Lessons to Learn

A few words from Tom Stanley, without question the top performing mutual fund manager in history:

The Resolute Way: Tom Stanley’s Investment Philosophy

There are many ways to be a successful investor. I have no claim that what has worked for me in the past will continue to work in the future, but I would like to share with you some of the principles I have learned over the past 25 years that have helped me become a better investor.

1. Be a Long Term Investor
Too much emphasis is placed on short-term fluctuations. It is easier to anticipate long-term trends.
2. Have a Flexible Approach
Change is the only certainty and as markets change, one should change as well.
3. Actively Look for Ideas
I find many of my best ideas; they don't find me.
4. Be Skeptical
Check facts directly. Strive to understand the bias and potential conflicts of interest among the sources that provide them.
5. I Eat my Own Cooking
My only stock market investment is the Resolute Performance Fund. This aligns my interests with the rest of the unitholders.
6. I Buy my Best Ideas
I prefer to buy only my best ideas.
7. Filter out the Noise
One of the greatest challenges is to filter out the noise and use only what is relevant.
8. Be Thrifty
Moderate costs facilitate moderate fees. Moderate fees facilitate performance.
9. Outperform by Being Different
To have a chance of outperforming the market, invest differently than the market.
10. Know Your Limits
It is just as important for me to know what I don't know as it is to know what I know.
11. Stay Humble
Stay humble or the market will make you humble.
12. Being Small is an Advantage
It is easier to outperform being small.
13. Apply Spiritual Principles
An important measure of one's success is how much he benefited his fellow man.
14. Investing is Not a Team Sport
The best decisions are rarely made by committee.
15. A Good Card Player Does Not Show His Hand
Confidentiality is essential for successful small cap investing.
16. Too Much Emphasis is Placed on Precision
I don't need exact numbers to make decisions.
17. Be a Contrarian
Being a contrarian is harder in practice than in theory.
18. Strive for Effective Rationality
Do the homework; know the facts; and make decisions based on the facts.

AQR Capital Management

Read the following letter of valid points written by Clifford S. Asness, founder of AQR Capital Management:

http://dealbook.blogs.nytimes.com/2009/05/05/a-hedge-fund-manager-strikes-back-at-obama/

Tax Havens

Yesterday President Obama called out the multinationals that are "shirking" taxes by using overseas tax havens. The NY Times article does a good job of covering the background of the argument but one thing it fails to mention is the reason businesses use tax havens or other methods of U.S. tax avoidance. Our corporate tax rates are too high!!

Companies want to be able to compete and it's hard to be competitive when someone in another country can do business cheaper than you can. In the past corporate tax rates didn't have much impact on business decisions because businesses couldn't just get up and move, but that is not the case today. Advances in technology have lowered costs of doing business. The world is flat and information moves quickly.


From the article...

"The top corporate tax rate is 35 percent, but the Treasury Department estimated that in 2004, the most recent year for which data is available, American multinationals paid $16 billion in taxes on $700 billion in foreign income — an effective rate of 2.3 percent. "

I agree this is pathetic but if the corporate tax rate was lower this number would be considerably higher. The only reason people use tax havens is because it is economically viable to do so. The costs of moving the money is still less than paying the ridiculous 35% top tax rate. Let's say the Obama administration lowered the top corporate tax rate to 20%. This would result in more truthful profit reporting and it might even create more jobs in the process. Another potential benefit from a lower corporate tax rate is higher revenues. Actually decreasing the tax rate might put us at a point on the Laffer curve that generates more revenues.

P.S. In the last paragraph of the article Professor Jim Hines from the University of Michigan is quoted on the topic. I had him for Government Revenues (Econ 483?) and I would recommend taking the class if he is teaching it. He is really brilliant and knows everything about the tax code and its revenue implications.

WisdomTree Steps Up

From the WisdomTree Q1 Announcement:

Commodities

WisdomTree intends to launch the WisdomTree Long-Short Commodity Fund. This will be a commodity fund designed to generate an absolute return through a dynamic allocation to long and short commodity positions.

Alternative

WisdomTree intends to launch the WisdomTree Absolute Return Fund. This fund will seek to generate an absolute return through a dynamic allocation to long and short commodity and financial futures positions.

WisdomTree intends to launch the WisdomTree Long-Short Equity Fund. This fund will seek to give investors “market neutral” exposure to U.S. and non-U.S. equity markets. It will be an actively managed strategy designed to capture potential excess returns between WisdomTree ETFs and comparable capitalization-weighted indexes.


I love to see to a company INNOVATE instead of REPLICATE. Keep it up WT, keep it up.