Howard Marks - Sea Change

[simoan]

It's a shame investment threads on TLF always end up in some form of personalised argument about who did what when etc. To be honest, I ignore any claimed performance by PI's on bulletin boards etc. and have done so for as long as I can remember. I'm sorry but I'm just totally uninterested in anyone elses portfolio. What's the point? Everyone is on a different investment journey and you hardly ever see anyone discussing the disastrous investments they have made... funny that! The only thing that really matters is reward obtained for the risk undertaken, and on that basis it's hard to imagine more than a handful of active PI's have beaten the S&P 500 over the timescale mentioned in Howards Marks memo (2009-21). I know I haven't. Cheap S&P 500 ETFs are widely available to all, and anyone that chooses to use the FTSE indices as a marker of their performance is only trying to kid themselves IMHO.

I'm only on TLF looking for potential investments and to discuss ideas such as Howard Marks suggestion that there is a sea change happening which means I should maybe review my investment process going forward; particularly seeing as I'm now somewhat older than when I started investing (having left it quite late in life) and now happily retired much earlier than many folk are able to.

Back to this thread... I accept Howard Marks argument that interest rates are very likely not heading back where they came from anytime soon and that they will be quite sticky, particularly here in the UK. So, having spent a few days looking around for high yield bond investments etc. I alighted upon the the thread on the floating rate coupon Investec Pref (INVR) for which I'd like to thank those involved in that discussion. Whilst I wasn't particularly looking for another preference share to hold, this morning I sold one of my disasters (Hipgnosis Songs) and bought some INVR with the proceeds.

All the best, Si

[Lootman]

The problem is that you are trying to advocate an investment strategy that you claim will beat the index. But you cannot actually describe it in a way that anyone can understand or follow.

GS spent considerable time singing the praises of the Manchester PIBS, which I would guess are his 20%, and thanks to him they are a multi-bagger for me. So one can follow if one is paying attention.

Sure, but we have all had odd investments that worked out well. And as Simoan notes below, we tend to talk about those and gloss over our failures. Having a bit of luck with a single holding does not constitute a strategy, let alone one that can consistently beat the S&P 500, which was the claim.

Absent a methodology then an individual portfolio is really just a series of one-off bets, allied with a hope that a few of them will do sufficiently well to compensate for the duds. And even if that ends up beating the index, at least for some time periods, it may have been merely the result of added risk, leverage or plain luck.

To be honest, I ignore any claimed performance by PI's on bulletin boards etc. and have done so for as long as I can remember. I'm sorry but I'm just totally uninterested in anyone elses portfolio. What's the point? Everyone is on a different investment journey and you hardly ever see anyone discussing the disastrous investments they have made... funny that! The only thing that really matters is reward obtained for the risk undertaken, and on that basis it's hard to imagine more than a handful of active PI's have beaten the S&P 500 over the timescale mentioned in Howards Marks memo (2009-21). I know I haven't. Cheap S&P 500 ETFs are widely available to all, and anyone that chooses to use the FTSE indices as a marker of their performance is only trying to kid themselves IMHO.

Indeed. The S&P 500 is up 15% a year on average for the last 15 years, and has increased tenfold in 30 years, in capital terms only with dividends on top. It has returned 10% a year on average for a century now, total return. All at zero effort and very low cost. How much in the way of extra effort, risk and stress would you expend to try and do better? Why would anyone believe that UK largecaps would do better?

As for preference shares, I was never a fan, but the events of 2007-2009 put me off them for a lifetime. I know that some did well out of them but only because they were bailed out. It could easily have been very different. For FI I will only buy government bonds, and only in currencies that I think are solid. I am wary of holding sterling assets of any kind, ultimately. "Equities for growth; bonds for income".

[CliffEdge]

The problem is that you are trying to advocate an investment strategy that you claim will beat the index. But you cannot actually describe it in a way that anyone can understand or follow.

GS spent considerable time singing the praises of the Manchester PIBS, which I would guess are his 20%, and thanks to him they are a multi-bagger for me.
So one can follow if one is paying attention.

I cleared out the hall cupboard recently.

Any interesting skeletons?

V8

No but multiple bags (plastic).

[simoan]

As for preference shares, I was never a fan, but the events of 2007-2009 put me off them for a lifetime. I know that some did well out of them but only because they were bailed out. It could easily have been very different. For FI I will only buy government bonds, and only in currencies that I think are solid. I am wary of holding sterling assets of any kind, ultimately. "Equities for growth; bonds for income".

That's fine, but there was a point at that time when it became clear the banks were too big to fail and that the debt instruments would be legally respected. The risk/reward then changed markedly for the better and it was not too late to buy in and make big gains. I'm not saying this with hindsight either, but I wouldn't do the same again if it were to happen again now, because I'm 15 years older and my financial situation is quite different, and I'm pretty happy with a 7% pa return at this point.

[Lootman]

As for preference shares, I was never a fan, but the events of 2007-2009 put me off them for a lifetime. I know that some did well out of them but only because they were bailed out. It could easily have been very different. For FI I will only buy government bonds, and only in currencies that I think are solid. I am wary of holding sterling assets of any kind, ultimately. "Equities for growth; bonds for income".

That's fine, but there was a point at that time when it became clear the banks were too big to fail and that the debt instruments would be legally respected. The risk/reward then changed markedly for the better and it was not too late to buy in and make big gains. I'm not saying this with hindsight either, but I wouldn't do the same again if it were to happen again now, because I'm 15 years older and my financial situation is quite different, and I'm pretty happy with a 7% pa return at this point.

Yes, there was a lot of risk and luck in it. In the US quite a lot of holders of preference shares were wiped out during the GFC. As I recall if an entity was taken over by another one, e.g. Bear Stearns by JP Morgan or Merrill Lynch by BofA, then the prefs were OK. But if the government bailed out an entity, then its prefs were toast.

Also note that technically prefs are not "debt instruments". In the capital structure they are equity instruments and rank below debt.

The financial sector is far and away the biggest issuer of prefs and that sector has not been a happy place for 15 years now.

Anyway taking such high-risk binary bets is not a consistently reliable way to beat an equity index.

[simoan]

Anyway taking such high-risk binary bets is not a consistently reliable way to beat an equity index.

Of course not, who claimed otherwise? FWIW I never measure my portfolio performance against indices. I only measure it by my own "sleep at night" index Risk is front and centre of my investing process, not something you see mentioned much on these forums.

[GoSeigen]

The problem is that you are trying to advocate an investment strategy that you claim will beat the index. But you cannot actually describe it in a way that anyone can understand or follow.

GS spent considerable time singing the praises of the Manchester PIBS, which I would guess are his 20%, and thanks to him they are a multi-bagger for me.
So one can follow if one is paying attention.

True, I've explained my processes and thoughts in considerable detail on this forum and TMF but 1. Lootman clearly was not paying attention and 2. some people are "just totally uninterested in anyone elses portfolio" [but they wish people would mention their disasters more often].

I've given a decent breakdown on my views about gilts in just the past 2-3 months, inflation and monetary matters on numerous occasions over the years (and its influence on fixed interest and equity), UK banks likewise. Certain people clearly just like to troll and dish out personal abuse without checking their facts. Actually it's hard to check facts when you are churning out endless argumentative posts in practically every corner of the site day in day out...


GS

[Lootman]

GS spent considerable time singing the praises of the Manchester PIBS, which I would guess are his 20%, and thanks to him they are a multi-bagger for me. So one can follow if one is paying attention.

True, I've explained my processes and thoughts in considerable detail on this forum and TMF but 1. Lootman clearly was not paying attention and 2. some people are "just totally uninterested in anyone elses portfolio" [but they wish people would mention their disasters more often].

Sorry but yes, I did not "follow" your trades. I am not part of this cult that you appear to think that you have or deserve.

And I never denied that anyone here could never get lucky with a risky trade. I have done so as well. The difference is that I do not think that makes me an investment genius. And I can at least explain my strategy, which you apparently cannot.

You claimed that you could "beat the index". But you only beat the UK equity index, and that has barely moved in 25 years. You were crushed by the S&P 500 index. So your "active" beats "tracker" claim seems rather stretched, unless you are claiming 15%-20% pa returns.

[BullDog]

GS spent considerable time singing the praises of the Manchester PIBS, which I would guess are his 20%, and thanks to him they are a multi-bagger for me.
So one can follow if one is paying attention.

True, I've explained my processes and thoughts in considerable detail on this forum and TMF but 1. Lootman clearly was not paying attention and 2. some people are "just totally uninterested in anyone elses portfolio" [but they wish people would mention their disasters more often].

I've given a decent breakdown on my views about gilts in just the past 2-3 months, inflation and monetary matters on numerous occasions over the years (and its influence on fixed interest and equity), UK banks likewise. Certain people clearly just like to troll and dish out personal abuse without checking their facts. Actually it's hard to check facts when you are churning out endless argumentative posts in practically every corner of the site day in day out...


GS

Well, speaking for myself obviously. I want to read about the stuff you posted because otherwise I wouldn't learn anything.

In any case, I have enough investment disasters of my own without hearing about anyone else's.

Even if I don't like Costain shares very much

[Lootman]

True, I've explained my processes and thoughts in considerable detail on this forum and TMF but 1. Lootman clearly was not paying attention and 2. some people are "just totally uninterested in anyone elses portfolio" [but they wish people would mention their disasters more often].

I've given a decent breakdown on my views about gilts in just the past 2-3 months, inflation and monetary matters on numerous occasions over the years (and its influence on fixed interest and equity), UK banks likewise. Certain people clearly just like to troll and dish out personal abuse without checking their facts. Actually it's hard to check facts when you are churning out endless argumentative posts in practically every corner of the site day in day out...

I have enough investment disasters of my own without hearing about anyone else's.

Personally I am always a little wary when someone reports their successes but buries or glosses over their failures. It makes you wonder how they compute their alleged returns.

Back in my youth when I worked for a fund manager, my boss once told me that it was better to lose money and know why, than to make money and not be able to explain it. I had just made 40K profit on an overnight trade but, when asked about it, I could not define the risk I had taken. Lesson learned.