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This week we received two charts that are so very instructive about the industry we are part of. Here is the first:

The source for this chart is Bloomberg. The story with it was the traditional sell side story, basically that the market is soaring but that it is not too late to join in. Appealing and compelling! Get on that train today!

The other chart we received was also from Bloomberg, covering the S&P 500 index going back to January of 2007 instead of February of 2009. 

So, the part from February of 2009 looked identical but the left side had a very large fall included. The point of that chart was to show that, from January of 2007 through  the late 2009 you still needed more rise in the market just to break even. Not compelling! Not appealing!!

Which chart is more important to an investor-the one showing that they need to hurry and join in the meteoric rise or the one that shows that they still have significant market losses and no compounding of your money? You be the judge.

Morningstar has released new information that over half of mutual fund managers have no money in their own funds. No skin in the game. There is no reason that over half the managers of mutual funds have no investment in their funds except-they are not good investments! I believe we could eliminate a lot more than half of the funds that exist without harming anyone except financial services companies. One of the reasons they are not good investments is Morningstar itself. The style boxes they pioneered (e.g. small cap value funds are one of the 9 equity boxes)are good for Morningstar. They get to rate thousands of funds as a result of their complicity in “filling the style boxes.”  It is also good for financial services companies, who got to roll out scores of funds to fit each of the style boxes. On the other hand, investors have a more simple need- managers who compound their money. A few good managers who are unconstrained, given a mandate to make money and mitigate risk are what investors need. Thousands of style box funds, mostly managed by people with no skin in the game and no mandate to manages investor’s risk instead of their own,……..well,…………what you see is what you get. And, in this case, it ain’t pretty.