Tuesday, December 8, 2015

25 Years Later We Are Still Complaining About The Same Things

25 plus years later we are still complaining about the same things.  The more things change, the more they stay the same.  If you have kept an eye on the financial blogosphere you have probably read about; the massive buybacks corporations are doing due to all the free money, the underperformance of hedge funds, and the influx of cash moving into passive strategies. Below are excerpts from a book written 25 years ago.

"The rotund and owlish seventy-five-year-old money manager's worries are legion: the horrendous budget deficit, the competitive failings of U.S. business, deficient ethics, the undisciplined stock-buying spree."--Every time a major corporation misses their quarterly numbers they immediately announce a buyback.

"Wright Investors' is typical of a majority of U.S. money managers who have failed to match the performance of the major stock market indexes during the five-year bull market."--We hear about this every day, outperformance by managers comes for the most part in down years.

"Inevitably the competition among the nation's more than 1,000 money management concerns came from investment performance measured not from decade to decade or year to year, but from quarter to quarter."  This was recently discussed by Carl Ichan.  With social media and up to the second everything, investors now have the ability to become even worse investors quicker by chasing what has been hot and getting rid of what has not.

"Institutional clients began to resent the fees they were paying to their money managers, and indexing began to appeal as a way to cut investment costs."--Passive investing, robo advisers.

"As the popularity of index fund grew, so did trading in the same big blue-chip stocks that account for all or most of the weight of the most popular market measures among index fund builders: the S&P500, The S&P100, and the American Stock Exchange's twenty-stock Major Market Index (MMI), which includes seventeen stocks from the Dow." --All we hear nowadays is how only a few mega-caps are lifting the averages, FANG.

So there you have it, the popular topics of 25 years ago are still popular today, what's new?

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