Longtime acquaintance Mick Weinstein has an interesting post up at Covestor about what appears to be a new venture for Suze Orman. Per the article her investment advice has focused on dollar cost averaging into diversified mutual funds without market timing or stock picking. But that has changed as apparently she is now in the newsletter business partnering up with someone named Mark Grimaldi who manages the Sector Rotation mutual fund (NAVFX).This post will be about NAVFX, not so much about Orman. The fund looks like it started December 30, 2009, it currently has $25 million AUM, has a lot of turnover and has an expense ratio of 1.99%.
The newsletter that Orman and Grimaldi have a model portfolio as follows;
Dreyfus Small Cap (DISSX)
Janus High Income (JAHYX)
Sector Rotation Fund (NAVFX)--this is Grimaldi's fund
American Century Heritage (TWHIX)
American Century Value (TWVLX)
You can click through for percentages as we think putting them here is a potential compliance issue.
The make up of NAVFX is interesting, or at least it was on March 31 which is the last time holdings were reported and given that the turnover is 457% per Morningstar it would not be surprising if the fund looked completely different now.
Despite the name the fund only owned one sector ETF comprising 2.05% back on March 31 in the top 25 and the top 25 accounts for about 95% of the fund (eyeballing the percentages). I forgot to mention the fund uses ETFs almost exclusively. There were commodity ETFs, broad based equity and fixed income ETFs, several country funds and most interesting was the 22% in ProShares Ultra S&P 500 (SSO) and 15% in SPY. Despite all the warnings about levered ETFs SSO has been "working," YTD it is up 14% while the S&P 500 is up 7%. The broader levered funds might not be so crazy to hold when the market is functioning normally but I don't have a firm conclusion on that.
The Sector Rotation Fund which obviously owns more than sector funds was trailing the SPX by a couple of basis points YTD through Monday. Morningstar has the since-inception return at 11.95% which is slightly better than the categories Morningstar assigned to the fund but that trails the S&P 500 which was up 19.5% in the same period. I wondered whether comparing to the S&P 500 might was the proper comparison but based on the March 31 snapshot it effectively had 59% in that index, the description says the fund seeks capital appreciation and the prospectus says "in seeking to build a portfolio designed to outperform the S&P 500 Index..."
The 11.95% would be easier to defend if there was something in there about absolute return or hedging along the lines of Hussman although the fund can use inverse funds so maybe that is hedging and while there was a TIPS ETF in top 25 there were no inverse equity funds. There was an inverse bond ETF but that strikes me as strategy not counter-strategy. The fund is too new to have a bear market track record and maybe it would target something that would seek to avoid the full brunt of down a lot but I don't get that indication from the prospectus.
Much like Mick's post I don't really understand why Orman has aligned herself with such an expensive fund given what she apparently preaches for investment advice (I've never seen her show, just commercials for it which shows snippets) and for some reason I found this interesting in a what not to do sort of way.
There is nothing wrong with mutual funds using ETFs, what matters is how they are used. You might be able to see the strategy in the fund but I don't.
10 comments:
I thought susies main claim to fame was live with in your means. I have seen the snippets and seen the show once or twice for 15 to 20 minutes while surfing tv shows.
I usually do live within my means. So her show has little interest. Dollar cost averaging is a legitimate approach, but I question the fund you mentioned. What the heck is she thinking? She has oodles of money and really does not need to sell out like this.
yeah, I too am under the impression she has made a fortune
...I don't really understand why Orman has aligned herself with such an expensive...
...What the heck is she thinking?She has oodles of money and really does not need to sell out like this...
Answer:
There is one thing Suzie does not have-ENOUGH.
She will get closer to it with this laughably expensive fund but she will not get there.
Anon 7:59,
Quite insightful.
I read she has over 25 million. I understand wanting more, but her reputation has got to be worth more than whatever they pay her for the fund. At least it use to be IMO
6:21
Roger,
A link to frothy farmland value article.
http://bit.ly/mLfslc
Farmers have significantly increased their debt levels in recent years…the fastest increase since the prelude to the 1980s farm debt crisis.
This is vague. Global demand should grow steadily which is of course a positive. If the above quote means they are over-indebted then there is a high likelihood of some problem developing. The demand could bail them out but increased debt as worded above does not mean too much debt. Maybe there is too much debt but that is not expressed clearly in the link. Or am I missing something there?
Think over leveraging just like real estate disaster. Higher levels of debt fueled by ever increasing land/commodity levels. At some point the music will stop, and perhaps it is even happening now.
As I read in the WSJ today, "An old banker said, 'Just remember this, young man: Assets shrink, liabilities never shrink!'"
As an aside, many agricultural marketing enterprises faced insolvency just a few short months ago in the face of never ending margin calls. There are many, many moving parts to this.
Yes you are missing something, what if global demand doesn't steadily increase? What if the farm programs are radically changed in the new farm bill? What if the crop insurance program is radically changed (as GOP debt fighters want) so that natural disasters are no longer indemnified and debt service no longer becomes possible? In short, there are many artificial price support mechanisms that can drastically change overnight. Ben Graham might not like the margin of safety here.
I don't know the answers, but please be very cautious in your quest to invest in farmland.
There shouldn't be any great confusion about the goal of the newsletter, the mutual fund, etc. The purpose is to make money for people.
No, not you.
The Suze, of course. And whoever is running the fund with the high level of annual expenses.
Some posters perhaps can't understand why the Suze would do this. Respectfully, they must have short memories. David Sokol ring a bell? He was paid $24 million in total compensation for the past 3 years by Uncle Warren. Was that enough? No.
Reputation for some people means nothing. Money, on the other hand, well, that's the ticket.
I don't intend to sound cynical (well, not much, anyway). I think the facts speak for themselves in this case. Kudos to our host for his post.
BillM
I saw a bunch of Amish farmers the other day. These guys farm with horses and antiquated equipment. Some have really nice houses and lots of land.
BUT they live within there means and are very successful.
It is amazing this living within you means thing has not caught on.
Post a Comment