Mutual Fund Liquidations

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Here’s a fascinating, mostly overlooked little article — Mutual Funds Opt to Liquidate in Wednesday’s NYT. It almost indirectly showcases the effects of Darwinism in finance:

Some of the nation’s more than 8,000 mutual funds are shutting their doors, as their managers confront a lackluster stock market, greater regulatory scrutiny and higher costs.

Yesterday, the WWW Internet Fund, set up in 1996 to capitalize on the Internet boom, the first mutual fund to do so, said its board had decided to liquidate the fund and two affiliated funds, Growth Flex and Market Opportunities. The announcement came nearly two weeks after managers of the Oakmark Small Cap Fund announced that it would be closing.

“We’re sitting here with $10 million in assets and three years of losses,” said Lawrence York, manager of the WWW Internet Fund. The funds’ assets peaked at $150 million at the height of the Internet bubble, Mr. Lawrence said, and have since been shrinking because of disastrous performance. The WWW Internet Fund lost 57 percent, 52 percent and 49 percent in 2000 through 2002, respectively, according to Morningstar. It rebounded in 2003 to return more than 70 percent, but is down again this year, 12 percent through July.

Watch the bulls&*#: “The board questioned “whether it was in the best interest of shareholders” to keep the funds going, Mr. York said. With assets shrinking, the costs of running the funds had escalated, since there was less capital over which to spread expenses. The WWW Internet fund has an expense ratio of 5.5 percent of assets, according to Morningstar.”

Best interest of the S/Hs? Don’t make me laugh! That’s merely a polite way to say –”Hey, we’re losing money on this goddamned thing. Close the f#$@er down!”

Here’s some more giggles: “It’s refreshing to see a board do the right thing,” said Russel Kinnel, director of fund research at Morningstar, adding that it was rare for mutual fund boards to shut a fund voluntarily. “It may be another sign that Eliot Spitzer’s campaign is having an effect.”

Hell, if they do the right thing –even of its for the wrong reasons — I guess its better than doing the wrong thing . . .

Check out the rest of the piece.

Source:
Mutual Funds Opt to Liquidate
By RIVA D. ATLAS
New York Times, August 18, 2004

http://www.nytimes.com/2004/08/18/business/18place.html

Category: Finance

Barton Biggs Better Begin Browsing Blogs . . .

As we noted last November, oil prices were approaching resistance at $32.25. As we noted, “if prices pop over that level, you could see a clear run towards $36-38.”

So now we read that a Wall Street legend avoided our good (and free!) advice:

“Hedge funds started a year ago by a leading investment strategist, Barton M. Biggs, have been stung by losses this year, partly because of a bearish bet on the price of oil at a time when the commodity’s prices are setting records.

Mr. Biggs, for nearly three decades a strategist at Morgan Stanley, set up his investment firm, Traxis Partners, in June 2003 with two other longtime Morgan employees. He now manages around $2 billion in assets. Mr. Biggs, 71, joined an exodus of scores of prominent Wall Street executives over the last few years who started hedge funds – portfolios managed on behalf of wealthy investors and institutions like pension funds.

Mr. Biggs’s funds were down more than 7 percent this year through July, net of fees, according to a letter to Traxis investors. A majority of the losses came in July, as the price of oil soared. Yesterday, crude oil for September delivery settled at a record $48.70 a barrel on the New York Mercantile Exchange. Futures prices have climbed more than $10 a barrel since the end of June.

In all seriousness, I rarely would want to be on the other side of a bet from Mr. Biggs. And, I expect that right here is where we should see some sort of topping action in Oil.

But that doesn’t mean we are going back to the mid-30s anytime soon; I’d be happy with low 40s.

Here’s an additional excerpt:

Read More

Category: Finance

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Someone had asked for additional views on the 3 Bubbles form the WSJ a few months ago. Here’s IBD’s take on it; I’ll try to post another perspective on it from Jim Stack of Investech . . . Source: IBD http://www.investors.com/images/editimg/feature0817.gif

Category: Finance

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Category: Finance

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