Tuesday, December 17, 2013

The Tapeworm Hungers!

The following chart shows portfolio management revenue divided by corporate dividends. Keep in mind that portfolio management isn't just about dividend management, but I think the chart offers a fairly good parasite indication.

Click to enlarge.

That's one exponential trend failure I won't lose any sleep over. Hurray! Miracles really do happen!

As the bull market goes on, people who take great risks achieve great rewards, seemingly without punishment. It's like crime without punishment or sex without sin. - Ron Chernow

In a bull market, gotta pay the tapeworm to enhance the return that you could achieve yourself! You need professional expert portfolio management!

In a bear market, gotta keep paying the tapeworm to lose less money than you could lose yourself! You need professional expert portfolio management!

That's what I'm told. The only difference is that professionals just don't use the word tapeworm. "Value added portfolio manager" sounds better.

Over the long-term, how's that plan working out? Seriously.

Manager Value Added

MVA is a powerful concept that defines the extent of value added by active portfolio management. It's about how much value you are getting in return for the fees you pay to your fund manager. Managers with high MVA add value and can beat the index.

Managers with high MVA add added value and can did beat the index. Past performance is no guarantee of future results.

Why pay the high fees if you can get better returns with an index fund?

Great question.

For the less sohisticated investor, there is nothing wrong with this line of thinking which, as a matter of fact, is adopted by traditional mutual fund software and web sites.

Sohisticated is not a word. They would have known this if they would have used one of the many free value added online spell checkers.

Performance tables compare fund results to index returns, leading investors to conclude, in the majority of cases, that fund managers cannot beat the index.

Yeah, that's pretty much what I conclude.

The problem with that method is that it does not compare apples to apples. It's like saying: my apple tastes better than your orange. Fine, if that makes you happy, but I still like oranges more than apples.

The orange has bite marks and much of the juice is missing. Just sayin'.

Source Data:
St. Louis Fed: Custom Chart


fudge_hend said...

For the less sohisticated investor

I think the correct spelling is sofisticated. i.e. using index funds means you are less likely to get bohica'd by egg management fees.

Rob Dawg said...

All you are saying is that Portfolio managers chase yield.

Stagflationary Mark said...



Broker: "If you weren't so fisticated before, you sure will be now!"

Customer: "Awesome!"

fudge_hend said...

double entendre investing

The key is to only provide the prospective verbally.

Stagflationary Mark said...

Rob Dawg,

All you are saying is that Portfolio managers chase yield.

I think portfolio managers chase customers. Can't chase yield until one has chased customers. Other people's money for the win!

fudge_hend said...


arrggg stupid spell check. I'm so unsofisticated.

Stagflationary Mark said...


Only verbal? Genius!

We have, um, well, "ad" value and are a "bettor" firm compared to most.

We "chews" your portfolio allocation like it is our own, and in some ways it really is.

If you give us your money then it "freeze" up your retirement for other things that you'd rather be doing. You can live like the "farrows" (a litter of pigs) under our capable guidance!

Special thanks to Alan Cooper's Homonyms. :)

dd said...

Ohh God this is so depressing; but the idiots in charge have appointed the Fidelity morons as the designated "money manager" cum tapeworm devouring our insubstantial "retirement." GAWK.

Stagflationary Mark said...


"In Fidelity" we trust!

Just sticking with the homonym theme.

Troy said...

if you've got 10 minutes to kill, I thought this exchange I got into this AM was entertaining:


Rob Dawg said...

My dad told me in the mid 1960s that my retirement age would be 72 1/2. Near half a century later he's still spot on. One extra year of contributions, One less year of draw, die offs. Easy to fix.

Troy said...

apropos to my FICA derail, someone making the cap 1985-2010 was made to over-contribute $24,000 in total, which if continuously invested in 10 year USTs would be worth $70,000+ today.

So while my $x0,000 is sitting in the SSTF, sell it off and pay me.

Actually, I'm more of a spectator in this train-wreck since I've had very little W-2 income 1985-now, having worked for the UC system 1986-1992, and myself for most of this decade (1990s was in Japan, no FICA there either).

Troy said...

OK, I did the math, and ~$20,000 of the $2.7T trust fund notionally belongs to me, that is 1/135 millionth, which, curiously, is current PAYEMS.


Troy said...

Things that make you go hmmm..

The FICA cap is up 200% since 1985, while the average wage is up 130% . . .

CAPCHA is "fore-arm siximb"

yeah, I'm feeling the "fore-arm" all right.

Stagflationary Mark said...

Sorry I went quiet!

Had other things on my mind. Our dog Honey just had yet another surgery. Tack on another $957 for two broken front teeth. All she was doing was chewing her soft chew toy this time.

When it rains (snows), it surgeries. What a year she's had.