Finally some words of reason. Thank you smokddd1.
There is room in this world for passive and active investing strategies, just as there is room for both value and growth investment styles. They complement each other other and perform differently in different parts of the investment cycle.
For the last decade of "risk on" momentum (passive investing) has demonstrably outperformed the more cautious positioning adopted by most active managers. That's just a fact. Indices move on flows totally agnostic to risk. With more money piling into risk assets exiting bonds and cash year after year, an index fund is likely to outperform most active managers.
Of course when flows reverse, as they inevitably will at some point in the next year, two or three, the downdraft will create very large losses for investors. No stop losses, no puts, no defensives, just plain simply stock losses. I expect it will leave many investors stunned to see 20%, 30% or 40% of their capital wiped out with protection. Naturally, everyone will lose money, but the long successful but recent investment laggards including Buffett, Druckenmiller, Douglas, Tagliaferro, Clifford and Co will get their turn to do their stuff.
Successful investment managers don't suddenly become stupid. It is more likely market euphoria that makes prices stupid. At least in the short term.
Zero interest rates, excess leverage, excess liquidity, direct government stimulus and rising prices all have consequences. The same one in fact. They fuel a fire.
I don't want this boom to end, but what I want is totally irrelevant. End it will.
I suspect most active managers have been continually wrong footed by dopey central bankers who have run the show since the GFC, the the Covid response. Them's the breaks. As these policies become increasingly ineffective with diminishing returns and accelerated risks, the field flattens out.
Passive funds will bleed cash like never before and it will find its way to products that manage risk. That is my expectation of this roaring 20's.
As for Magellan. I have not been tempted to buy any stock until it breached $30. Yes I am in the red.
If the price tanks on Monday, I will first assess the nature of the announcement, the impact of the announcement and the likely response of MFG. If I consider the problems to be containable and manageable I will back up the truck on Tuesday, after the mugs have read the news a day late and panic.
Although imperfect, this aggressive approach to good businesses that find themselves in distress has served me very, very well for over 40 years. I just love low debt, low capital intensive, high IP and high cash flow businesses, like MFG. Key person risk is there for sure, but founders rarely jump when prices are low. That's why they are successful.
There is a smorgasbord of MFG on the ASX right now, not the least of which is PTM suffering from Judith's 20% stock dump. Value investors are being truly spoiled for choice. I have my favorites. I hope next week, MFG is added to the list at say $25- $26 or better. A year or two of lower profits, and lower dividends would not bother me in the least. Repairing the business and the brand is the main thing I try to worry about, because at the end of the day these things will determine the price.
GLTASH, this looks like it could be a bumpy ride but it could be one you can tell your grandchildren to teach them that the rules of investing rarely change.
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