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| Greetings!
Thank you for interest in the Blue Haven Capital newsletter. We welcome your questions and comments and can be reached via email at info@bluehavencapital.com
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Question: According to a 2005 report, approximately what percentage of hedge funds which beat the hedge fund index in one year persist and beat it the following year?
20%
50%
70%
90%
Click here for the answer!
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| THE MARKETS
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Stock index performance (Domestic and International)
as of 12/28/2008
Domestic Index Performance Year to Date:
Dow Jones Industrial Average................-33.95%
Standard & Poor's 500..........................-39.16%
Russell 2000.......................................-36.85%
Domini 400 Social Index........................-38.49%
International Index Performance Year to Date:
MSCI Japan (in $US).............................-30.21%
MSCI Pacific xJapan (in $US).................-52.63%
MSCI Latin America (in $US).................. -53.44%
MSCI EAFE (World xUS in $US)..............-44.60%
Month End Interest Rates:
10 year US Treasuries...........................2.13%
10 year AAA rated municipal bonds..........3.78%
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IT'S A MAD MAD MAD MAD WORLD
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Bernard Madoff and the disappearing $30 billion
The promotion of snake oil elixirs has gone on since the early days of the wild west, yet the Madoffs of the world continue with the "black boxes", the dog and pony shows, and the smoke and mirrors...and continue to attract millions with their smooth talking sleights of hand. According to the Wall Street Journal, Bernard Madoff was never able to articulate how it was possible that he earned 1% to 2% for clients month after month, year after year. That should have been warning #1. When looking for money management, here are a few questions that should always be asked: Who will be the custodian of my funds?- Blue Haven Capital uses Schwab Institutional as its custodian
Who provides regulatory oversight of your firm?- All Registered Investment Advisors, including Blue Haven Capital, are regulated at either the State level or by the SEC (Securities and Exchange Commission).
Can you explain, in simple terms, what your investment strategy is?- Stocks: Since approximately 75% of actively managed mutual funds do not beat index returns, Blue Haven Capital tends to buy stock indices (index ETFs and funds) for its stock investing. The goal in doing so is to beat the approximately 75% of actively managed mutual funds and mutual fund managers in the US who don't beat the indices.
- Bonds: Use our more than 20 years of institutional level bond experience to buy good individual bonds at competitive yields for our clients.
In addition to your firm's statements, will I receive statements from a third party showing exactly what is in my account?- In addition to quarterly statements from Blue Haven Capital, all clients receive statements directly from the custodian of their account- most likely Schwab Institutional.
How exactly are you compensated and what exactly is the amount of that compensation?- Blue Haven Capital currently charges between 0.5% and 1.0% annually for asset management. Starting in 2009, our maximum rate will drop from 1.0% to 0.8%. We receive no trailing commissions nor other "incentives" from fund companies or brokers to use their products.
Blue Haven Capital encourages transparency and rigorous questioning in the money management business, and we look forward to more managers in the industry joining us in our philosophy. |
| THE BOND MARKETS
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Commission Costs
We were reminded recently of a study that came out in 2004. In this study (Municipal Bond Liquidity by Lawrence E. Harris and Michael S. Piwowar- Feb 2004), Mr. Harris who was the Chief Economist of the United States Securities and Exchange Commission, came to the conclusion that commission costs on retail sized bond trades were twice what the commission costs were on institutional sized trades. He explained this by saying that "Large institutional traders generally have a good sense of the values of municipal bonds, whereas small traders do not."
Because interest rates are low, the hidden commissions involved in purchasing bonds have become an even larger percentage of that bond's yield. Also, because the stock market continues to underperform, and more individuals and institutions are depending upon bond income to provide income generation in their portfolios, the need for professional, experienced, institutional level bond expertise has only grown.
Blue Haven Capital encourages all investors, whether individuals or institutions, to take a fresh look at the competency of their bond portfolio managers. It could be a number of years before the stock market settles down, and bond portfolio returns have become an even more integral component of portfolio management. Does your bond portfolio manager have access to the bid wires? Is your bond portfolio manager adding any commissions into the costs of the bonds purchased for your account? Does your bond portfolio manager have access to many different bond inventories or is he or she working from only one inventory?
Some terrific opportunities exist in the bond markets these days. We welcome the opportunity to discuss them with you.
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| 2009
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Looking Ahead
As the stock market continues to falter, and interest rates continue to fall, one fact persists: It is very difficult for a poor economy to fight low interest rates. At some point, a confluence of higher liquidity, low interest rates, increased consumer confidence, higher consumer demand, and lower prices for goods and services will result in an improved economy. Here are some ways to enjoyably bide your time until the economy rights itself:
- Continue to enjoy family and friends, but perhaps do it in a less lavish way. Reacquaint yourself with books, board games, pot luck dinners, and "parlor" games.
- Take the time to garden and bake. You'll perhaps pick up a new hobby, save some money, and spend time in an enjoyable way all at once.
- Don't forget the human services non profits. The demands upon food banks, shelters, and both mental and physical health facilities only rises in economically difficult times. Additionally, donations to these groups tend to be lower when the economy is tough. If you have extra time or money you can spare, give willingly.
Blue Haven Capital thanks our clients and supporters for the confidence you have given us throughout 2008, and we wish you all a happy, healthy, and fruitful 2009.
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Blue Haven Capital is a fee-only registered investment advisor providing experienced, professional low cost investment management for individuals, private foundations, and public charities. If you know an individual or group who might be interested in our services, please forward this email to them!
Best Regards,
Donald Cummings Bill Moucka
Principal Principal
Blue Haven Capital LLC
630.588.3800
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