Time Flat

Discussion in 'Risk Management' started by Error Correction Funder, Mar 10, 2018.

  1. Wowzers. It cracks me up when people say "just buy the dips". Easier said than done!!!
  2. Once you have done it successfully once. Then you can use those profits as a cushion to do it again and again.

    Nothing like a long winning streak and large profits to make you think trading is easy and before you know it, you start taking really stupid risks..
    Last edited: Mar 10, 2018
    murray t turtle likes this.

  3. Yea, Bill Miller had that figured out.
  4. After 15 years as a star manager creating lots of value for his investors, his 16th year turned out to be so bad that his net value to his customers became negative. Most of the investors' money arrived near the end of the streak.

    Fund managers are the most overpaid profession in the world based on the value creation to their customers. It is one of the few legalized profession I know that makes a person rich despite making customers poor. Other legalized professions that fall into this category are financial advisers, insurance agents. THe book "Where are the customers' yachts?" written 100 years ago still ring true today.

    After beating the S&P 500 every year from 1991-2005, Legg Mason's Value Trust fund is down 58% over the past year. The collapse has more than wiped out the fund's record streak: Value Trust is among the worst-performing funds in every period tracked by Morningstar: 1-year, 3-years, 5-years, and 10-years.

    The fund's assets under management have fallen from $16.5 billion to $4.3 billion, taking Legg Mason's fees down with them. Since most of the $16.5 billion arrived near the end of the streak, moreover, most of Value Trust's investors have done even worse.
  5. ironchef


    If he hung in there, kept buying the dips in 2008, by early 2009 things turned and he would have made everything back and then some by now.

    Yes, another 2008 is lurking around the corner but that shall also pass and things will go back up. The real risk is out of the market when things turn.
  6. zdreg


    it is nothing new. this book was written (first published January 10th 1979)
  7. ironchef


    When I first started investing/trading, I opened a brokerage account with Piper Jaffray and Hopwood and they assigned a broker to handle my account. Over the course of 6 months, he occasionally cold-called and recommended a stock. I bought based on his recommendations thinking he was the expert. Every time after I bought, the stock went down. I ended up losing about half my brokerage capitals. Closed my account and not until years later did I went back into stocks.

    Now I know the brokerage bought wholesale from big institutions then unloaded them to unsuspecting mom and pop retails like me. My lucky break came when by chance I read an article about a company named Berkshire Hathaway...
  8. You should have shorted all of his recommendations.
    fbmbirds likes this.
  9. Why not read IBD (Investor's Business Daily)
    In those days it was very professional newspaper,don't know about now,did not read a copy in more than 12 years
    I learned about IBD from watching Louis Rukeyser Wall Street Week on PBS.
    #10     Mar 11, 2018
    murray t turtle and Greenie like this.