Waiting out the Fads

Comment on “Most Mutual Funds Do Not Outperform,” in the Briefly Noted column in the May 2017 AAII Journal.

This brief notice is one of the most important things yet from AAII.

One hears and reads oceans of alleged data advocating one or another flavor of active management. There is almost never any reference to the SPIVA data, let alone any argument to refute it.

While it may be possible that some new fad, like factors, will prove out, one waits to see it done long term by real funds with real money (recall the Nifty Fifty and the tech bubble). The 15-year survivorship of only 42% for all domestic equity funds recommends doubt as the appropriate default attitude. Many funds tried, and many funds died. There is no obvious a priori reason that today’s gimmick will be any better than yesterday’s gimmicks.
—Richard Vroman from California

Finding Your Edge

Comment on “What Is Your Investing Edge?” by John Huber, in the May 2017 AAII Journal.

Great article in that it simplifies a mind-set that is often mentioned, yet often disregarded in practice.
—Scott Bowen from North Carolina

Using Faber’s Trinity Portfolio

Comment on “The Trinity Portfolio: Combining Diversification, Tilts and Trend-Following,” by Mebane Faber, in the May 2017 AAII Journal.

This is an article that has some thought and data behind it and is written in a comprehensible style, so thanks for that.

I was intrigued to look a bit more into the reference material, and as a result I have some hesitations. It’s quite an active strategy, so not for everyone.
—Jim Linnemann from Michigan

Reconsidering Medicaid

Comment on “Common Questions About Medicaid and Medicaid Planning,” by John Horn and Dera Johnsen-Tracy, in the May 2017 AAII Journal.

While it is legal to establish financial strategies to shield your assets from paying your own medical costs and transferring the expense on to the other taxpayers (i.e., Medicaid), neither I or my brothers or sister felt that it was morally right to shield our mother’s assets for our benefit so that other taxpayers could pick up the cost of her care.

I wish this type of discussion would have been included in the article and how the cost of Medicaid impacts the federal deficit.
—Jim from Washington

What Constitutes a Trendline

Comment on “Rules for Drawing and Analyzing Trendlines,” by Jeffrey Weiss, in the April 2017 AAII Journal.

I wish to emphasize a point about trendlines that might get missed by some readers: in geometry, only two points determine a line. Not so in technical analysis. One needs at least three. The reason is simple:

One can draw a line between any two points, but that does not make it a TRENDline. The line needs to be tested to become a real trendline. The more the better, but at least three touches and tests: the starting point, ending point and one or more tests between the two. If the market bounces off the line several times, it clearly is something investors are paying attention to, which is what we want.
—John McGinley, CMT