I recently came across an excellent blog post called The Handicap of Experienced Investors by JJ Abodeely in his excellent blog called the Value Restoration Project.

The article looks at successful fund managers identified by Fortune magazine in 1989. And with 22 years of real investment performance evaluates the success of the fund managers to find out what made them successful or not.

JJ's findings are quite surprising, for example, the larger firm becomes the less flexible they are and thus the lower the investment returns. JJ adds that when firms become successful and large, it becomes increasingly difficult for them to focus on the investment returns for their clients.

Even more surprising is the finding that work experience and the longer a manager has been with a fund does not help performance. They found that less experienced managers had better performance.

How can that be you may ask?

JJ quotes research that determined that less experienced managers have stronger incentives and are more willing to take risks, with this often leading to superior performance.

He also makes the point that experience may count against most fund managers saying:

Relying heavily on experience tends to mean looking to the past and considering the probability of future outcomes based on how things played out historically. Exposure, on the other hand, considers the likelihood — and potential risk — of an event that recent history may not reveal.

These two insightful points just scratch the surface of the blog post.

The whole thing is really worth reading.

Here is that link again:   The Handicap of Experienced Investors

 
If you liked the article I would encourage you to add the Value Restoration Project blog to your RSS feed.

Nothing to do with investing but something interesting on demographics, something I follow with a keen interest.

According to the current world birth-rate the United Nations has estimated that the 7th billion person on the planet will be born at the end of October 2011.

That is 7 000 000 000 people....

Allianz, the German insurer, has put together an interesting interactive website that has interesting information about world demographics and the country there the 7 billionth person may live.

Here's the link to the interactive website:
We will soon be seven billion


More of my articles on demographics can be found here:

World demographic changes – Why you should care

Living knowing your retirement fund is bankrupt

Slow motion train wreck – German demographics

Watch Japan implode
 

Mainly trimming and adding but also a few new positions is the best way to describe the past quarter’s activities.

And all four funds beat their respective indices.

Top contributors for the quarter – Consumer Staples, Healthcare, Industrial Holdings

• Coca Cola Femsa
• Diageo
• British American Tobacco
• Roche
•  Johnson & Johnson
• Kone
• Krones

Top decliners for the quarter – Media, Financial, Oil and Gas

• Zurich Financial
• Munich Re 
• Berkshire Hathaway
• Axel Springer
• Mediaset Espana
• ConocoPhillips
• Devon Energy
• Total

Portfolio changes

Tweedy, Browne Global Value Fund

• Added to – Zurich Financial Services
• Sold – Imtech, Milbon Co, TKH Group, Zehnder Hldgs Bearer
• Trimmed – BBA Aviation, CIE Financiere Richemont, Coca Cola Femsa, Daetwyler Bearer, Fraser & Neave, Jardine Strategic, Kone Oyj, Krones, Linde, Nestle, Philip Morris Intl, Sika AG
• Merged – Embotelladoras Arca, Grupo Continental

Tweedy, Browne Global Value Fund, Currency Unhedged

• New positions – Heineken, Metcash Ltd,
• Added to – Axel Springer, BAE Systems PLC, CNP Assurances, Diageo PLC, Johnson & Johnson,  Mediaset Espana, Mediaset SpA, Munich Re, Nestle, Novartis, Roche Holding, Royal Dutch Shell PLC, Schindler Holdings, SK Telecom, Teleperformance, Total, Unilever, Zurich Financial Services

Tweedy, Browne Value Fund

• Added to – Wells Fargo & Company
• Trimmed – Diageo PLC ADR, Emerson Electric, Henry Schein Inc, Linde, Nestle ADR, Philip Morris International

Tweedy, Browne Worldwide High Dividend Yield Value Fund

• Added to – BAE Systems PLC, Exelon Inc, G4S PLC, Kimberly Clark Corp, Mediaset SpA, Metcash LTD, Munich Re, Novartis, Roche Holding, Sysco Corp, Total, Unilever, Zurich Financial Services

If I was Greece I would default the reason is probably best explained in the excellent blog post by Harris Kupperman in his blog Adventures in Capitalism blog called What Should Greece Do?

The post contains an article by Peter Gianulis, manager of Carrelton Asset Management with themost important part being this:

“By defaulting (or the credible threat of defaulting), Greece actually improves their negotiating position not worsen it.  I would immediately default on all government obligations, raise the retirement age, cut social programs, simplify the tax system and create new business tax incentive programs to create a “safe tax haven” for new European businesses willing to operate in a European country without the shackles of the Euro.  Also, the fact that you cannot borrow more money in the international markets would be the best news; you are now forced to live within your means.

Greece (representing less than 5% of European GDP) is not large enough to even register a “blip on the screen” in terms of world economies or markets; so why all the fuss? It is our belief that a Greek default would legitimize the concept of government defaults from European or “Developed” Countries and most likely lead to a series of defaults (far larger than Greece) that would roil the financial markets and world economies for years.  The European Central Bank (as well as the FED) is acutely aware of this draconian scenario.”

Read the whole article it’s really worthwhile. Here is the link again What Should Greece Do?


So the other European countries are really not bailing out Greece but their own banking systems that have loaded up on debt of Greece and the other over-borrowed European countries.

The banks can most likely survive a Greece default but not a default by Portugal and Ireland. And definitely not Spain.

Barry Ritholtz in his Big Picture blog is of the same opinion.

In his post titled Not the Greeks, But Their Creditors Get Bailed Out he mentions:

"Whenever you hear a Bailout being discussed, look to see who it is that is actually being bailed out. It is not the Greek people or even the Greek government — rather, it is the creditors of Greece. These are the banks mostly in Europe, primarily in Germany and France, but also includes Japan, China and the US."

Also next time I hear a bank CEO or analyst saying that Europe cannot allow Greece or anyone to default I am going to throw up. Because it is not an independent opinion backed up by in depth independent analysis. It is someone talking his book, plain and simple.

Take a look at these really interesting charts from SocGen on the extent of infrastructure spending in China.

I am firmly in the camp of people that thing China is going to pick up problems. The only thing is I just don’t know when.

The charts are also interesting as they clearly show the extent of the property bubble in Spain and the collapse of US construction spending.

In the US the underinvestment in infrastructure also has something to do with it.

Bubblelicious Chinese Construction Charts