Waiting 12 years and ongoing for wind to change would be rather long stretch of underperformance.
It is better to switch to value after there is some certainty that wind has changed.
And it is ok to miss some 6 months of value outperformance while we for sure know.
Wholeheartedly agree. That's why I no longer own anything from either company - or much 'foreign'!
“after there is some certainty that wind has changed”
I hear this a lot. I’ll admit that I’m not very good at being certain that a bottom is in. Many people seem to be skilled, or at least confident, at knowing when “a confirmed uptrend is in place”. Not me. I’d rather just stay invested, subject to my usually tweaks around the edges.
Disclosure: I think that T/A is a load of bunk. Don’t believe any of it.
It's a point of view, @chang... So long as SOME believe it.however, you can trade as IF it was true though, yes? As to timing, surely you can inch in or out over time while a pattern persists. That would have you solidly in growth and out of foreign by this time (actually, a long time back)! Value tried to catch up recently, but there's too much turbulence in the market to have a persistent pattern emerge (imo).
Regarding Nygren's unfortunate investment in Washington Mutual, there is an excellent book about the bank's history, from the early days when it was a very well run, conservative community bank, through it's change into a high flier, and then the decline and fall. "The Lost Bank: The Story of Washington Mutual - The Biggest Bank Failure in American History", by Kirsten Grind (2012). A great read, sometimes more like a work of financial fiction rather than a true-life story. At the same time, a bit sad to read about an institution that was run with integrity, and took care of it's workers, and made itself a bank that served the community, turned into a profit machine with an eye for the main chance. It's a good book, and I highly recommend it.
@racqueteer To be blunt, I think that by the time a pattern emerges, it’s too late to trade. Maybe it’s just me. T/A might tell me what’s already happened, but it doesn’t tell me what’s going to happen any better than the stars or one of those big plastic 8-balls.
Sure, I “inch” all the time when I have new money to invest. And when I think a previous judgment or decision about an asset (fund, stock, etc.) should be revisited and a change made, I’ll do that too. I’ll also revisit and change my AA if I think I can do better .... but not because I think some asset class has peaked or bottomed. Honestly, I consider myself completely incapable of knowing that.
Kleintopp, at Schwab, has an interesting note, dated 6/8, in which he suggests that market leadership changes when a new cycle starts, as now. His view - that international and value may finally have their day. I dunno. I followed, for a while, M * recommendations on FMI funds, SEQUX, Oakmark funds. Big mistake. Not sure why M* gives gold stars to funds that do not match market rises, but fall as much or more as the market falls. Have done personally much better since i switched a couple years ago to SCHX. As for M* premium, why pay extra for bad advice?
There were blogs devoted to the looming housing bubble bust, as far back as 2006 or 2007. They featured illustrative examples of over priced homes that had second mortgages and home equity loans drawn on their inflated valuations. Las Vegas, Sacramento, Miami, other areas were repeatedly singled out as especially egregious hot spots of irresponsibility, all areas of massive new housing construction. So, no, there was no excuse for Nygren to be so sanguine, fiddle in hand.
To posters waffle and Pi.
I think you are missing the point.
Sure, there was great evidence of the problems with subprime mortgages...no doc loans, etc.
However, it is an old mantra in finance and banking...do not end up holding the paper. This means such mortgages should be packaged and moved into investor hands (including hedge funds and private investors). Small mortgage lenders did this, and were mostly absolved from the financial mess of that time.
But in competition for earnings growth, banker CEOs starting to keep the paper (mortgages) themselves, to maximize gains. This would perhaps be acceptable (or not) to shareholders...if they had a chance to assess it; except the vast majority of such loans were held "off the books." No visibility existed of how much banks held themselves.
The surprise was not that a good percentage of these mortgages went bad; it was that banks were holding the assets when the house burned down, and the SEC permitted the lack of transparency.
I know that now. I did not know that several years ago. It cost me money. The debacle with SEQUX was what opened my eyes. M* had a gold recommendation even as the fund was plummeting in value. Even after it destroyed its performance record, M* gave it a Silver. So, as I said, i use SCHX for large cap and do ok. M*, in this age of transparency, has never actually disclosed conflicts with any funds they rate.
Many people seem to be skilled, or at least confident, at knowing when “a confirmed uptrend is in place”.
Absolutely. The immortal "the market will tell me what to do". Can't you hear it talking, Chang?
FWIW, my feeling has always been that holding equities entailed risk, and I want to be adequately compensated for taking that risk - literally risk adjusted. I've also felt that I did't want to be taking risk everywhere simultaneously, so 'bond' holdings should influence equity holdings and vise versa, but that's another issue. That's not a stance that lends itself to trying to maximize total return, though, and it involves a longer time scale. I'm not going to catch short-term moves necessarily. Hence the "inching in and out" approach which reduces whipsawing effects. Each individual has to assess what 'risk' means to them, how much to take, and where to take it to meet their required return. Over the last decade, OAKMARK wasn't cutting it. D&C was somewhat better, but there were better choices available. Foreign wasn't the place to be. EM was pretty much a disaster. The tricky thing is trying to determine if there is actually a fundamental problem with the fund, or it has just been in the wrong sectors for that point in time. OAKMARK shows brief flashes of really high performance. I think the FUNDS are fundamentally ok, but why be in them NOW?