So many times in our world pundits get on TV, or write articles, and simply repeat ideas or “facts” they hear elsewhere without putting any original thought into the matter. One of my favorite sayings is “I don’t know”. There are plenty of topics that I am poorly versed in and or have no idea what I am talking about. It was refreshing to see Dalio a few months ago when asked about muni bonds basically say that he had no value to add in that area. One example of people repeating what they hear is/was the long standing belief that risk = return in finance. Another example is everyone who misquotes the famous asset allocation study where “all of your returns are determined by your allocation”. Wrong – that’s not even what the study says in the introduction…
Anyways, a recent example is all of the analysts and journalists writing about 13F strategies. Almost every single one mentions that these cannot possibly work due to the 45 day delay in reporting. And to every single one (I’m counting dozens I’ve had this conversation with) I respond with, “How do you know? Have you tested to see if the delay matters? If so, but how much? Have you stratified the managers by turnover, by their strategies?”. Every single one has replied with a blank stare. Sometimes I even respond with, “Did you know in many cases that the 45-day delay actually helps?” Mind blown. FYI reporters here is a short summary. Maybe we will write a longer academic paper to put the topic to bed.
(Except one, Mark Yusko, who commented that the top holding would not be the managers best idea, which turns out to be true as it underperforms the other holdings. So if you are replicating a strategy that overweights the top holding you are doing it wrong!)
Anyways, these pundits should at least be open to what the data and research says. For a real time example on 13Fs, the funds covered in my book have outperformed the S&P by 7% per year. I will update the piece again in 2013, and perhaps after this equity yield and currency piece turn my attention to a hedge 13f piece – that is unless all this crazy interesting CAPE work doesn’t get in the way…
